Posted: January 15th, 2024
The Fall 2023 Investor Sentiment Survey from RCN Capital revealed that investors remain optimistic about the future of the residential real estate market, even in a time marred by numerous challenging conditions. This optimism is encouraging, as it indicates that investors believe there are positive prospects for growth and success within this sector despite headwinds. By investing carefully and with confidence, these individuals can take advantage of any opportunity to make profitable investments while also helping to fuel economic recovery in their local areas.
The results of a recent survey conducted by RCN and CJ Patrick Co. indicate that 72% of investors believe market conditions are the same or better than they were one year ago. Furthermore, 75% expect these conditions to remain stable or improve over the next six months. These findings suggest that most investors have an optimistic outlook on their investments in the near future.
The latest investor survey indicates a noticeable improvement in sentiment compared to the results of the previous one conducted earlier this year. 49% of respondents thought that current conditions were better than they had been last year, up from 30% when asked in springtime. This suggests an increase in confidence amongst investors regarding their outlook on economic performance.
“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,” Jeffrey Tesch, RCN Capital CEO
“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.”
“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 CEO of CJ Patrick Company, Rick Sharga. “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.”
While investors are feeling more optimistic about the real estate market, they are still exercising caution in their investments. The survey revealed that only 22% of respondents plan to buy more properties than one year ago, with 39% planning on buying the same number and another 39% investing in fewer properties. This indicates that although there is an increase in optimism, investors remain aware of potential risks associated with making large-scale investments.
High capital costs are a major roadblock to investors in today's market, with 76% of respondents citing them as an obstacle. Capital costs refer to the expenses associated with starting or expanding a business and can include purchasing equipment, hiring employees, and building facilities. Such high upfront investments can be difficult for businesses to manage and deter potential investors from entering the market due to risk-averse tendencies.
These prohibitively expensive start-up costs make it hard for entrepreneurs to launch their projects while also preventing new investment opportunities from emerging. In a survey of investors, the most commonly cited challenge was lack of inventory with 42% reporting it as an issue. This was followed by competition from institutional investors (33%), consumer homebuyers (29%), difficulty securing a loan (22%) and supply chain delays (22%).
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