Business sentiment among residential U.S. real estate investors plunged during the first quarter after having remained broadly steady over the previous two quarters, according to findings from a quarterly industry survey released Tuesday.

After reporting “cautious optimism” for the sector in 2026 amid a “mixed outlook” for acquisitions at the start of the year, respondents to RCN Capital’s spring outreach sent the private wholesale lender’s Investor Sentiment Index plummeting 14 points to 87 in the first quarter, its lowest level over the 11 quarters since the index began.

In a market analysis accompanying the survey findings, RCN Capital linked the dislocation in investor sentiment to a broader shift in consumers and business outlooks darkened by various energy, trade and growth impacts of the ongoing Iran war, the balance of which “points to growing concern about near-term housing market conditions.”

“Notably, this quarter marked the first instance in which all four components of the Investor Sentiment Index declined simultaneously,” the report noted. “As a result, the overall decline in the Index reflects a broad-based shift in outlook rather than weakness concentrated in any single category.”

The RCN Capital survey asked respondents to assess current market conditions compared to a year ago, market conditions over the next six months, year-ahead acquisition plans and the trajectory of home prices. RCN called slow first-quarter home sales “probably also a contributing factor” to overall “lackluster” sentiment.

Nearly 60% of surveyed investors, which includes a mix of large and small operators across the rental portfolio and fix-and-flip or fix-and-hold channels, think the war in Iran will have a negative impact on the housing market, and therefore on their business. The pessimism was “more prevalent among fix-and flip investors,” with 66% believing the war would hurt their business, compared to 46% of rental property investors.

“Investor sentiment was clearly affected by the war in Iran,” said Jeffrey Tesch, CEO of RCN Capital, in a press release announcing the findings. He noted specifically how the war “reversed the positive outlook investors had expressed about 2026” in the previous survey.

Rental investors, however, offered darker outlooks on current market conditions, with almost 46% feeling that the residential real estate investing environment had deteriorated from a year ago, compared to only 29.5% of flippers.

Overall, 32% of respondents think conditions will worsen over the next six months, up from 27.2% during the previous quarter — though larger shares of investors expect the market to improve (34.3%) or stay the same (33.7%). The high cost of financing was rated by 54% of respondents as one of the three biggest challenges facing their investment activity, followed by home prices (33%) and competition from institutional investors (32%).

About 42% of respondents cited flipping as their primary type of investment, compared to about 41% who cited rental investing. That marks the “first time in several quarters” that flipping surpassed rental investing, according to RCN.

The survey found that 58% of real estate investors reported owning five or fewer properties, 21.7% own six to 10 properties and 3.67% own 11 or more investment homes.