Senior housing faces a budding glut as Boomers Prefer to Stay Home.
The rise of technologies that help the elderly stay in their homes threatens to upend one of commercial real estate’s biggest bets: Aging baby boomers will leave their residences in droves for senior housing.
“People don’t want to go to a place where there’s only a bunch of other old people,” said James Crispino, head of the senior practice at design firm Gensler.
The aging-in-place technology trend marks a challenge to the numerous real-estate developers who have been rushing to build senior housing to accommodate the roughly 72 million Americans born between 1946 and 1964, representing about 20% of the U.S. population. In about one decade, boomers will start reaching their mid-80s, the typical move-in age for senior housing.
Senior-housing developers added 21,332 new units in 2018—more than double the number that was added in 2014, according to the National Investment Center for Senior Housing & Care, an industry organization. Senior housing is now one of the fastest-growing commercial real-estate sectors, ahead of office, retail, hotels and apartments, according to Green Street Advisors.
But developers might have jumped the gun a bit and now some worry there is an emerging glut of senior housing. Senior-housing occupancy fell in the third quarter of 2019 to 88% compared with 90.2% in the fourth quarter of 2014, according to the National Investment Center for Senior Housing & Care.
Some companies specializing in senior housing are suffering. Shares of Ventas Inc., a big health-care real-estate investment trust, fell close to 9% one day last month after it said the occupancy rate of its senior-housing communities declined to 84.1% on June 30, compared with 84.5% a year earlier and 88.5% in June 2014.
Moreover, the average age that people enter senior housing has been rising, partly because of improving health. It is about 84 to 85 years today, compared with 82 one decade ago, according to Green Street analyst Lukas Hartwich.
Complicating the Problem
Developers are scrambling to come up with facilities where seniors do want to live.
Assuming they succeed, what about all the already built developments that do not fit the bill?
And if they don’t succeed, it’s even worse.
Build for Millennials?
Perhaps builders would be better off building developments where millennials want to live. But student-debt ridden millennials cannot afford to buy much of anything.
Housing Bubble Reblown
As noted in Housing Bubble Reblown: the Last Chance for a Good Price Was 7 Years Ago.
Moreover, millennials delay family formation because of debt, so fewer need a home.
Still others are squeezed by rent.
Squeezed Out of House and Home
Millennials are Squeezed Out of House and Home.
They cannot afford to buy and they cannot afford to rent.
This will force more millennials to move back home.
Others will move back home (if they are not already there), to take care of aging parents.
Secular Deflationary Implications
To top it off, millennials’ attitudes about housing and family formation have changed.
Millennials do not have the same values as their parents.
That is a secular change, not a cyclical one, with huge deflationary implications.
Mike “Mish” Shedlock
If they want the boomers to move in to the housing then make it for the Millennials, or better yet gen X. Then the boomers will climb over each other for more loans to prevent it or take it for themselves and move right in.
Boomers ‘prefer’ to…
but their children will decide.
I am a firm believer in euthanasia. Death with dignity.
What a waste. Don’t kill yourself before you take out someone that needs taking out. Let the cops euthanize you. Do the world a favor before you go.
After the corporations that own these senior care facilities go bankrupt, the cities will take some of them over and convert them into low-income housing and/or homeless shelters.
The city/county used to operate some of these as warehouses for low income people in the process of dying, which is what “nursing homes” used to be. They sold them off about 20 years ago, however. I suppose we could go full circle.
FWIW, by the way, many of these facilities are operated by not-profit corporations. That doesn’t mean they can’t go bankrupt, but it is less likely as they will have fund raising efforts to go through before that would ever happen.
LMAO
My dad lives with us, and im not that young anymore. He cant walk anymore. Scared to death of nursing homes and after my wife had worked in a few in years past cant say I blame him. He lives on our property in a separate house but one of us is always around. Im there now helping him go to the bathroom which is every 3 days or so and usually a 2 hour ordeal. Then ill be back here at 2pm and then go to work for 10 hours. When I get old im just screwed because we decided not to have kids and who says they would’ve done what we are anyway. Ive also decided im not going to a home so when the time comes im checking out on my own. Problem is not coming down with a sudden sickness thats so bad im not able to do that and end up at the death camp. This isn’t crazy talk. Dad’s the 4th elderly person ive dealt with and seeing his struggles etc im telling you straight up how it is. I will say I think this country does a piss poor job of taking care of their own. I work with some tawaiese and they are nothing like the US habit of dropping the old off in the trash bin.
