Investor optimism hit an annual low in August, and has steadily declined since January, according to the latest UBS/Gallup index, released today.

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.

“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.

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.

“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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