Residential real estate investors are the most pessimistic they have been in three years, with fresh survey data showing sentiment sliding as geopolitical turmoil, weak home sales and rising costs squeeze the market.

Residential investor sentiment plummeted in the first quarter, according to the RCN Capital/CJ Patrick Co. Investor Sentiment Index, and sits at its lowest point since the index launched 11 quarters ago.

The drop marks a sharp reversal in sentiment — the index had plateaued over the last three quarters — that has left investors feeling slightly worse than at the previous low in the spring of 2025.

"Based on our survey results, the war in Iran is clearly having an impact on investor outlook, but the lackluster performance of home sales in the first quarter is also likely a contributing factor," Rick Sharga, CEO of CJ Patrick Co., said in a statement.

Home sales declined year-over-year in each of the first three months of 2026, and the war with Iran drove up oil prices and indirectly pushed mortgage rates higher, which RCN said likely dampened demand toward the end of the quarter.

Just under 59% of investors said they believed the war with Iran would negatively impact the housing market and their business. The concern is more pronounced among investors who buy properties to upgrade and resell, with 66% saying the war would hurt business, compared to 46% of rental property buyers.

RCN’s survey largely reflects the perspectives of smaller investors, with 4% of respondents owning 11 properties or more and 58% owning five or fewer properties.

Three-quarters of respondents said rising insurance costs or the inability to insure a property had become a factor in their real estate decisions, and 53% said it caused them to miss out on an opportunity to buy or sell an asset.

Roughly 30% of survey respondents said the investment environment was about the same as a year ago, with an even split on either side for investors who thought the landscape had gotten better or worse. Investors collectively had a similar outlook for how the residential market will look over the next six months, with 34% saying it will remain roughly the same.

The Q1 survey results were the first in which all four indicators in the index slid. Investors said the market was worse than it was a year ago, they have lowered their expectations for the next six months, they cut their acquisition plans for the next year, and fewer investors expect residential prices to rise.

“While the current reading is among the lowest recorded, sentiment has proven to be reactive,” RCN Capital said in a press release.

The index jumped 14 points the quarter after the negative report last spring.

“If market conditions stabilize or geopolitical pressures ease, we could see a similar rebound in investor confidence emerge in the Summer 2026 report.”

The Trump administration’s enhanced deportation campaign has had some impact on a majority of investors, with 35% citing higher construction costs, 36% saying it was harder to find labor and 21% saying it cut into sale and rental opportunities.

The tariff regime has hit 70% of investors, with 44% citing higher construction costs, 30% saying they have reduced net margins on income and 30% saying they faced supply chain disruptions as a result.

At least 30% of residential investors cited the high cost of financing, rising home prices, competition from institutional investors, a lack of inventory and rising materials costs as among their biggest challenges. Financing topped the list as a problem for 55% of investors.

The same issues are expected to be headwinds in the six months ahead, although significantly fewer respondents cited rising home prices as a concern.

Both single-family housing and multifamily developments are contending with the uncertain macroeconomic outlook and a supply glut weighing on rent growth. Multifamily asset prices are down 1% year-over-year, and Colliers forecasts pricing will remain flat during the year as part of a “rebalancing phase.”