More than four months after the Iran war rattled real estate investor sentiment following a year of declining profitability in 2025, outlooks across the core purchase segment that has buoyed sales production since 2023 remain subdued.

“Driving worsening sentiment are several challenges, most notably the difficulty of finding deals and securing capital,” said investor-community platform BiggerPockets in its third quarter sentiment survey findings, published last week.

But more respondents now expect impacts of the Iran war on the real estate market to be muted, at 47% compared to 32.5% the previous quarter, suggesting “investors have absorbed the initial shock and no longer see the conflict as the market threat they did a quarter ago,” the report said.

“Investors increasingly see the market as holding in place,” BiggerPockets continued, “which fits the gradual cooling in overall sentiment we’ve tracked all year.” Higher borrowing costs appear likely to endure, more respondents said in the third quarter than during the first three months of the year.

In the first quarter, 40% of respondents expected typical 30-year mortgage rates to end the year between 5.5% and 5.99%. Now, 45% of respondents anticipate typical 30-year rates between 6% and 6.49% a year from now, while roughly 3 in 10 expect rates between 6.5% and 6.99%.

Concern about rising holding costs for investment properties — including persistent increases in homeowners insurance premiums, property taxes and repairs and maintenance costs — has also steadily eroded outlooks, as well as profit margins.

As a result, the more affordable Midwest market and “its reputation for affordability and cash flow” were overwhelmingly cited as having the best investing conditions over the next 12 months, with 45% naming the region compared to 22.5% for the second-place Southeast and Florida.

The Midwest recorded the lowest typical starter home price at $264,000 as of June, compared with $311,000 in the South, the region with the second lowest starter home price threshold. That affordability matters because investors, first-time buyers and low- to moderate-income buyers often compete for entry-level inventory, particularly in markets with tight supply.

Regional imbalances in supply conditions that have kept upward momentum on prices in the Northeast and Midwest as prices soften or decline in the South and West underpin growing sentiment that national prices will remain flat over the next year, with 40% thinking so compared to about 28% in the first quarter.

Pricing trends are of particular concern to fix-and-flip investors, not only when acquiring new properties to rehabilitate but in assessing after-repair-value (ARV) of the unit given prevailing sales conditions. Volatile rates and slow purchase demand have created unpredictable conditions for fix-and-flip investors, pushing more to ‘flip’ flips into rentals.

Rent conditions, however, have shown signs of firming after a prolonged period in rent softening in single-family rentals.

Rents were 1.3% higher year over year in May, according to analytics firm Cotality, half the 2.6% pace notched a year ago. Concerning more nuanced investor cash-flow considerations, lowest-priced rentals only posted 0.4% growth while the most-expensive tier rose 2.2%.

BiggerPockets’ survey found 45% of respondents expect rents to remain flat, while 38% anticipate a modest rise between 0% and 5%. Just 12.5% expect a “mild decrease.”

“Taken together, investors see rents as flat to slightly higher, a steadier picture than the one they paint for home prices,” the report read.

Long-term rentals remained investors’ dominant strategy of choice, selected by 55% of third-quarter respondents as the “most successful strategy” over the next year, up from the second quarter and well above the 8.5% who selected house flipping.