Are We Overbuilding Senior Housing?

This article in the Wall Street Journal (GO HERE) got me thinking about a number of things senior related. While housing is the most important – where, how much, equity, etc. – a number of other issues also come into mind, such as health, mobility, travel, and family. The focus on the WSJ article was on the businesses building housing for the older and more challenged seniors – most of whom are NOT baby boomers.

Senior assisted living properties coming on to the market today serve residents that are at least 75 years old and older. The first Boomers are now 69ish and even though maybe 10,000 of us do turn 65 each day is the magic number is age 66. I know there’s Medicare but it’s the SS check that really counts. And THAT is the problem: managing assets, health, properties, time, bucket lists, and family. So the issue of senior assisted living for most Boomers is irrelevant – and too soon. Now the businesses that are building these facilities need to be careful, true; but they will be ready (and if they survive) for the real press and need in about fifteen years.

The issue that I see confronting most of us in the over 65 crowd (and those soon to join us) is time, health, and equity. There are hundreds of experts out there willing to share their opinions on how to stretch your savings until your last breath—pleasant thought, eh? Nevertheless, it’s true, many of us have been successful in life, done right by ourselves and for their families and want, while still healthy, to climb to the top of the Duomo in Florence, see Antarctica, do a photo shoot in Africa or Alaska. And most want to see their grandkids get married – something that today is a far greater chance than ever. We are healthier, richer, and often, wiser.

The senior housing (assisted, resort, second home) market is incredibly diverse. By far the majority of Boomers will age in place. Their home is literally their castle. They will stay until they can’t or won’t take care of it. That will be a wrenching moment, we have all been there, or will be, with our own parents when they/we are forced to find other housing. The difficulty of planning for that day is hard. Too many variables, too much emotion, and too much history. But we get through it and more often than not, end up better in the end.

The most critical issue is the equity in our properties—how do you cash it out and use it to live. Sure Social Security is there, but hardly enough to travel on and maintain the life you’ve grown accustomed to. So we look to our savings (equities, bonds, and assets) and how to meter their returns and their decline. Should we sell the home? And when? Should we reverse mortgage (and how do you really do that?)? What are our renting options? And where? Too many options—and so much time.

Stay tuned . . . . . . .

I Wonder As I Wander

I have been wondering (a lot) about where growth and development will happen as we move from this cycle of collapse and retreat. I won't be pointing fingers or shaking my fist at the stars - too easy and accomplishes absolutely nothing. For this session let's just lay back on the couch and think a little about the future.

Obvious Trends:
Currently there are strong regional growth areas, such as Silicon Valley and other high tech areas that will continue to add jobs and more importantly entrepreneurial growth - from little acorns come huge oaks. While sadly I think that most tech manufacturing will still be outsourced overseas, the intellectual capital side will significantly support residential growth and the expansion of nearby existing research facilities. But housing will not be cheap, if anything, too expensive. I am also seeing sales of once high-tech land rezoned into residential use in these same markets - this is market driven as home prices continue to rise. The first builders in are the big regional players followed quickly by the national public companies.

Retail is in turmoil. After almost twenty years of building too much square footage there is a strong sense that this retrenchment (i.e. selling off malls for other uses, converting urban retail to multi-story residential) will have ongoing and serious effects on existing retail centers. The two major players, Simons and GGP are fighting it out in the marketplace with rumors of acquisitions and privatizations. There are too many big box retailers cannibalizing their own markets. Regardless of the "green mindset" people will drive to buy. Look for a return to and growth of well supported and "improved" older downtowns. Retail will continue to be more than loading up the SUV at Costco (but don't short their stock either).

The Boomer market is a head-scratcher. While there is a strong, albeit small, retirement community market - many of these are too remote to be effective. The days of the huge Del Webb communities are probably gone, they will be more modest and actually focused on one particular regional submarket such as south and west side of Chicago, affordable areas of New Jersey, the nearer suburbs of the San Francisco Bay Area. Most Boomers still want to be near their children and grandchildren but an international airport as well. The "urban" life is not for most of them, but think urbane. I also think there is a huge opportunity to develop dense and well amenitized senior neighborhoods with attention to great security and medical support. The things that scare most older people are being alone, ill, and forgotten. Senior and assisted living communities (at all economic levels) can provide these comforts. A good model is Sunrise - but costs are very expensive. This will be a big, big, political issue. Far more then even today's medicare debate, just wait and see.

Look for more and more assisted living communities - this doesn't take a genius to figure out. But they are still more often than not mom and pop operations. I see trends to larger and more resort oriented assisted living facilities. Not everyone is senile and bed ridden - at some time we will all need just a little more help.

What I also hope to see is more regional and sub-regional support for transit systems. This mania for high speed rail will pass as urban areas suddenly realize that the funds they desperately need are going to remote and underutilized areas. Look for expansions of systems such as BART and other Metro lines. One impact is the blowback form neighborhoods faced with freeway widening - they will not except it. The days of stacked freeways are a long time, if ever, away.

And lastly (as noted in last week's blog) look for renewed pushes into the regional edges. Land is cheaper (and way cheaper today than five years ago). This helps to support the primary reason for this edge growth - better and less expensive housing. It drives the enviros and pols crazy - but as always the marketplace will win out in the end. 

Stay Tuned . . . .