REAL ESTATE INVESTOR OPTIMISM DROPS TO LOWEST LEVEL IN TWO YEARS ACCORDING TO SPRING 2025 RCN CAPITAL INVESTOR SENTIMENT INDEX™
Deteriorating market conditions, recession concerns, and uncertainty about the impact of Trump tariffs and mass deportations dampen investor outlook.
SOUTH WINDSOR, Conn., April 17, 2025 /PRNewswire/ -- Real estate investor sentiment fell for the second consecutive quarter, down by nine points from the prior quarter and 12 points from a year ago. The quarterly score of 88 was the lowest level recorded in the RCN Capital/CJ Patrick Company Investor Sentiment Index™ since it began in the Fall of 2023 and is down by 36 points since hitting its highest score of 124 in the Fall 2024 report.
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According to the Spring 2025 RCN Capital/CJ Patrick Company Investor Sentiment Index™, the percentage of investors who viewed today's market as better or much better than it was a year ago dropped from 35% in the previous quarter to 31% ; those who viewed the market today as being the same as a year ago dropped from 41% to 34%; while the percentage of those who felt market conditions had worsened rose from 25% to 34%. Investors were evenly split on where the market is headed over the next six months, with 34% expecting the market to improve, while 33% expected it to stay the same, and another 33% expected it to decline. The 33% response rate among investors expecting conditions to worsen represented a 14-point jump from the previous quarter, and is the worst negative score recorded since the beginning of the survey.
The RCN Capital/CJ Patrick Company Investor Sentiment Index™ (ISI) tracks the pulse of real estate investors across the country and gauges their market outlook. The Index uses Summer 2023 (the initial survey) as its basis, and analyzes responses to four key 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?
The Index score dropped from 97 in the Winter to 88 in the Spring. Three of the four metrics in the Index showed quarter-over-quarter declines: views on the current market dropped by seven points; outlook for the future market fell by 10 points; and belief that prices will continue to rise dropped by three points. Plans to buy properties, while still the lowest number in the index, actually improved by two points.
"Investor sentiment is trending along the same lines as homebuilder sentiment and consumer sentiment, which recently recorded its second-lowest score in over 50 years," said RCN Capital CEO Jeffrey Tesch. "Our survey results suggest that enthusiasm among both rental property and fix-and-flip investors is being challenged by economic uncertainty, rising home prices and insurance prices, and high finance costs. Hopefully market conditions will become more favorable as we move into the important Spring and Summer months."
Flippers Continue to be More Optimistic Than Rental Investors
Fix-and-Flip investors were significantly more positive about market conditions than were rental property investors. Over 44% of flippers believe that market conditions have improved over the past year, compared to only 17% of rental property investors. The gap was slightly wider when looking to the future: only 17% of rental property investors believe conditions will improve over the next six months, but 48% of flippers do. Similarly, only 28% of fix-and-flip investors believe that today's market is worse than last year's, while about 43% of rental property investors noted a decline in the market.
Both rental property and fix-and-flip investors agree that home prices will continue to rise: 53% of all respondents, 58% of flippers, and 49% of rental investors agree. But investors believe that home price appreciation is slowing down: almost 73% of respondents expect prices to decline, stay flat, or rise by less than 5% in the next year.
And there are also notable differences in purchase plans for flippers and rental owners. Just over 47% of all respondents plan to buy the same number of properties in 2025 as they did in 2024. But investors appear to be less likely to increase the number of homes purchased in the coming year: 35% of flippers and 28% of rental property investors said they planned to buy fewer properties in 2025.
Investors Concerned About the Economy, Skeptical of Trump Plans
Almost 56% of investors expect the U.S. economy to enter a recession in the next 12 months, possibly a contributing factor to the lackluster scores on investors' future outlook. Another potential reason for a less optimistic view of the market is uncertainty about the impact of two of President Trump's current initiatives: higher tariffs on imported goods; and mass deportations of undocumented immigrants.
When asked what the impact of higher tariffs might be, investors were concerned about increased costs (60%), supply chain disruptions (47%), and reduced profit margins on flips or rental returns (40%). Investors in California and Florida both noted supply chain disruptions already happening in their markets.
When asked about the impact of large-scale deportations, investors cited increased costs (48%), and difficulty finding skilled workers (47%). Interestingly, 33% of respondents said that mass deportations wouldn't have any impact on their business.
"Investors believe that deteriorating economic conditions may lead to a recession and are decidedly unenthusiastic about the Trump Administration's plans for higher tariffs and mass deportations," said Rick Sharga, CJ Patrick Company CEO. "Anticipating an environment with higher materials and labor costs, combined with a possible increase in unemployment which would weaken demand, appears to be clouding investors' hopes for future growth."
High Cost of Financing Still Cited as Biggest Challenge – Insurance a Growing Concern
The high cost of financing continues to be the most frequently cited challenge by investors, as it has been since the inception of the survey, noted by 55% of the respondents. Rising home prices (41%), competition from larger investors (38%), lack of inventory (33%), and the high cost and/or limited availability of insurance (26%) were the other challenges most frequently mentioned. As noted above, supply chain issues were cited by investors in Florida and California and may be related to some of the destructive extreme weather events that have decimated parts of both states in recent months.
This was the first time that insurance-related issues were among the five most-cited challenges, and reflective of a problem growing in size and awareness in the housing market. Nationally, over 73% of all investors claimed that insurance costs or the inability to secure a policy factored into their decision on whether or not to make a real estate investment, and over 43% said that insurance problems had caused them to miss out on a deal.
Future challenges cited by investors in the survey were almost identical, although the percentages varied slightly. One interesting note: both flippers and rental property investors believe that in the coming months they'll begin to see more competition both from larger investors and from traditional consumer homebuyers looking to purchase a property.
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, LLC