Investor confidence in the housing market held steady in the third quarter, according to the Fall 2025 RCN Capital/CJ Patrick Co. Investor Sentiment Index, released on Thursday.
The index dipped slightly from 102 to 101, marking the sixth time in 10 quarters it has finished above 100, a sign of continued optimism among real estate investors. But the reading was 23 points lower than a year ago, reflecting ongoing challenges in a sluggish housing market.
The index found that 45% of investors viewed the market as better than a year ago, down from 49% in the second quarter. About 30% said conditions were unchanged, while 24% said the market had worsened. Looking ahead, 48% expect conditions to improve over the next six months.
“Market conditions for real estate investors continue to prove challenging, with stubbornly high financing rates, rising labor and materials costs, and soaring insurance premiums taking a toll on investor profit margins,” said Jeffrey Tesch, CEO of RCN Capital.
“These higher costs have also made affordability a problem for homebuyers — especially first-time buyers — which weakens demand and limits opportunities for fix-and-flip transactions.”
While investor views on the current market were steady, their plans to purchase more properties dropped modestly. Investors remained confident in home-price growth, with the index’s home-price outlook rising three points to 75.
The index detailed that investors are increasingly gravitating toward rental properties as home sales have been slower. Roughly 44% of survey respondents identified as rental property investors, compared with 38% as flippers and 17% as wholesalers.
Nearly 55% said they had shifted their primary investment strategy in recent years, often moving from flipping to rentals.
But fix-and-flip investors expressed greater optimism than rental investors, with about 55% of flippers saying that market conditions had improved over the past year, compared with 27% of long-term rental property owners.
Fluctuating home prices have prompted many investors to modify their business models. Nearly 29% said they had reduced asking prices or rents, while 21% scaled back investment activity. Half of flippers reported lowering their sale prices, compared with about 10% of rental investors who said they had cut rents.
Other concerns include rising insurance costs and limited coverage availability. More than three-quarters of investors reported that insurance factors into their decision-making, and 64% said it has caused a deal to fall through. The issue is particularly acute in insurance-sparse states like Florida and California.
Federal trade and immigration policies are also affecting investors’ businesses. About 56% cited higher construction costs tied to tariffs while 46% said labor shortages tied to deportation policies have made hiring more difficult.
High financing costs are the top challenge for nearly 70% of investors, followed by rising home prices, limited inventory and competition.
“Most of the challenges investors are concerned about directly affect an investor’s profit margin, and this is an issue most acutely felt by smaller investors, who make up over 90% of the residential real estate investment market,” said Rick Sharga, CEO of CJ Patrick Co.
“Financial returns on property sales or rentals are critical for these investors, since 76% of them report that investment income is either their primary source of income or an important supplemental source of funds. Compressed margins can be the difference between a comfortable lifestyle and financial distress.”