Id also like to add for the people that say “I dont want the burden” that it’s pay back time. Think of the crap they had to deal with your first 18 years. Just remember……..with that attitude you’ll also be going to a home staffed with $10hr rear end wipers that have zero interests in hearing you talk about your past or anything else. Leave it the USA to figure out a way to profit massively and further destroy family.
Well if you are going to off yourself, maybe you will consider starting a society called “Do something productive with your last days”. In that society, people who are near death are given a 9mm hand gun and directed toward a scum bag politician to go have a final meet and greet with. Might as well do something to benefit the rest of us on your way out.
Looking at my property tax statement this am, we could use some deflationary pressure. And a whole lot of it. Yeah, wishful thinking that would bring my bill down. Just really depressing.
Our real estate taxes have more than doubled in 21 years. However, the house might be marketable for the same price it would have gotten when we build in 1998. That’s after another $80K in improvements/upkeep. WE’RE ALL REALLY RENTERS WITH SIGNIFICANTLY MORE SKIN IN THE GAME!
Sounds like a great opportunity for some website to become the “Amazon” of senior living openings … a little competition in this situation would bring the price of entering nursing home living waaaaayyyyyyy down. 😉
We’re talking seniors here: You need a business model more aligned with Über (renting) than Amazon (buying).
I don’t see the problem here. Boomers are far to young to be customers of these facilities just yet. Wait 15 years, and these places will be full, and have waiting lists, unless they go crazy building more in the interim. Yes, when the baby boomers die off, there will be too many of them, but long before we get there, there will be too few of them.
Long health care REITs ? A serious economic downturn would definitely keep ‘those places’ empty, with children willing (or forced rather) to take care of their parent(s) again…..
Senior care won’t be as much of a problem moving forward for a few reasons. Boomers are the last generation that can possibly afford these inflated prices (my aunt’s facility cost over $10K a month before she died, and that was in the Midwest). American health care is permanently uninterested in competitiveness, so rather than lowering costs the number of care homes will dwindle.
The other issue is that life expectancy has fallen for what, the last five years? By all indications that will continue into the future and accelerate in any significant downturn. In the coming decades fewer people will live into old age. Eventually, people won’t believe things like the 2020 election where every major candidate is in their 70s!
Wrong on the last point. All the candidates are filthy rich and have the best healthcare money can buy.
Yeah, life expectancy between the rich and everyone else will widen. The problem is that wealthy old people will be unrelatable to the general population, so as long as we’re going to keep up the “candidate you’d rather have a beer with” charade, the elderly won’t do well.
If we drop the pretense and have open elite rule, that’s a different story.
Never mind we’ll import the new economy.
Eureka!! We should create a system where hard working up and comers who are trying to form families carry the weight of the poor, the elderly, The wars , the government, etc. Just think, the elderly can live retired in their lake house for 50+ years, play golf and never have to baby sit if they don’t want to (carried by SS, Medicare, etc from the up and comers). Then Mish can write blogs about why they aren’t moving into $4-5k daycares. Let’s see what that does to our society!! Oh wait… It’s a failure. Family formation from anyone who should be making families has ground to a halt!
Family formation by the poor seems to be at an all time high.
Is this assisted living housing? Or any type of care inclusive housing? These will be expensive, costing from a minimum of $4k up to $10k. If this is about unassisted senior housing, then they definitely need more of it in CA. The wait lists for these are hundreds to thousands long.
My in-laws moved to a single level condo-duplex in a gated community for their old age. Most of the people there were middle aged or elderly, but there was a swimming pool in the community for the grandkids to enjoy. I think similar communities with moderate accommodations for slightly disabled folks is a great idea. I also like the roommate plan layout. You may love each other, but sleeping together and sharing a bathroom is not as much fun as it was in your 20’s.
I sold my paid off 2500 sq ft home for $330k and downsized to a 400 sg ft apt for $700 a month…wish I had a bit more room but I’m not paying $2000 for something that a builder wants based on THEIR needs for income vs my needs for space and economy….
Glad that works for you. I think you would do well in prison because your current living space is the size of a couple prison cells.
For those that want to conserve money while still living a real life I suggest calling all the boat yards up and down the east and west and gulf coasts in search of buying an old fiberglass trawler that is almost worthless, get something in the 40+ foot range with a trashed out engine. Spend no more than $5k on the hull. You will find that many people have huge project boat sitting in boat yards until they die, leaving the boat yard owner with a non-paying owner. They cannot sell these boats because they don’t run and so often they just take a chainsaw to them and haul them away at their own expense. IF you offer them a song they will take it and be glad for actually getting money instead of having to spend to get rid of it.
