Single-Family Housing Investor Sentiment Hits All-Time Low Amid Rising Costs and Conflict

Investors in the single-family housing market are increasingly concerned about interest rates, rising insurance and home costs, and the ongoing war with Iran. As a result, they are less confident in their businesses than they have been in at least three years.

Investor sentiment at the end of June fell for the second straight quarter to an all-time low on the quarterly RCN Capital/CJ Patrick Company Investor Sentiment Index, or ISI. The index surveys more than 300 investors in the fix-and-flip and rental businesses.

Just 26% of respondents said they believe market conditions are better than they were a year ago, the lowest share since the survey began in 2023 and down from 35% in the first quarter. Fully 45% said the market has gotten worse, the highest in the survey's history.

"In addition to the ongoing conflict in Iran, rising finance costs, limited inventory, escalating home and renovation costs and downward pressure on rental rates are all contributing factors for their increased pessimism," said Jeffrey Tesch, CEO of RCN Capital, a private lender to real estate investors, in a release.

The vast majority of investors surveyed in this report were small to mid-sized. That's in contrast to large institutional investors covered by the recently enacted 21st Century ROAD to Housing Act, which will generally prohibit investors with at least 350 single-family homes from acquiring additional single-family homes. Small- to mid-sized investors tend to use bridge loans, special investor loans for rental properties and conventional loans that are typically 30-year and fixed rate. Of those surveyed, 28% reported paying cash in their recent purchases.

Mortgage rates hit a recent low at the end of February but rose sharply at the start of the war with Iran. They are now at their highest level in over a year.

More than half of survey respondents said the high cost of financing is "one of the biggest problems in today's market," according to the report. Three-quarters of them said they do not expect to see any rate relief anytime soon, and some expect rates to rise.