In late March, Casey Lynch got off a reassuring call with his lender: Yes, the bank would still finance a downtown Boise project that his firm Roundhouse was in the early stages of planning.
Two weeks later, the bank called him back. It wouldn't be making loans after all.
Lynch, who builds and operates apartments, isn't the only developer in the Boise area to see a project delayed by the coronavirus pandemic. Uncertainty in the industry has led some developers to pull back on their applications.
Collegiate Development Group has said it will wait to build a 243-apartment project next to Winco Foods in Downtown Boise. Visum Development Group is delaying construction on an eight-story apartment and retail tower downtown.
Lynch sees the blow as temporary — but it was hard for him to shrug off memories of the last recession. It had taken years of work to get Boise to be seen as a market worth investing in since then, when credit markets dried up and construction slowed.
"Until recently, banks wouldn't even lend to projects in Boise," Lynch said in a phone interview. "That is going to be disrupted now."
The Great Recession fundamentally shifted what was built and who could afford it. Now, just 12 years since the supposed "once-in-a-lifetime" crash, developers and bankers are facing another one.
It's unclear how the impact of coronavirus on the economy will change the housing market here, and whether its impact will be as sweeping as the last recession's. But it seems unlikely to bring more than a brief halt to the trends of rising prices and intensifying shortages of houses for people of ordinary means.
"There's going to be a whole group of people from the West Coast who don't want to be in big cities who are going to want to move here," said David Wali, executive vice president of Gardner Co. "We don't have enough houses for the people who are here already."
The impacts of the Great Recession still loom large. The recession left the Treasure Valley with a deficit of housing: Builders went from building 11,039 housing units in 2005 to a low of 1,643 in 2010, according to COMPASS, the regional planning agency.
The recovery has been slow. More than a decade later, building levels have not yet surpassed the 2005 peak -- but they've come close. In 2019, the Treasure Valley added 10,295 residential units. Between 2010 and 2019, builders added 54,505.
Meanwhile, the Treasure Valley has grown from 581,288 people in 2010 to an estimated 737,790 people in 2020, according to COMPASS population estimates. With 156,502 people added, that means that over a 10-year period, the Treasure Valley added 348 housing units for every 1,000 additional people.
In 2015, Boise conservatively estimated that it would need to add 1,000 housing units per year by 2035 to meet demand, or about 400 units per 1,000 people. And that's just for Boise, which is growing at a slower rate than Meridian or Star.
"We've been building a deficit of housing over the last 10 years," Lynch said by phone.
It's a harsh contrast from the housing boom of the early 2000s, which — fueled by real estate speculators and subprime mortgages -- resulted in a temporary oversupply of housing in Boise.
Corey Barton, founder of Meridian's CBH Homes, Idaho's largest homebuilder, can remember walking into one of his subdivisions in 2005. Peering into the windows, he realized that 10 of the homes he had sold months earlier were still sitting vacant. They'd been bought by speculators, hoping to flip them for a profit or rent them — but couldn't.
"It was at that moment that I was like, 'Well, I should pay attention here,'" Barton said in a phone interview.
Since the recession, a combination of construction labor shortages, limited loans for developers, rising land prices and skyrocketing demand have contributed to a new housing market that favors building luxury homes and rentals over small starter homes.
Housing industry leaders list a number of reasons why the more builders build, the more they fall behind.
After the real estate bubble burst and the value of houses plummeted, credit disappeared. With banks refusing to make loans on real estate, developers stopped building.
"If you had any real estate projects, lenders didn't want to talk to you about it at all," said Boise land consultant Bob Taunton by phone. "A lot of bankers had taken back a lot of property, so it was very, very difficult to get any new loans."
Less construction meant less need for construction laborers.
"Construction workers were washed out of the profession — in part because of age," Taunton said. Many of them were in their 40s. "It's not easy work. So they found other things to do, or they moved away."
And with the duration of the downturn, many didn't come back.
In August 2006, Idaho employed 56,500 people in construction jobs. During the recession, two in five of those construction workers disappeared, leaving Idaho with 33,400 by August 2011. Slowly, that number has grown: In August 2019, the state returned to prerecession levels, with 56,400 construction laborers employed.
Workers cost more now than they did before the recession. Median hourly wages for construction laborers have grown 40% since 2005, to $16.53 from $11.81. That, plus increases in materials costs, have brought construction costs up by 20% to 30% from 2010 levels, local developers estimate.
"Everyone's chasing available labor, offering them a little bit more," Taunton said.
There's also the growing cost of land. Between 2012 and 2017, residential land in the Boise metro area grew in price from an average of $206,000 an acre to $386,600, an increase of 87.7%, according to the Harvard Joint Center for Housing Studies.
As costs escalated, the projects that did get built tended to be smaller in scope. Rather than building 50 houses at a time to achieve economies of scale, developers could only get enough money from banks to build 15 houses at once, Taunton said. As a result, the houses that did get built also tended to be less affordable.
Entry-level housing — which in previous recessions had helped to lead recoveries — wasn't built in the years following the Great Recession. The young people who would typically buy up smaller-sized housing couldn't. Many had lost their jobs. Others had seen the financial commitment of homeownership backfire on their parents and opted to rent instead.
