It’s a bleak outlook for real estate investors heading into 2025, according to a quarterly survey released this week by. RCN Capital and CJ Patrick Co. Their Winter 2024 Investor Sentiment Survey showed that only 35 percent of investors view the market as “better” or “much better” than last year – and not many think things will get better anytime soon.
Survey respondents answered four questions related to the current market outlook, future market conditions, expected home price increases and the number of properties they purchased compared to the previous year.
Positive sentiment has fallen sharply since the company’s survey in the fall of 2024 when 68% of respondents felt the market had improved. Additionally, the share of investors who feel conditions are getting worse increased from 13% in the fall to 25% in the winter. Overall, investor sentiment fell 27 points to 97 – its lowest level of the year. But despite the negative attitudes, the share of respondents who plan to buy properties in the near future has improved.
Are investors optimistic about the next six months? According to research, most do not see the light at the end of the tunnel. Only 42% expect the market to improve. In comparison, 71% of respondents to the fall survey expect the market to improve.
“Rising mortgage interest rates and negative pressure on rental rates are likely to cause investor sentiment to reverse course after a year of steady growth,” RCN Capital CEO Jeffrey Tesch said in a statement. “This is a repeat of our survey and there was an unusually high percentage of rental property investors, who tend to be less optimistic. That may have caused a little effect.”
Long-term rental property investors were the least optimistic group. Only 31% believe the current market is better than last year, while only 33% think things will improve in the next six months.
In contrast, short-term fix-and-flip investors were more optimistic about the future of the housing market. Almost half (45%) of home surveyors in the winter survey believe conditions have improved since last year, while 48% believe things will improve in the next six months. That’s even as only 28.7% of this group reported a positive return on investment in the third quarter of 2024, according to the report. Atom report issued in December.
The survey noted that the majority (55%) of both investor groups agreed that house prices will continue to rise.
Among those less optimistic, two common but obvious challenges persist in the real estate investment market.
Similar to the fall survey, funding costs retained their place as the top concern of respondents. It was followed by supply shortages, rising housing prices, investor competition and insurance availability. In accordance with HousingWireAccording to the Mortgage Rates Center, 30-year mortgage rates were close to 7% in December after being close to 6% during the fall.
Insurance costs were also a top concern for respondents, consistent with the fall survey findings. About 70% of investors said insurance costs factored into their investment decisions, while 53% said they failed because of insurance costs.
Some states have been more troublesome than others in terms of insurance costs. The study highlighted Florida as an important case study based on the impact of hurricanes Helene and Milton. In Florida, rental property investors (57%) cited insurance costs as an important issue compared to 41% of flippers.
Political events were also discussed. Fall survey respondents expected Kamala Harris to win the 2024 presidential election, but when that didn’t happen, winter respondents were concerned about the Trump administration’s plans to implement tariffs and deport large numbers of undocumented immigrants.
“While there are limits to what the Federal Government can do to improve the housing market, any measures that remove foreign regulations, make land available for development, and encourage the construction of affordable housing will benefit builders, real estate professionals, investors, and consumers,” said Rick Sharga, CEO of -CJ Patrick Co.
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