There’s a bright spot on the horizon for assisted living, and with all the bad news right now, some good news is especially appreciated!
The equity value of residential real estate continues to grow, and the predominant group benefiting from this growth are the older age cohorts. Their equity growth is important to the assisted living sector as the extraction of this equity is most often the primary means of financing assisted living.
The other bit of good news is that the rate of extraction, or liquidation, is low. This may be due to the double blessing of increasing real estate values and the robust economy. Fewer homeowners are accessing their equity through second mortgages, and many more 65+ remain in the workforce, leaving the primary residence “nest egg” untapped.
The assisted living market continues to struggle with market declines and correlated occupancy challenges. NIC reports that occupancy in assisted living hit a new low of 85.7%. However, the NIC data is based on a sampling method that has over-estimated the actual experience of many operators. In addition, many operators have removed capacity in response to declines in demand. We believe the actual occupancy, if all capacity were included, would be 80 – 82%. In some marketplace areas, the occupancy is even lower.
These market challenges are the result of the precipitous decline in live births from 1925 – 1945, as well as the continued poor acceptance rates among the elderly age cohorts. These are not “temporary glitches” as some have reported, but structural market supply and demand issues. To learn more abut how this affects you, email Stackpole & Associates at firstname.lastname@example.org.