Investor outlook is extremely positive
despite ongoing challenges with financing costs, rising home
prices, limited inventory, and competition from institutional and
traditional homebuyers
SOUTH
WINDSOR, Conn., July 17,
2024 /PRNewswire/ -- 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.
Summer 2024 Investor Sentiment Survey
Release Marks the Launch of the Investor Sentiment Index
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."
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
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SOURCE RCN Capital