As the economy recovered, developers opted to build luxury housing, which offered better profit margins than small-starter homes.
"If there's plenty of demand at the mid- to high-end products, why would you spend time at the entry-level side of the market?" said Wali.
Rising land costs also make building bigger more attractive, Wali added. "If you're collecting a 10% margin on a house, why would you spend time on a $200,000 house?"
So that's what has been built since the construction low in 2011 -- houses above 2,000 square feet on cheap farmland in West Boise, Eagle and Meridian that home builders sold for $300,000. Few houses less than 1,500 square feet. Few townhouses. And few apartments -- at least, not until the market started to recover around 2014.
It's a trend that has largely continued today, as more retirees and newcomers move to the Treasure Valley after cashing out on their houses in higher-priced markets. Since 2015, no new house in Ada County has sold for less than $160,000, according to statistics from the Intermountain Multiple Listing Service.
The trend is bigger than Boise, said David Ledford, executive vice president for housing finance and regulatory affairs at the National Association of Homebuilders.
"We have a real affordability crisis," he said by phone. "The supply of homes for entry-level buyers has been inadequate. It's hard to build an affordable home when you've got so much sunk into the land costs."
In the recession and early years of the recovery, not only were builders not building new starter homes, but a wave foreclosures had drowned Boise's market. With prices depressed, large-scale investors snapped up foreclosed houses and converted them into rentals.
That interrupted the typical real estate cycle of young people trading up their small, modest homes for larger ones as they got older and wealthier, freeing up those houses for new buyers.
By the time some millennials could afford to buy again, Boise had gotten cool. By 2014, the Treasure Valley's population was growing by about 20,000 people each year, or 55 people each day. Demand pushed prices up. Since 2007, the median home price in Ada County has increased from $228,000 to $347,275.
Prices aren't just high in Boise. They've risen in areas like Meridian, Kuna and Nampa, places that traditionally offered cheaper land costs and more affordability.
With limited land availability and increasing demand, maintaining affordability in the Boise area may require residents to accept denser types of housing that can be built efficiently for middle-income families, like duplexes, condos and townhouses, housing experts say.
That "missing middle" housing — choices that exist between suburban single-family homes and downtown apartment towers -- can keep buyers from continually being forced to drive further out to find cheap housing.
"Homeownership is really geared toward the influx of the population coming into Boise," said Jennifer Seamons, senior vice president of KeyBank's Community Development Corp. "The multifamily development is really catered toward a modern, single person who wants to live downtown. There's not the inventory available for your teachers, your firefighters, your police officers, to really afford within city limits anymore."
The Treasure Valley was just returning to its prerecession housing numbers. Now, developers worry what the coronavirus-led downturn will spell for Boise's housing market.
One thing many agree on: This recession won't overhaul the real estate industry the way the Great Recession did.
"The two are not even close to being the same in our world," Barton said.
"2008 was a financial crisis," Seamons said. "Here, we are in the middle of a global pandemic. But there are some similarities in terms of potential effects, and how it's going to ripple through the economy."
Most developers interviewed by the Statesman said they expect that housing construction could slow -- but the timeline for a recovery will be much faster than the mid-2000s recession.
"Builders are in a much better position heading into this possible downturn," said Abram Neider, CEO of Meridian's Eaglewood Homes. Before the recession, he built around 200 homes a year. These days, he builds just 70 — and he has buyers in place before he even starts construction on most of them.
Homebuilders like Neider and Corey Barton say they're still moving forward, business as usual. But for apartment and townhouse builders who rely on lenders to finance their projects, the coronavirus could stall development.
"Short-term, you will see almost no new construction in the Valley, including on multifamily," Lynch said. "You couldn't finance almost any speculative project right now."
It's unclear how long the disruption will last, Lynch said. But the impacts will also be felt on the demand side.
In the renters' market, demand could increase as more people put off buying a home.
"Unemployment is going to spur the demand for more affordable housing nationwide," Seamons said.
But in the homebuyers' market, the number of out-of-state buyers could decline as fewer people seek to move.
For Scott Weyrauch, this is the second time in his life that a recession has interrupted a move. Based in Las Vegas, the 49-year-old works as a self-employed project manager for trade shows and events around the country.
He planned to put his Las Vegas house on the market on March 18 and relocate to Boise this summer. But then the coronavirus hit. Every major trade show was canceled until October.
"I need to see my industry come back before I put my house on the market," Weyrauch said in a phone interview. Until he can sell his house in Las Vegas, he can't move.
Lynch expects that Weyrauch isn't the only one in that situation.
"The 20,000 people a year moving to the Treasure Valley could be cut in half," he said. "If you're moving from California and your personal balance sheet has been decimated by this, the last thing you're going to do is pack up and move to a place where you don't have a job."
But he anticipates that as soon as people can move, they will — and perhaps in greater numbers than the Valley has seen in the past. That means that home prices aren't likely to decline.
In fact, many developers expect values will keep climbing — which they say makes the need building even more pressing.
"Because we entered this crisis with a shortage of housing, there's still a need for more housing," Lynch said.
