Are Investors Confident in Today's Real Estate Market? September 2020 Sentiment Survey

Here at BPInsights, we want to help real estate real estate investors gain a better understanding of today’s macroeconomic climate. In July 2020, we began collecting investor sentiment data in July of 2020.

What is investor sentiment data? In short, we’re asking how you view today’s market. Is it a good time to buy? What about sell? And do you think prices will go up—or stay stagnant?

After collecting a few months of data, we’ve already found some fascinating insights. These surveys provide a snapshot into how investors feel about the market in the year of COVID-19. Do you agree? Check out the results below and give us your thoughts in the comments.

Is it a good time to buy?

As represented by a randomly collected survey sample in early September 2020, the majority of BiggerPockets investors still believe it’s a good time to buy an investment property. In fact, roughly 54 percent of respondents either agree or strongly agree that the next six months will remain a good time to buy.

But interesting trends emerge if you look at responses’ weighted average—especially when you compare it to our previous survey, held in July 2020.

First, a quick note on how I am weighting these survey results. Each response is scored as follows:

Strongly agree: 3
Agree: 1
Neither agree nor disagree: 0
Disagree: -1
Strongly disagree: -3

For our July survey, the weighted average came back at a score of 1.11—meaning the average response was just slightly better than “agree.”

In September, that weighted average dropped to .71. That’s a pretty sharp drop. Because we’ve only collected this data for a few months, it’s impossible to compare this drop to historical trends—but let’s just say I am surprised. My best guess? As home prices in most cities continue to incline, investors are unsure if rental income will keep pace, and that depresses confidence.

However, the good news is that that confidence in the ability to obtain a mortgage is rising.

In July, the weighted average was -0.17—slightly better than neutral. (One thing to note: Given the way we phrased this question, a negative number is better. We’ll correct that in the future.) In September, that weighted average dropped to -0.49, indicating that investors are less concerned about their ability to get a mortgage than they were just two months earlier.

Is it a good time to sell?

Given the above data, it’s no surprise to see an increasing belief that now is a good time to sell investment properties.

In July, just under 52 percent of survey respondents agreed or strongly agreed that the next six months would be a good time to sell. In September, that number jumped to almost 70 percent.

Looking at the weighted average, we see almost an exactly inverse change between investor opinions about buying vs selling an investment property. In July, the weighted average was 0.6, and it has since risen to 1.13.

But when asked if they believe if home prices will rise in the next six months, investors are decidedly less confident. In July, the weighted average was just -0.03, as close to neutral as you can get. Confidence in appreciation has gone up slightly in September, leading to a weighted average of 0.31.

While confidence is rising, no one seems to be predicting runaway appreciation—at least in the next six months. We followed up with respondents who felt that prices were going to rise and asked them by how much. The average answer came out to one percent appreciation over the next six months. That’s not something to scoff at, but is a lot less exciting than the past few years’ appreciation trends.

What will happen to rent prices?

Investors in our surveys seem to be much less opinionated about rent prices than they are about buying and selling properties.

Looking at the above chart, you can see that very few respondents in both July or September felt strongly in either direction. Between 85 and 90 percent of respondents are clustered in the middle three choices.

In July, that led to a weighted average of 0.07—basically neutral. That score has since grown to 0.35, creating a very similar upward sentiment shift to the price appreciation shift shown above.

When asked how much rent will grow, the average investor predicted seven percent. Frankly, that seems too high to me. Seven percent rent growth in six months would be remarkable in any year—but in a year with millions of Americans out of work and facing difficult financial situations, rents rising that quickly seems a bit misguided.

Perhaps the uncertainty about vacancies over the next six months is creating some confusion. Looking at the chart below, you’ll see that of all our metrics, this one has remained the most stagnant. There has been almost no movement at all. In fact, the weighted average changed from -0.11 to -0.10 in two months—statistically, it didn’t move at all.

I chalk this up to a healthy dose of humility on the part of our survey respondents. With all the macroeconomic uncertainty (eviction freezes, government interventions, vaccines, and more!) it is truly difficult to understand how vacancies might trend in the coming months.

Overall, investors aren’t particularly panicked about the state of the real estate investment market. Yes, fewer investors feel like now is a great time to buy—but the majority still think it is. The majority believe that both rent and housing prices will appreciate, too. Personally, I find these results encouraging.

Because we only began collecting this data a few months back, we can’t compare our results to this point last year. If we could, I expect we would find somewhat similar results: That most investors think it’s a good time to buy, but others believe it’s time to take profits and sell some of their portfolio.

Hopefully, understanding the sentiments of your fellow investors will help you readers plan your investment strategies going forward. I’d also advise you to pay careful attention to any government stimulus plan in the coming months. Any action (or inaction!) will likely have a large impact on the real estate and rental markets.

What do you think about today’s market? Is it a good time to sell or buy—and what do you think rents will do?

Tell us in the comments below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.