It is mainly doom and gloom for real estate investors heading into 2025, according to a quarterly survey published this week by RCN Capital and CJ Patrick Co. Their Winter 2024 Investor Sentiment Survey found that only 35% of investors view the market as “better” or “much better” than a year earlier – and few more think the situation will improve any time soon.
Survey respondents answered four questions regarding current market prospects, future market prospects, expected home price increases and the number of properties they purchased compared to a year ago.
Positive sentiment fell sharply from the Fall 2024 survey, in which 68% of respondents felt the market had improved. In addition, the share of investors who thought conditions had deteriorated rose from 13% in the fall to 25% in the winter. Overall, investor sentiment fell 27 points to 97 points – the lowest level in a year. But despite the negative attitude, the share of respondents planning to buy property in the near future has improved.
Are investors optimistic about the next six months? According to the research, most do not see the light at the end of the tunnel. Only 42% expect the market to improve. By comparison, 71% of respondents to the autumn survey expected the market to improve.
“Rising interest rates on owner-occupied loans and negative pressure on rental prices may have caused investor sentiment to change course after a year of steady improvement,” Jeffrey Tesch, CEO of RCN Capital, said in a statement. “This particular version of our survey also had an unusually high percentage of respondents who were rental real estate investors, who tend to be less optimistic. That may have colored the results a bit.”
Long-term rental investors were by far 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.
Conversely, fix-and-flip investors were more optimistic about the future of the housing market in the short term. Nearly half (45%) of home flippers in the winter survey believe conditions have improved compared to a year earlier, while 48% believe the situation will improve over the next six months. That’s the case even if only 28.7% of this group report a positive return on investment in the third quarter of 2024, according to a Atom report released in December.
The survey found that the majority (55%) of both investor groups agreed that house prices will continue to rise.
Among those with less optimism, two well-known but notable challenges persist in the real estate investment market.
As with the fall survey, financing costs maintained their place as the top concern for respondents. It was followed by the lack of inventory, rising home prices, competition among investors and the availability of insurance. According to HousingWireThe 30-year conforming loan rate hovered around 7% in December after being closer to 6% in the fall, according to the Mortgage Rates Center.
Insurance costs were also one of the top concerns for respondents, consistent with the fall survey findings. Nearly 70% of investors said insurance costs played a role in their investment decisions, and 53% said a deal fell through because of insurance costs.
Certain states had more problems than others when it came to insurance costs. The study highlighted Florida as a key example based on the impact of Hurricanes Helene and Milton. In Florida, more rental real estate investors (57%) cited insurance costs as a major issue, compared to 41% of flippers.
Political developments were also mentioned. Fall poll respondents expected Kamala Harris to win the 2024 presidential election, but when that didn’t happen, winter respondents worried about the incoming Trump administration’s plans to impose tariffs and deport large numbers of undocumented immigrants.
“While there are limits to what the federal government can do to improve the overall housing market, any initiatives that eliminate outside regulations, make land available for development and encourage affordable housing construction will benefit builders, real estate professionals, investors and consumers. says Rick Sharga, CEO of CJ Patrick Co.
