The real estate market is in a state of flux. Lawsuits, record property prices, high mortgage rates, an affordability crisis. RentSpree CEO and Co-Founder Michael Lucarelli is providing his take on the state of the market and what the rest of this year might hold.

Without further ado, here’s a short Q&A we conducted via email:

What makes the housing market so challenging today and what role does the rental segment play in all of this?

Buying a home will continue to be out of reach for many this year, Just like it has been in the past couple of years. Mortgage rates have stayed higher than expected for the start of this year and despite high hopes I think they are unlikely to decline in any significant way in the near future. Adding to that is the increase of single-family home prices. Despite some recent headwinds, the median cost of a house in the U.S. is still $417,700 as of the fourth quarter of 2023. That’s 37 percent higher than in the first quarter of 2020. In some high-demand metros such as Los Angeles that number goes up to an astonishing $1.2 million, according to Realtor.com. These cost trends have pushed the average age of first-time homebuyers to 36. What does that mean? That more people stay renters longer. Investors have recognized that fact and poured billions of dollars into the apartment sector in 2023. Last year was also a record year for rental construction (more than 440,000 units have been added) and 2024 is likely to be similar. That has helped level out rents a bit, which is good for those looking for a home. Nationally, the median rent for a one-bedroom was $1,496, flat over the prior month. All this means is that the rental market is going to continue to remain very strong this year.

It seems in the world of agents, brokerages and MLSs, the for-sale market is pretty much anyone is focusing on. Why would anyone want to deal with less-lucrative and often time-consuming rentals?

It’s true that a lot of attention is often directed towards the potentially lucrative for-sale market. But we think that overlooking rentals would be a missed opportunity for several reasons. First off, rentals offer a steady source of income for agents. While sales transactions can be more sporadic and unpredictable, rental properties provide a consistent stream of revenue because of monthly rent payments. This type of stability can be particularly valuable for newer agents.

Secondly, dealing with rentals presents an opportunity for lead generation by building lasting relationships with both landlords and tenants. Those can lead to repeat business, referrals, and connections that extend beyond individual transactions.

What is one of the predominant themes in the real estate space at this moment in time?

One of the biggest themes we are seeing is real estate turning ever more national. I used to always hear that real estate is a traditionally local business. But people are migrating more than they used to. Our own RentSpree data has shown that between 2021 and 2023, about 17 percent of rental applicants were looking for housing in other states. That’s up from 14 percent in 2020 and 12 percent in 2019. We think this is largely driven by a couple of factors. One, housing affordability is at a 30-year low. The troubling combination of rising home prices and high borrowing costs put the possibility of buying a home further out of reach for more people in their current locations. Secondly, remote and hybrid work options are continuing to be much more prevalent today. I think most industry leaders are less and less expecting a return to the way things were before the pandemic. Instead, many are predicting the possibility that many workers won’t be returning to the office at all or at least nearly as often. That gives people a lot more freedom to live where the cost of living might be less, such as in the suburbs or even other lower-cost states.