Dump the inboard engines out of it and put a small 100 HP outboard on a bracket off the transom. Buy something used but in really good shape, including bracket, for $5k. This will push you around at 8 knots quite efficiently. You then reclaim the engine bay as living space or storage space. Find something with an aft cabin. You will have good living space and also low cost mobility on a platform that has no property tax associated with it. You can stay at marinas on a monthly basis or find someone in SE fl who has canal front property in lauderdale or miami who wants to rent their seawall out. This can be had for $500 per month and sometimes less if you find an older, more conservative person who is desperately in need of cash to pay their property taxes. With this you could live a very nice, very enjoyable life and government can never charge you another dime in property tax.
My parents died in 2018 at the ages of 95.5.
Even though my mother had dementia for the last 6 years of her life, my stubborn father did not move them to “Sunset Living” until 3 weeks before he died. She lived in the memory care unit at $6000/mo for another 8 months. Good news. He was really good at investing his engineer’s salary and they had plenty of money.
My brother and I sold the house for $500K and it scraped and replaced by a $1.8M house.
My wife and I expect to leave our daughter between $29K (Fidelity’s worst case) and $12M (cfireSim’s best case) when my wife dies at 95.
Hilarious. Do I understand correctly you inherited $250-900k (from the house alone) and you hope to leave your posterity at least $29k? Bravo!!
Or $12M.
Quite a range, but the Monte Carlos I run on my future have a wide spread (cardboard box under freeway to living 1st class).
Predicting the future is a bitch, but a great gig if you have boundless self confidence and/or self delusion. With a loud mouth and plenty of predictions you can provide everybody with what they want – a crystal ball.
The difference between astrologists and Lou Dobbs is simply a matter of scale (plus his acute Dunning-Kruger’s).
There really are a wide range of different facilities. My father also used what you call a “sunset” facility for the last 3 months of his life, for about $6k a month. These have full time nursing, and are dedicated to end-of-life care. They are very different from the independent apartments for elderly, which have nurses on staff, but where people live in their own apartments, and can live independently. Both serve a needed function.
Remember, though, baby boomers are only 56-66 years old right now. Few are candidates for the sunset facilities, and most are not even ready for the independent apartments yet. Give them another ten years, though.
I plan on dying at home with a glass of Petrolo Galatrona in my hand.
Excellent goal. I did have to look up the wine.
It is a single vineyard Merlot from Tuscany. My wife and I were married atop the Galatrona Tower – a 12th century watchtower on the property of the winery.
Is that made from petroleum?
Drinking your children’s inheritance?
Seniors understand that selling their home and moving to expensive senior housing is a death wish. Accommodations are tiny, food is terrible and there is nothing for them to do. At least in their own home they can eat what they want or not, make as much noise as they like and they have something to do…. look after their home. My grandmother always lived with one or another of her children. She in return looked after her grandchildren during the day and cooked the evening meal. Win win for both. During her last years they looked after her and were happy to do so.
I am 72 and my only grandchild is 5. I bought a house two miles from her parents. They put me in charge of education. I found a private christian academy that was acceptable to them. I pay for it, and I take her to and from school. I also get to spend time at Lava Island and Chuck E. Cheese.
You are a real man. No kidding. You shouldn’t have to pay, but you are doing your duty. Proud of you. Thank you.
There will really be a glut when the boomers all die off.
I’m not convinced they’ll ever actually be gone. I think half are trying to live forever and the other half are investing in cryogenics. (Tad bit of humor but you get my point).
Sometimes having a kid stay with parents is not so bad. When my grandfather was widowed he let his daughter’s family move in with him, and they took care of him. Seems like a win/win to me, and also seems to me that was pretty common in the “old days”. An old friend of mine retired to Florida and has one kid in NY, one in Washington state and one in France. Not very close family, poor guy.
This is actually common in Asian cultures until the most recent generation. Now most kids are not near their parents. There has been a boom of retirement places in Asia for the same reason but it is much cheaper.
We did the same thing with my dad and it worked out way better.
It’s my understanding that was the way it generally worked in the US until literally one generation prior to the current elderly generation. My grandfather literally raised me while both my parents worked.
My idea is to accumulate a lot of gold, bury it in several locations, distribute the encrypted treasure maps and crypto keys to unwitting (yet trustworthy sources), establish a fool-proof time-released method for my children to acquire said crypto keys and maps (which requires a secret input from me, designed to assure they are taking good care of me), and then …
Crap, that’s too complicated. Instead, I’ll continue to love them and pour my life into their lives, teach them values and the Word of God, and share my wealth now. Trusting they will do the same for me if I need them.
