Investor optimism reaches annual low

The real estate market downturn has been affecting just about everything from interest rates to rental occupancies.

Perhaps its biggest impact is its effect on investor optimism, which reached an annual low in August 2006.

An article, “Investors lose confidence in residential real estate” published August 28, 2006 on Inman News provides information on how the current real estate market had such an impact on investor optimism.

“ The Index of Investor Optimism dropped two points since July to 53 in August, and has fallen 40 points since January. The index is based on a monthly survey and had a baseline score of 124 when it was established in October 1996.”

The index’s results were released August 28, 2006 in accordance with the UBS/Gallup index.

Why has the real estate market had such an impact on the index?

“‘One key issue of growing concern to investors is the residential real estate market,’ UBS announced today. About 44 percent of respondents rate conditions in the real estate market as ‘only fair,’ and 12 percent rated real estate conditions as ‘poor,’ up from a combined 46 percent who rated the market as ‘only fair’ or ‘poor’ in June and July.”

The real estate market has been slowing for about a year and investors are worried that it is not going to turn around anytime in the near future. This is making investors weary of conducting any investments; they would rather wait to see what happens in the upcoming months.

“ About 70 percent of investors believe that conditions in the real estate market are getting worse, up from 63 percent in June, the survey also found. Investor sentiment toward investing in real estate assets nationwide has also fallen. In August, 50 percent of investors said that now is a good time to invest in real estate related assets nationwide, down from 55 percent in June.”

However, it is not the real estate market alone which is causing so much concern. Like everything associated with the market, there are many factors that are fueling real estate and economic concerns.

“‘The drop in confidence in the real estate market reflects the economic data for that sector and suggests that investors are feeling the pinch in their local markets,’ said Anne Briglia, senior fixed income strategist for UBS Wealth Management Research, in a statement. ‘Although we have seen gasoline prices stabilize recently, investors are clearly worried about the implications of international tensions on future energy prices.’”

“ About 94 percent of investors polled said they view energy prices as harmful to the investment climate. Respondents also stated that they believe gasoline prices will continue to rise somewhat over the next three months. About 85 percent of respondents said they believe current international tensions are hurting the investment climate, while 75 percent are concerned about the Federal budget deficit and 72 percent worry about the danger of increased inflation.”

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