Retiring baby boomers caught in the real estate crash are fueling three senior housing trends – smaller homes, cheaper furnishings and renting instead of owning.
The long-term future of the market is leaving real estate experts guessing until financial stability returns and seniors are more secure about their income and investments.
“First of all everyone knows the baby boomers are now moving into the senior market at an unprecedented rate, and that will continue for the next 20 years,” says John Rochford, president of Nashville-based Rochford Realty and Construction Company.
“The question of what those individuals will require or demand for housing is somewhat tempered by the impact on their decision making by the present economic conditions. These include decisions … on stocks and savings rate declines, and in a big way real estate values.”
Rochford says seniors are starting to prefer renting rather than buying in a “dramatic fashion,” and builders are constructing rental properties to meet the demand. His company offers apartments for seniors at the Saint Paul complex in Green Hills.
“There [also] has been a dramatic change from larger homes to smaller,” Rockford explains.” They [seniors] still want quality but at lesser cost.”
The most popular residences for seniors are one floor, with two bedrooms, two baths and a garage.
The lower-priced homes in the Cottages of Providence have dropped from about $250,000 a few years ago to $149,000 presently.
In addition to building smaller homes, his home offerings are now cutting expenses. For example, carpet and vinyl are being used instead of hardwood and other more expensive alternatives.
Both builders and realtors have been impacted by the trends.
Gaius Hill, president of Christian Realty in Franklin, says the hardest hit in Middle Tennessee has been the “senior community single family sales market, with sales slowing dramatically.”
Overall in Middle Tennessee, sales of the senior single-family community residences have dropped about 40 percent from their peak of a few years ago, Hill explains.
“The inability of seniors to sell their present homes easily and the loss of their property values have prevented them from buying residences in senior communities as they were a few years ago,” Hill adds.
Independent living communities, which generally lease, have been affected as well, with an increase in vacancies.
Nationally, independent-living leasing vacancy rates have increased about 20 percent in the last few years, but the Middle Tennessee market has been holding up better with vacancy increases of 14-18 percent, Hill says.
Locally, one of the more upscale independent-living communities is Legacy Crossing Retirement Community in Franklin.
Legacy Crossing is performing better than the norm, according to a spokesperson.
Prices range from $2,160 for an efficiency to $3,355 per month for a two bedroom. Included in the price are three meals a day, house keeping and utilities. Units vary from 438 to 840 square feet.
Assisted-living facilities have seen a vacancies increase four to six percent nationally.
Hill says Middle Tennessee has fared better with a rate of two to four percent, and some facilities have experienced no increase in vacancies.
Cumberland at Green Hills, is an assisted-living community that has performed extremely well in its three years of existence
“We have 110 units composed of studio, one-bedroom and two-bedroom units,’’ community relations director Nell Anne Hannon says. Prices range from $3,900-$7500 per month and for 499-1,200 square feet.
Hannon says the community is completely filled and has a waiting list.
Besides the economy, healthcare reimbursement can have an influence on assisted living unit demand, such as the Long Term Care and Choices Act for Tennessee that recently went into affect.
Hill says the act allows for more care reimbursement at assisted living facilities, including hospice care. This will significantly increase the demand for assisted living rooms in the near future by increasing the average stay for residents from about 24 months to 40 months.
Many assisted-living residents are there temporarily because of illness or injury. After recovery, they may move back home or into an independent-care community. So allowing additional service reimbursement can make a significant difference in stay times.
Continuing care retirement communities (CCRC), where an individual can go from independent living to assisted living and eventually to nursing home care, have been hit quite hard, Hill says. These often require a buy-in in which the senior pays an upfront charge for admission and then a monthly service fee.
This sector has experienced a decline of 40 percent or more over the last few years in Middle Tennessee, and 50 percent nationally, Hill says.
“We have made pricing adjustments to meet the changing market conditions,” says Jon Tagatz, executive director of The Heritage of Brentwood, an upscale CCRC that includes a nursing home and independent living..
The 180 independent-living apartments at The Heritage, completed in May of 2007, are 93 percent occupied. However, the 37 villas and garden villas completed in April of 2009 have met with “much slower occupancy.”
Tagatz says The Heritage also has started working with a third party to provide assistance in financing to seniors moving to the community and needing to sell their existing homes.
Despite current conditions, demand for senior housing is expected to increase.
“The senior population around Nashville is between 10 and 12 percent presently, depending on the county” says Maribeth Farringer, executive director of the non-profit Council on Aging of Greater Nashville. “By 2030 it is expected to rise to between 20 and 25 percent.”
This tremendous increase will eventually have major impacts on the overall community, she explains, adding economic conditions have many seniors reconsidering their plans. Instead of moving to a retirement community or assisted living, they are staying put.
“If you are living in a home where you mortgage is paid off, the idea of having to pay a certain amount each month in a questionable economy can raise anxiety levels,” she explains. “It scares some people.”
And because of the poor employment situation, some seniors are allowing their children to move in with them, she continues.
“Community Without Walls” is a national trend Farringer says she expects to start influencing Nashville. This is a community in which many seniors live and work together.
The Nashville Livability Project that is focusing on how the city will prepare for baby boomers, including housing, transportation and support services. When fully implemented, Farringer thinks it will be beneficial to the aging population and have influences on the market.
No one knows for sure how the trends will influence the senior housing market, particularly in the long run.
“It comes down to those who provide a place where people want to live for a more affordable cost will be the eventual winners,” Gaius Hill says.