Residential Investor Sentiment Jumps 16%

Residential real estate investors appear largely unphased by recent challenges including the high cost of financing, rising home prices, limited inventory and competition from institutional and traditional home buyers.

Investor sentiment jumped 16% from the previous quarter, according to the RCN Capital/CJ Patrick Company Summer 2024 Investor Sentiment Index. Nearly two-thirds of investors indicated they view today’s market as better or much better than it was a year ago, while only 20% felt it was worse. Further, 61% of investors expect the market to continue to improve and only 14% expect it to decline, which represents the highest percentage of positive responses and the lowest percentage of negative responses since the study began.

Investors are not without concerns despite their optimism, the report said. More than 84% of investors surveyed said they worry about increasing insurance costs and the unavailability of insurance in markets frequently impacted by extreme weather events. Nearly 68% noted that these insurance issues had caused them to miss out on an investment opportunity. Squatters are another commonly cited problem for real estate investors, with more than half indicating they have personally encountered problems with squatters.

Flippers were overwhelmingly positive about the market, with 73% saying it 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. However, 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.

The majority of investors, including 92% of flippers and 86% of rental property investors, said they plan to continue investing primarily in their home states.

“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.”