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Investor outlook is extremely positive despite ongoing challenges with financing costs, rising home prices, limited inventory, and competition from institutional and traditional homebuyers
To download the full version of the Summer 2024 Investor Sentiment Survey, click here.
SOUTH WINDSOR, CT – July 16, 2024 – Real estate investor sentiment jumped by 16% from the previous quarter, according to the new RCN Capital/CJ Patrick Company Investor Sentiment Index™. Sixty percent of investors viewed today’s market as better or much better than it was a year ago, compared to only 20% who felt it was worse or much worse. Investors were equally bullish on where the market is headed, with 61% expecting it to continue to improve, while only 14% expected it to decline – the highest percentage of positive responses and lowest percentage of negative responses since the inception of the RCN Investor Sentiment Survey.
The RCN Capital/CJ Patrick Company Investor Sentiment Index™ (ISI) was designed to track the pulse of real estate investors across the country and gauge their market outlook. The ISI is based on the quarterly RCN Capital Investor Sentiment Survey of residential real estate investors and focuses on their responses to four specific questions:
- Current Market Outlook - How does the environment for residential real estate investing compare to one year ago?
- Future Market Outlook - What’s your outlook for residential real estate investing over the next 6 months compared to today?
- Expected Home Price Increases - What do you expect home prices to do over the next 6 months?
- Number of Properties Compared to Past 12 Months - How does the number of properties you plan to invest in over the next 12 months compare to the number of properties you’ve invested in over the past 12 months?
“Despite numerous challenges, real estate investors feel much better about the investing environment today than they have over the past year and are equally optimistic about where the market is heading,” said RCN Capital CEO Jeffrey Tesch. “Rental property investors are slightly less positive than fix-and-flip investors, which may be due to rental prices flattening and even declining in many markets across the country.”
The Summer 2024 Investor Sentiment Survey from RCN Capital, conducted by market intelligence firm CJ Patrick Company, again highlighted growing concerns among investors about increasing insurance costs or the unavailability of insurance in markets subject to frequent extreme weather events. Over 84% of the investors surveyed noted that rising insurance costs or the unavailability of insurance coverage was a factor in their decisions to buy and sell real estate. Almost 68% noted that these insurance issues had caused them to miss out on an investment opportunity. Both of these findings were significantly higher than in the prior quarter’s report.
The problem is particularly acute for investors in states that have seen unusually high levels of extreme weather events over the past few years. 100% of the respondents who invest in California properties cited insurance issues as a consideration in their decision-making, and almost two-thirds (73%) said insurance problems had cost them a deal. In Florida, 83% acknowledged factoring insurance into their investment planning, and 67% noted that insurance issues had caused them to miss out on an opportunity.
Another growing issue appears to be the prevalence of squatters, who were cited as a problem by 76% of respondents in their markets; 53% of the respondents noted that they’d experienced problems with squatters on a personal level. The problem appears to be more severe for fix-and-flip investors than for rental property owners: 90% of flippers cited squatters as an issue, compared to just under 50% of rental property investors.
The Summer 2024 Investor Sentiment Survey is the fifth quarterly report from RCN Capital, taking the pulse of real estate investors across the country, identifying market challenges and opportunities, and getting feedback on current trends and events.
Flippers More Optimistic Than Rental Property Investors
There was a significant contrast between the market sentiment and outlook between fix-and-flip investors and rental property investors. Flippers were overwhelmingly positive, with 73% saying the market today is better or much better than a year ago compared to only 35% of rental property investors. Similarly, 75% of flippers expect market conditions to continue to improve, while just 37% of rental property owners feel the same way. Investors who felt that market conditions today were similarly split by type of investment: only 11% of flippers felt conditions today were worse than a year ago, while 36% of rental property investors responded that way.
It doesn’t appear that these differing opinions are based on expectations for the U.S. economy; despite being more optimistic about the market, 75% of flippers believe the economy is likely to enter a recession this year, while only 35% of rental property owners do. Both groups expect home prices to continue to rise, with 88% of flippers and 61% of rental property owners anticipating price increases. And almost all of these investors – 92% of flippers and 86% of rental property investors – plan to continue investing primarily in their home states.
Challenges Faced by Investors
Investors cited many of the same factors as major challenges to their success as in previous surveys, but reflected some changes to current market dynamics. The high cost of financing was mentioned most frequently – by 74% of respondents. Lack of inventory (45%) replaced rising home prices (35%) as the second-most cited challenge. Investors also continue to cite competition from institutional investors (44%) and from traditional consumer homebuyers (26%) as major issues.
Looking ahead, investors appear to see market conditions shifting slightly, as only 67% noted the high cost of financing as a top concern, and inventory issues (42%) and rising prices (32%) were also cited less often. On the other hand, respondents also seem to expect more competition from both institutional (47%) and consumer homebuyers (29%) six months from now.
Some of these trends were very similar for both flippers and rental property investors. Financing costs were noted by 77% of flippers and 76% of rental investors; and lack of inventory by 46% and 45% respectively. But there were also some significant differences noted in key challenges. Flippers cited competition from institutions much more frequently (53%) than rental property investors (35%), whereas rental property investors complained about rising home prices with more than twice the rate (53%) than flippers did (21%).
“It’s interesting to see some of the nuances in the investor sentiment data, and consider some of the implications” noted Rick Sharga, CJ Patrick Company CEO. “It appears that recent reports of increased flipping activity – and improvements in flippers’ gross margins – may be fueling some of the optimism from that set of investors. Meanwhile, flat and declining rent rates, an influx of hundreds of thousands of apartments, and rising property acquisition costs may be dimming the outlook for some rental property investors.”
To download the full version of the Summer 2024 Investor Sentiment Survey, click here or on the image below:
About RCN Capital
RCN Capital is a South Windsor, CT-based national, direct, private lender. Established in 2010, RCN provides commercial loans for the purchase or refinance of non-owner-occupied residential properties. The company specializes in new construction financing, short-term fix & flip and bridge financing, and long-term rental financing for real estate investors. For more information on RCN Capital and RCN’s loan programs, visit www.RCNCapital.com.
About CJ Patrick Company
Founded in 2019, CJ Patrick Company is a Market Intelligence and Business Advisory firm working with companies in the real estate and mortgage industries. Visit www.cjpatrick.com for more information.
About the RCN Capital/CJ Patrick Investor Sentiment Index™ (ISI)
The RCN Capital/CJ Patrick Investor Sentiment Index™ (ISI) was designed to track the pulse of real estate investors across the country and gauge market outlook. The ISI is based on a quarterly survey of residential real estate investors and focuses on their responses to four specific questions:
- Current Market Outlook - How does the environment for residential real estate investing compare to one year ago?
- Future Market Outlook - What’s your outlook for residential real estate investing over the next 6 months compared to today?
- Expected Home Price Increases - What do you expect home prices to do over the next 6 months?
- Number of Properties Compared to Past 12 Months - How does the number of properties you plan to invest in over the next 12 months compare to the number of properties you’ve invested in over the past 12 months?
More detailed methodology available upon request.
Contact:
Erica LaCentra
RCN Capital
860.432.4782
elacentra@rcncapital.com
Rick Sharga
CJ Patrick Company
(949) 322-4583
rick@cjpatrick.com