What You Need to Know
- Two-thirds of those surveyed said insurance issues had caused them to miss out on an investment opportunity.
- Seventy-five percent of flippers believe that the U.S. economy is likely to enter a recession this year.
- Investors seem to expect more competition from both institutional and consumer homebuyers six months from now.
Real estate investors are feeling upbeat despite numerous ongoing challenges, according to the RCN Capital/CJ Patrick Company Investor Sentiment Index, published Wednesday.
Investor sentiment shot up by 16% quarter over quarter, with 60% of surveyed respondents viewing the current market as better or much better than it was a year ago, compared with 20% who said it is worse or much worse. Sixty-one percent expect it to continue to improve, while only 14% expect a decline.
RCN Capital said this was the highest percentage of positive and lowest percentage of negative responses since the survey’s inception.
The index is based on a quarterly survey conducted by market intelligence firm CJ Patrick Co., which takes the pulse of real estate investors across the country, identifying market challenges and opportunities and seeking feedback on current trends and events.
Insurance Headaches and Squatters
Some 84% of the investors surveyed reported that rising insurance costs or the unavailability of insurance coverage was a factor in their decisions to buy and sell real estate. Two-thirds said these insurance issues had caused them to miss out on an investment opportunity.
Both of these findings were significantly higher than in last quarter’s report, RCN said.
The problem is particularly acute for investors in states that have experienced unusually high levels of extreme weather events in recent years. All respondents who invest in California properties cited insurance issues as a consideration in their decision-making, and 73% said insurance problems had cost them a deal.
In Florida, 83% acknowledged that they had factored insurance into their investment planning, and 67% noted that insurance issues had caused them to miss out on an opportunity.
The prevalence of squatters is another growing issue, cited by three-quarters of respondents in their markets. Fifty-three percent said they had experienced problems with squatters on a personal level.
The problem appears to be more severe for fix-and-flip investors than for rental property owners: 90% of flippers cited squatters as an issue, compared with about half of rental property investors.
Market Sentiment Differences
Market sentiment and outlook of fix-and-flip investors and rental property investors contrasted sharply in the new survey. Seventy-three percent of flippers said the market is better or much better than it was a year ago, compared with only 35% of rental property investors. Similarly, 75% of flippers expect market conditions to continue to improve, while just 37% of rental property owners do so.