Is the residential housing market starting to bottom out? Possibly. The National Association of Realtors announced last week that the median U.S. price in July was $178,400, down 15% from a year earlier. Realtors and the media are already trumpeting a bottom based upon increased sales over the last month or two but we’ll need to watch carefully for the next three months as foreclosures represent a large part of home sales and as the tax credit offered to first time homebuyers is creating demand in the market for homes less than $400,000. This incentive expires in November of this year and there has been no talk of extending this by the Obama Administration. As for homes that are valued at $500,000 or greater, there is still substantial pain on the horizon. With financing scarce for jumbo mortgages and people waiting to sell their homes prior to buying another, the upper end of the housing market will have a harder time to adjust. Unfortunately, home equity isn’t going to rally as fast or furious as the S&P 500 has since March 2009.
Assuming we have reached (or nearly have) a housing bottom, what does this mean for the senior living/housing industry? Not much in the near term. Seniors will continue to live in their current residence (unless a life event happens) for the next 2-3 years before realizing that the home equity they lost will not be regained in enough time to make postponing a downsizing or lifestyle change practical. A more interesting question might be how long would it take to regain just half of what they’ve lost? With these facts in mind, demand for 55+ independent housing will start to gradually increase starting in 2011 and will most likely peak in 2019-2020. After this phase, the trends for assisted living and skilled care are likely to increase as this demographic bulge moves through the aging process. Lets hope that during the next 18 months, the commercial finance and capital markets will heal further and find comfort in the unstoppable demographic trends that senior living and housing are certain to come. That’s not to say that nothing will happen for the next 18 months…to quote Robert Burns, “The best laid schemes of mice and men, Go often askew.” Let the scheming begin.
