RCLCO: Sentiment Index in Recovery Territory

(Image courtesy of RCLCO; Breakout image courtesy of Mathias Reding/pexels.com)

RCLCO, Bethesda, Md., released its Real Estate Market Index, finding that sentiment has moved solidly into recovery territory. The index ended the year at 64.8–and an RMI over 60 is typically indicative of positive or improving conditions, the firm says.

The survey forecasts the index will continue to increase–the future RMI is projected to grow to 82.08 over the next year, which would indicate expansion.

Survey respondents generally predicted most real estate sectors to be in recovery or early stable phase.

And, 76% of respondents believe conditions will continue to improve over the next year.

Looking at the economy more generally, 66% of respondents believe interest rates will decline at a moderate pace. Opinions were mixed on inflation, but the largest share, at 38%, thinks it will remain stable.

Forty percent believe cap rates will stay the same; 37% believe they will decrease modestly. Sixty-eight percent believe capital flows to real estate will increase.

Views on construction costs were a bit more pessimistic than RCLCO’s last survey–57% of respondents believe there will be an increase.

Predictions the homeownership rate will increase moderately were made by 32% of respondents, up from the mid-year survey.

In terms of valuation changes for sectors, for-sale residential, multifamily, land, industrial and self-storage are predicted to grow by a weighted value of 3-3.5%. Hotel and retail are anticipated to grow by about 1.5%. But, the office sector is expected to decline by 2.25%.

Over half of respondents report that climate risk–such as conditions arising from flooding, hurricanes, wildfires and other natural disasters–have factored into their real estate activities, at 56%. However, only 12% say the impact has been significant.