Real estate investor sentiment is up by 16% quarter over quarter, according to a new report from RCN Capital.
The nationwide lender, which specializes in investor loans, maintains an Investor Sentiment Index (ISI) jointly with CJ Patrick Company, tracking market outlook based on four questions in a quarterly survey. According to respondents to the summer iteration of the survey, 60% of investors see today’s market as “better” or “much better” than it was one year ago. Just 20%, conversely, felt it was either “worse” or “much worse.”
Investors also seem rosy on the future, with 61% anticipating market improvement and just 14% foreseeing a decline.
“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.”
There was a substantial contrast between the two subsets of investors when it came to market confidence. Seventy-three percent of fix-and-flippers say the market is better or much better today than it was one year prior, and 75% of flippers expect conditions to get better. But just 35% of rental property investors see current conditions as better than last year, and just 37% see improvement in the cards.
On the flip (no pun intended) side, just 11% of flippers think the market is worse now than a year ago, but 36% of rental property investors do.
“It’s interesting to see some of the nuances in the investor sentiment data, and consider some of the implications,” said Rick Sharga, CEO of CJ Patrick Company. “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.”
Asked about the biggest challenges to their investment success, the high cost of financing, as in previous surveys, was mentioned most frequently, being cited by 74% of respondents. Lack of inventory, which was named by 45% of respondents, supplanted rising home prices, which fell to just 35%, as the second most prominent challenge. Other market issues garnering large response shares included competition from institutional investors (44%) and from traditional consumer homebuyers (26%).
