Real estate investor sentiment fell to its lowest level in at least three years in the first quarter, in large part due to the Iran war, a new report found.

The RCN Capital/CJ Patrick Investor Sentiment Index dropped 14 basis points to 87 last quarter, the lowest score recorded in the 11-quarter history of the report. The first quarter also represented the first time all four elements analyzed in the index, current market conditions, outlook for future market conditions, home price trends and plans for property purchases, decreased quarter over quarter.

"Investor sentiment was clearly affected by the war in Iran," RCN Capital CEO Jeffrey Tesch said in a press release Wednesday. "Almost 60% of the investors surveyed believed that the war would have a negative impact on the housing market, and on their business, and this reversed the positive outlook investors had expressed about 2026 in last quarter's sentiment index."

Mortgage rates reached a near-four-year low at the end of February before they spiked in wake of the conflict.

The percentage of investors who view the market as better than it was a year ago fell to 36% from 45% in the winter, according to the Spring 2026 RCN Capital Investor Sentiment Survey. Those who viewed the market as being worse than a year ago rose from 25% to 36% as well.

Roughly a third of investors expect market conditions to improve over the next six months, down from 44% the previous quarter, while a similar percentage expect conditions to worsen, up from 19%, the release said.

The index plateaued at 101 over the third and fourth quarters of last year. This quarter's score of 87 was just a point shy of last spring's score of 88, though.

"Real estate investor sentiment is in line with consumer sentiment, which recorded the lowest numbers on record in April, and homebuilder sentiment, which fell four points in April to record its lowest score in 14 years," said Rick Sharga, CJ Patrick Company CEO, in the release. "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."

Home sales fell on an annual basis in January and February, but spiked 31.6% month over month and 3.4% year over year in March, according to Remax's national housing report.

The challenges mentioned most often by investors in the spring survey were: the high cost of financing, cited by just under 55%, followed by rising home prices at 33%, competition at 32%, inventory at 31% and rising costs at 30%, the release said. 

The Senate's 21st Century Road to Housing bill, which included a ban on home purchases by large institutional investors, was passed in March as well. But more than 46% of respondents identify as smaller investors, and don't think the bill will affect them. Another 25% of respondents were small investors who believe the ban will reduce competition.

Among large investors, roughly twice as many said the ban will make it harder for them to continue to invest, while a smaller number said they'll find a way to continue to purchase properties, according to the release.