The nuclear family is an excellent solution but government wants everyone to have their own home so they can have more real estate tax income. Also they can tax care providers if the kids aren’t doing it. Nuclear family is cheap.
It would make a lot more sense for many of these boomers to give the house to their children (who are priced out of the market).
Eventually there be a wealth transfer but my feeling is it will be a lot smaller than people think because boomers are living longer and will have more time to spend money.
Boomers don’t usually spend the money. They have been there and done that. Yes they may live longer but so what. We all die in the long run.
Well my point was it costs money to simply live in a house. You have maintenance, taxes and other associated costs. I think boomers spend more than the generation before them. I also do expect that well to do boomers will spend money on quality of life differences to their health more than the generation before them. The longer they live the more they have to spend. That’s the bottom line. Oh yeah..there’s that thing called healthcare that only gets more expensive.
Cost less to live in your own mortgage free home including maintenance expense and property taxes than to move into a “seniors residence” IMO. And as I don’t live in the US, healthcare costs are not something boomers I know worry about.
Healthcare only matters if you are not willing to die. Once you accept death as inevitable you can avoid the healthcare trap. I was born in 1947.
I do think boomers are willing to spend on elective medicine if it improves their quality of life. That market will grow. Boomers also like to travel imo.
Boomers have the highest amount of personal loan debt according to Experian. They are buying something.
Most boomers I know are debt free, and mortgage free and are retired, and remain in their own home. Some do downsize to either a smaller single family home or a condo but still live debt free. But as I /they don’t live in the US, healthcare is not an expense they worry about.
Since this blog piece is on the US, things are quite different than in your country. Also, the Experian article does not say health care costs is the factor.
Seniors in the US have Medicare.
NBBS: My personal debt is high, according to my credit scoring system, because I put everything on my credit cards (including business expenses) then pay them off each month. Because of my credit score (and being male, if the latest Apple Card reporting is anything to go by) I have much higher credit limits on my cards than I asked for or really want. My kids can barely get credit cards, even the ones in solid employment with plenty of money in the bank (the others are at school). So it is of no surprise to me that 20-somethings have lower personal loan debt than 60-somethings – my wife and I try to get as much cash back from our purchases as we can. My debt is my mortgage (plus a car loan I got because they gave me 0% interest – why not, and it was after I’d negotiated the price with the expectation I was going to pay cash – they don’t take credit cards unfortunately at car dealerships). The mortgage used to be a good tax write off, but not since the personal deductible went up and AMT got taken off the table (the 2017 tax bill was the only good thing Trump did for me personally, and that was really Paul Ryan).
They are buying their retirement. They have no intention of paying it back. There was no jail for financial scammers in dot bomb, 2008, etc. so why bother worrying about repaying debt AS LONG AS there is no valuable collateral tied to it. This is what many people are thinking now.
Technology can do little to address mental degradation and seniors don’t see a big dif between seniors housing and a nursing home. Cost, stigma and putting off deciding.
Or some of us will have more time to invest our accumulated assets?
Yes but you have to be mentally sharp to do so which becomes increasingly difficult after 75 or 80.
Give the house to the kids? And then what for the boomer? Live where using what income? The kids will get either the house or the money in the long run. What is the rush?
And many kids these days will sell the house, blow the money on Millennial stupidity and then not even bother to stop by for your funeral.
C_O correct on price
The only benefit comes when the elderly need assistance to live. I just had to share the burden with one of my brothers of caring for my aging/dying mom. It is a lot of work to take care of a person who cannot even get up out of bed on their own. Which means they also need diapers and someone to change them like they were a baby. It’s no crime getting old but using one’s youth to take care of someone in that shape is no fun and your own life is ticking away as you do it.
Still, you do it until it no longer needs done and you hope like hell there will be someone to change your diaper when the time comes.
The biggest reason is the prices are just way too high. It costs on the order of 4k to 5k per month to live in most of these facilities. That is much higher than even a boomer with decent retirement money can afford.
Why would today’s elderly move out of their house unless they were mentally deficient or decrepit? These people lived through the greatest time of plenty in American history. If they own their home, they were also likely in a position to save. Plus, the younger generations pay their SS and Medicare; much greater sums (adjusted) than the elderly paid in for their parents. In my state, the elderly also get very preferential prop tax treatment. Why would they move out?
Yup. A house with a large garage has room for the motorcycles, bicycles, and skis. I was born in 1947.
I wish you all the best.
My wife have enough retirement income (promises) to live in one of these high end facilities, but the only way we’re giving up our home is if a van full of white coats forcibly remove us. I would rather die than be shelved in one of those facilities.