According to the Fall 2023 Investor Sentiment Survey from RCN Capital, conducted by market intelligence firm CJ Patrick Company, real estate investors believe that market conditions have improved and will continue to get better in the coming months, as 72% of the investors surveyed said market conditions for investing were better or the same as a year ago, while 75% believed conditions would improve or remain stable over the next six months.
“Despite higher home prices, higher financing costs, and limited inventory, real estate investors continue to express optimism about market opportunities today and in the months ahead,” said RCN Capital CEO Jeffrey Tesch. “Investors continue to play an important role in the housing market–according to a recent report from CoreLogic, more than one in four home sales is to an investor, and we continue to see interest from both rental property buyers and fix-and-flip investors in our business.”
The Fall 2023 Investor Sentiment Survey is the second quarterly report from RCN Capital taking the pulse of real estate investors across the country, identifying market challenges and opportunities, and getting feedback on current trends and events through an 18-question poll.
Investor sentiment on the current state of the real estate market improved from the Spring 2023 Survey, with 49% saying conditions are better than they were a year ago, compared to 30% in the spring. Views on the market six months from now also improved, with 44% believing that conditions will improve, up from 30% in the prior survey. Despite the optimism, investors are moving forward prudently, with only 22% of the investors surveyed planning to buy more properties than they did a year ago, 39% plan to buy the same number, and 39% plan to buy fewer.
“Interestingly, fix-and-flip investors seem much more optimistic about future opportunities–50% of them believe that conditions will improve over the next six months compared to just 24% of rental property investors,” said Rick Sharga, CJ Patrick Company CEO. “That may be an indication that flipping activity has bottomed out, but may also be a reflection of current challenges in the rental market, with rates continuing to decline even as more rental inventory comes online.”
According to the Fall 2023 Investor Sentiment Survey, investors continued to see the impact of higher mortgage rates in their local markets. More than 30% have seen a decline in demand for owner-occupied homes, almost 21% have seen an increase in demand for rental properties, and 37% have noted both trends.
Despite being optimism about the market environment going forward, 53% of those surveyed believed that the U.S. would enter a recession in 2023 or 2024. Only 18% felt the country would avoid a recession, while 29% were unsure. But even with a recession looming, investors overwhelmingly believe that home prices will continue to increase, with 53% of those polled expecting home prices to rise, 22% believing that prices will remain about the same, and 24% believing that prices will decrease.
Investors found similar obstacles in the fall survey as were found in the spring survey in terms of barriers to homeownership, and remain the main concerns by investors in the months ahead. The high cost of mortgage financing was the biggest issue among investors, being mentioned almost 76% of the time, while a lack of inventory was mentioned by 42% of the respondents. Competition from other buyers clearly remains an issue in today’s low inventory environment, with competition from institutional investors noted by 33% of the respondents, and competition from consumer homebuyers by 29%. Other challenges mentioned frequently included difficulty in securing a loan (22%) and supply chain delays (22%).
In terms of what regions are hotspots for investors, a new question added to the fall survey asked investors where they purchased their investment properties. Most investors focused on close to their home, as 44% purchased within their hometown, and 79% within their home state. There were no significant differences in purchase distances between fix-and-flip and rental property investors.
Top states targeted by investors over the next six to 12 months include:
- California, targeted by 18.44% of investors
- New York, targeted by 18.16 of investors
- Florida, targeted by 15.27% of investors
- Texas, targeted by 9.51% of investors
- Arizona, targeted by 6.63% of investors
The states garnering the least attention from investor activity over the next six to 12 months includes a three-way tie between Nebraska, New Hampshire, and North Dakota, all targeted by just 0.86% of those investors polled, followed by:
- Rhode Island and Montana, targeted by just 1.15% of investors
- Hawaii, Louisiana, Maine, Ohio, Utah, and West Virginia targeted by 1.44% of those polled
- Wyoming, Wisconsin, Vermont, Oklahoma, and Iowa targeted by just 1.73% of investors polled
Click here for more information on the Fall 2023 Investor Sentiment Survey.