Real estate investor sentiment mixed as market pressures persist

A recent survey conducted by RCN Capital revealed that just over half of real estate investors feel that current market conditions are at least on par with those from a year ago. However, this optimism has shifted as investors express more concern about the upcoming six months, particularly due to anticipated interest rate hikes from the Federal Reserve and challenges related to affordability for both rentals and purchases.

The RCN Capital Investor Sentiment Index, which reflects investor confidence in the market, climbed from previous record lows to a score of 89 in the third quarter, marking a five-point increase. The index uses a baseline of 100, with scores below that indicating a pessimistic outlook within the industry. Despite this slight improvement, investors have indicated a reduced willingness to pursue new acquisitions in the coming year compared to their sentiments a year prior.

Nearly 60% of the survey participants indicated that the ongoing conflict in Iran has adversely affected the real estate market. Additionally, about half reported negative repercussions from stringent immigration policies and tariffs implemented during the Trump administration. While 39% of investors believe market conditions will improve in the next six months, this is a slight increase from the 36% who felt similarly in the summer.

Jeffrey Tesch, CEO of RCN Capital, commented on the survey results, noting that investor sentiment has closely mirrored actual investor activity. He pointed out that purchases by investors declined in the first half of 2026, which aligns with the overall dip in sentiment. Despite this downturn, Tesch highlighted that single-family investors continue to play a crucial role in stabilizing the housing market, which is currently facing a shortage of traditional homebuyers.

In response to the ongoing challenges in the market, many major mortgage lenders in the United States have shifted their focus towards originating loans specifically for business purposes aimed at investors, as the demand for typical home purchases and refinancing has significantly decreased since the pandemic.

Investor sentiment took a notable hit following the onset of the Iran conflict in late February, which has led to an energy supply crisis and subsequent inflationary pressures. After accounting for approximately 30% of home sales in 2025, investor activity has slightly declined this year amidst broader market pressures. Investors have expressed particular concern regarding the potential for further interest rate increases by the Federal Reserve, which officials at the central bank are strongly anticipating in the near future.

The report noted that over half of the respondents believe that rising rates will increase borrowing costs, thereby reducing profitability. This financial strain on renters is hindering landlords' ability to raise rents, even as their operational and holding costs continue to rise. Additionally, slow sales, escalating acquisition and holding expenses, and declining home prices have been steadily compressing profit margins for home flippers over the past few years.

Research indicates that, in the last 18 months, a growing number of flippers have been selling their completed properties for less than their anticipated prices, while few have managed to exceed their targets. Meanwhile, typical homebuyers are grappling with similar market challenges such as high interest rates and tight budgets, which has led many to remain on the sidelines.

As more non-investor homebuyers withdraw from the market, demand for single-family rentals has increased, providing some stability and supporting rent hikes. The diminished competition from traditional buyers for reasonably priced properties may enable investors to secure better acquisition prices.

Rick Sharga, CEO of the business advisory firm CJ Patrick Co., which conducted the survey, remarked on the impact of the Iran conflict, stating that it has negatively influenced investor sentiment, aligning it with the broader trends observed in consumer and builder confidence, both of which are currently at or near historic lows.