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nvestor confidence in the residential real estate market has taken a significant hit, according to the latest Investor Sentiment Index from RCN Capital and CJ Patrick Co. The spring 2025 index score plummeted to 88, down nine points from the previous quarter and 12 points below year-ago levels, marking its lowest level since tracking began in fall 2023.
The index has shed a substantial 36 points from its peak of 124 in the fall of 2024. "Investor sentiment is mirroring homebuilder and consumer sentiment, which recently hit its second-lowest score in over 50 years," said Jeffrey Tesch, CEO of RCN Capital.
A survey of residential real estate investors nationwide found that only 31% view the current market as better than a year ago, down from 35% in the previous quarter. Meanwhile, those who believe market conditions have worsened rose to 34%, up from 25% in late 2024.
The outlook for the next six months is mixed, with about 34% of investors expecting an improvement, 33% anticipating no change, and 33% predicting a decline – a 14-point increase from the prior quarter. The index measures investor views on four metrics: current market conditions, six-month outlook, home-price expectations, and planned property acquisitions.
Three out of four categories posted declines, with only planned purchases showing an increase, albeit at its lowest-scoring level overall. Tesch attributed the decline to factors such as rising home prices, higher insurance costs, and persistently high mortgage rates.
A sharp divide exists between short-term fix-and-flip investors and long-term rental property owners. Flippers are more optimistic about market conditions, with 44% saying they've improved over the past year compared to 17% of rental owners. Looking ahead, 48% of flippers expect an improvement in the next six months, while only 17% of rental owners share that view.
Despite low enthusiasm, nearly half of all investors plan to maintain their current level of property purchases in 2025. However, 35% of flippers and 28% of rental owners said they plan to buy fewer properties this year.
Concerns about the broader economy are weighing on investor sentiment, with 56% expecting a U.S. recession within the next 12 months. Uncertainty over policy initiatives proposed by President Donald Trump is also influencing the forecast, with investors expressing concern about potential impacts of new tariffs and mass deportation efforts.
Investors worry that deteriorating economic conditions may lead to a recession and are unenthusiastic about the Trump Administration's plans for higher tariffs and mass deportations. Sixty percent of respondents fear tariffs will increase costs, while 47% expect supply chain disruptions and 40% anticipate reduced profit margins.
Insurance has emerged as a major obstacle, with 26% citing high or limited insurance availability as a problem. In total, 73% said insurance factors affected their investment decisions, while 43% reported missing out on deals due to insurance issues. Investors expect these challenges to persist, anticipating increased competition from institutional and consumer buyers in the coming months.
