It’s mostly doom and gloom 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 consider the market to be “better” or “much better” than a year prior — and not many more think things will improve soon.
Survey respondents answered four questions related to the current market outlook, future market outlook, expected home-price increases and the number of properties they purchased compared to a year ago.
Positive sentiment declined sharply from the companies’ fall 2024 survey in which 68% of respondents felt that the market had improved. Additionally, the share of investors who felt conditions had worsened ramped up from 13% in the fall to 25% in the winter. Overall, investor sentiment fell by 27 points to 97 — its lowest level in a year. But despite the negative attitudes, the share of respondents who plan to buy properties in the near future improved.
Are investors optimistic about the next six months? According to the survey, most aren’t seeing the light at the end of the tunnel. Only 42% expect the market to improve. Comparatively, 71% of respondents from the fall survey expected the market to improve.
“Rising interest rates on purchase loans and negative pressure on rent prices may have caused investor sentiment to reverse course after a year of steady improvement,” RCN Capital CEO Jeffrey Tesch said in a statement. “This particular iteration of our survey also had an unusually high percentage of respondents who were rental property investors, who tend to be less optimistic. That may have colored the results a bit.”
Long-term rental property investors were the least optimistic group by far. Only 31% believe that the current market is better than last year’s, while only 33% think things will improve in the next six months.
Conversely, short-term fix-and-flip investors were more optimistic about the future of the housing market. Almost half (45%) of the home flippers in the winter survey believe conditions improved from one year prior, while 48% believe things will improve in the next six months. That’s even with only 28.7% of this group reporting a positive return on investment in the third quarter of 2024, according to an Attom report released in December.
The survey noted that the majority (55%) of both investor groups agreed that home prices will continue to rise.
Among those with less optimism, two familiar but glaring challenges persist in the real estate investment market.
Similar to the fall survey, the cost of financing maintained its spot as the top concern for respondents. It was followed by the lack of inventory, rising home prices, investor competition and insurance availability. According to HousingWire‘s Mortgage Rates Center, 30-year conforming loan rates hovered near 7% in December after being closer to 6% during the fall.
Insurance costs were also a top concern for respondents, consistent with the fall survey’s findings. Nearly 70% of investors said that insurance costs factored into their investment decisions, and 53% said they had a deal fall through due to insurance costs.
Certain states were more troublesome than others in terms of insurance costs. The survey highlighted Florida as a key example based on the impact of hurricanes Helene and Milton. In Florida, more rental property investors (57%) cited insurance costs as a key issue compared to 41% of flippers.
Political developments were also mentioned. Fall survey respondents expected Kamala Harris to win the 2024 presidential election, but when that did not occur, winter respondents were concerned with the incoming Trump administration‘s plans to implement tariffs and deport a large number of undocumented immigrants.
“While there are limits to what the Federal Government can do to improve the overall housing market, any initiatives that remove extraneous regulations, make land available for development, and stimulate affordable home construction will benefit builders, real estate professionals, investors, and consumers,” said Rick Sharga, CEO of CJ Patrick Co.
