Since the start of the COVID-19 pandemic, we have seen the real estate market explode across the country. Idaho has been no exception to this recent boom.
House prices have significantly risen and the inventory of available homes has remained elusive. Throughout all of this, the rental property market has also seen tremendous growth in Idaho.
Let’s explore why rental properties in Idaho are a hot commodity. First, let’s start by taking a look at the overall real estate market due to its vast contribution to the rental market influx.
Real Estate Market Growth
Over the past two years, the real estate market has reached unprecedented new heights. We’ve all heard the buzz words being used like “skyrocketed,” “most competitive,” “record levels,” “it's a seller’s market,” and “red hot.” All of these describe what we have seen as people are buying and selling homes.
Here are some of the reasons why we’ve seen the real estate market boom.
Low Mortgage Interest Rates
During the pandemic, mortgage interest rates fell to an all-time low of 2.65 percent in January 2021. Instead of paying more towards the interest on a home, the lower interest rate allows home buyers to put that money towards the cost of the actual home.
This created an opportunity for many first-time homebuyers to feel ready to take the plunge into the world of homeownership. It also allowed current homeowners to upgrade their family homes for larger models while keeping their monthly mortgage payments roughly the same.
When everyone went into quarantine in March 2020, it was only supposed to be for three weeks. Those three weeks turned into months, and those months are now turning into years. During that time, many companies transitioned their employees to remote work.
Although many have not been quarantined for some time, some companies have decided to keep their employees remote. They have found that the work can be done just as easily in a home office as in their office building. Even if employees are not staying 100% remote, many companies are allowing greater flexibility with hybrid work schedules.
This ability to work remotely has allowed people to move to another part of their city, state, or even to another state all while maintaining their employment with the same company. Many have taken advantage of this opportunity to relocate.
When the decreasing mortgage rates started prompting people to consider buying a home, there was already a low inventory of homes on the market. This occurred for a number of reasons, including:
- People were reluctant to make big financial decisions during a time of uncertainty (the pandemic).
- People, knowing COVID-19 was contagious, did not want to have strangers in their homes for showings.
- Local restrictions in certain areas had impacted the housing development's growth.
In addition to these factors, the pandemic created an issue with the supply chain. The quarantine created a backlog of products because production had been shut down for weeks and months. Shipping was delayed nationally and globally. Home construction companies had to push out completion dates to wait for much-needed supplies.
All of these factors, and more, collectively created a small inventory from which potential homebuyers could select. As a result, they were competing with each other for the few homes that were available. This forced many buyers to put in bids over the asking price to even have a chance of having the winning bid.
As the inventory has slightly increased, it has taken some pressure off the market. This has recently allowed more people to purchase a home or to invest in real estate.
How Does the Real Estate Market Impact Rental Properties?
Now, how has this all impacted rental properties? Let’s look at a couple of reasons.
More People Looking to Rent
As the cost of buying a home has increased, many people are choosing to rent a home instead. As an article from the Washington Post points out, “So many families had been priced out of buying a house that the rental market in the Boise area had also become competitive, and rents had increased 18 percent since the pandemic began.” Although the cost of renting a house has increased, it is still lower than having a mortgage payment and the other costs that come with homeownership.
In addition, people who are currently renting might be looking for a new place. This might be because the current landlord is putting their rental properties on the market to sell. Also, we are seeing apartment complexes increasing their rent dramatically, in some cases, for current occupants.
Another factor is that people, who are moving from out of state or who have already sold their homes, are looking to rent a home while their new build is completed. The length of time to build a new house is taking two to three times as long right now compared to pre-pandemic timelines.
As a result, there is an even greater need for rental homes to meet the demand.
Supply and Demand
As with the home-buying market, a low supply of rental properties with a high demand of renters creates an environment in which apartment complexes and property owners are able to increase the rent to match what is happening in the rental property market.
According to a study conducted by Redfin, the average rent in the United States has jumped 14 percent as of December 2021. In certain parts of the country, it has risen as high as 35 to 40 percent.
A recent article by The Business Journal of North Idaho indicated, “With houses going up in cost and quickly disappearing off the market, many people have switched from sellers to rental providers.” They are seeing the long-term value of turning their home into a rental property rather than outright selling it.
Well, why not!?
As an article by Clever points out, “Idaho, with a strong state economy and growing population, is a great place to consider acquiring an investment property. Whether you are looking for single-family homes in the capital city of Boise, or student housing in one of several college towns, there are opportunities to make a profit for all kinds of investors.”
Idaho, as a state, has more to offer than just potatoes. Here are just a few reasons to invest in property in Idaho.
Even in its largest city, Boise, Idaho has a small-town feel. This carries all throughout the state to Pocatello, Idaho Falls, Twin Falls, and more.
People are looking to get out of big and crowded cities. Instead, they want more space. They want to live closer to where they work. Idaho provides all of this and more.
Lower Cost of Living
It just costs less to live in Idaho. This is especially true when compared to other states to its west and southwest: California, Nevada, Oregon and Washington. For this reason, many people are choosing to leave expensive cities and states to relocate to Idaho with its lower costs.
Although prices may have risen for certain things, like rentals, Idaho is still considerably lower than other west coast states.
High Quality of Living
While this may be subjective, Idaho has a higher quality of living than many other places.
Idaho gives its residents access to great outdoor amenities like its mountains, lakes, rivers, sand dunes, and valleys. There is also proximity to places like Yellowstone National Park, the Grand Tetons, Craters of the Moon, Coeur d’ Alene, Shoshone Falls, Thousand Springs State Park, Hells Canyon, Sun Valley, and more.
Idaho is the home to major employers including several government facilities and Fortune 500 companies. Throughout the pandemic, the economy has continued to grow. This has attracted a younger, more educated workforce.
As a result, Idaho has seen an increase in new residents, including many of whom are remote workers looking to leave behind expensive and crowded cities. Idaho cities are continuing to expand. This creates an excellent opportunity to invest in real estate.
If you’re looking to invest in property in Idaho, we have several other related blogs to help you decide where and when to invest:
Reasons to Invest in Real Estate in Pocatello, ID
Is Pocatello, Idaho a Good Place to Buy Rental Properties?
When is the Best Time to Invest in a Rental Property?
We are available to help with any questions.
If you own a home and are interested in converting it to a rental property, contact us. While we are headquartered in Idaho Falls, we have locations in Boise, Blackfoot, and Pocatello. At Rooftop Real Estate Management, we are committed to partnering with you, as a property owner, to help your investment reach its maximum income potential.