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 . . . . . . .

To Buy or Rent—Now That Is a Question

I remember when I was in my late twenties the one thing I wanted most was to own a home. My wife had always rented so she, while understanding, was somewhat ambivalent. I persisted and just after we turned thirty we bought our first home in… San Francisco. Yes, the small town on the west coast where home price are now totally and completely nuts. In fact the home we purchased in 1979 was recently sold for 11.66 times the price we paid—yes, totally insanity. (In fact, no improvements have been made to the house since we sold it in 1990, now that’s sad  on many levels.)

But we, like millions of other across the United States, have weathered the ups and downs and the vagaries of the housing marketplace and survived, and most have prospered. Much of our collective net worth is in that humble assembly of stick and stucco. Our hopeful retirement fund is not in some stack of bonds and stocks, but covered by a new composite roof. Such is the state of the financial world in the United States. Much of the rest of the world is confused by this American institution—considering that to pay rent is the norm—not home ownership.

So why aren’t home sales bursting through the roof? There are more potential buyers out there than at any time since the years following World War II. They are wealthier (or have access to family capital), they find that interest rates are incredible low (more than half what we paid in 1979), and depending on the region, reasonably priced.

Some say it’s the amount of debt that the under thirty crowd carries over from college. This may be true. Some say it’s the fear of what they and their families have just gone through during the Great Recession; this may also be true. And some say the culture has changed, ownership means being tied down, beholding to a bank and to sticks and bricks. This may also be true. My guess is it’s all of these and more.

There are changes in automobile ownership; reports are that some in the younger generation are opting out of buying a car. They rent one when they need one—other than that they take the bus or the train. For some this is a smart move—we all certainly know the costs of car ownership. In fact there is a growing trend of renting everything among the youth—thus reducing the baggage that we older types carry around with us. They may be into something here, but this also leads to not saving. And not saving leads to having little left at the end of the month and the end of the year, and most especially the start of retirement.

It is very hard to put your finger on the problem, as this Wall Street Journal article on renters pointed out yesterday. There it is stated that the real reason for not purchasing is lack of money (down payment), income, and debt. I’m shocked; in more than thirty years the reasons for not buying a home are exactly the same reasons we were faced with. Much of what happened in the Naughty Aughties when the government, banks, and builders foolishly messed with market forces and over built, over lended, and then over extended themselves and came very close to collapsing the economy, is now being averted. Steady pacing of construction, more prudent lending, more stringent controls for loan qualifications, and renting will do more to quite economic fears than any government program.

Stay tuned . . . . . . . . .

New York, New York

Grand Central Station

There is much in this world we don’t understand. Things like: Why does gasoline go up fifty cents overnight? Why with full airplanes, they don’t add more flights? Why newspapers get thinner and thinner when there is obviously more and more news? Why my stocks go down when the market goes up and conversely why they go up when the market goes down? And lastly, why do so many people like New York City?

I am a provincial soul from California (actually Northern California). Here the weather and the politics are mild, pot in some form or another is legalish, restaurants open and close with regularity, and we believe in the tooth fairy, earthquakes that never happen, and that actors make great politicians. Ho-hum.

Take America’s number one or two vacation destination (depending on the poll), San Francisco. Wonderful weather, cool afternoon fogs, bright days, pleasant winds; when it rains it is soft with little insult. Streets are moderately clean as are the people. We are a melting pot (gruyere cheese please) of nationalities, refugees, languages, and apartment dwellers. It is never difficult to find some minority group in the Bay Area that represents a country that has had some sad unfortunate event occur in their home country, if there were refuges from Antarctica, there would be three families living together in an abandoned walk-in freezer south of Market Street. We take everyone.

A Little Bit of Heaven!

And now back to New York!

We non-New Yorkers are pummeled nightly by shows about New York. CSI New York, Person of Interest, 2 Broke Girls, Suits, Blue Bloods, White Collar, Mad Men, Law and Order (and the whole never ending series), and many others in all too never ending syndication. And don’t even start with movies and reality shows. As we walked the streets of New York, I thought I had been there before - like last night.

We were staying an elegant hotel near Central Park, good to great restaurants within blocks, but, good-God, meals were tough to keep below $125 for two – and we tried. Now I know, if you’re going to New York you expect this, everything is expensive. But it is made up for by the very, very, inexpensive baubles (designer handbags, scarves, Rolexes) on the street – so I guess everything balances out.

It is crowded, swanky, low-brow, high-brow, glittery, schmaltzy, stylish and plain, overrated and underrated. From the still under construction Ground Zero Memorial (which will take your breath away), to the top of the Empire State Building (millions and millions have gone before), it is a place of large scale thoughts and dreams. It is also tired and worn-out neighborhoods – East Village, Greenwich Village, SOHO, all showing empty store fronts, closed restaurants, and busted sidewalks.

Wall Street Bull with Admirers

It is a four story town with skyscrapers, like your mom looking over your shoulder, staring down on you while you do your homework or listening while you talk with your girlfriend. It is tourists with folded maps posing as targets for hippsters, hucksters, and hooligans. It queues waiting for the next hop-on/hop-off bus. It’s twenty-somethings (seems to be the dominant demographic) wandering about with the latest styles or the latest knock-offs in a bag. It’s hip-hop dancing on the street corners and horse drawn carriages. It’s the last place in America where men wear suits when they go to work. It is where retail comes and goes so fast the streets are perpetually covered in scaffolding. It’s a clean smelling city after a rain – not like San Francisco when it is ripe from a long rainless summer. It’s a thousand tourist’s rubbing the bull on Wall Street’s balls and having a Kodak moment. It is Chinatown where some haven’t left its twenty square blocks in years and play mahjong every day – rain or shine. It is the Hudson River side with parks, bikeways, and cruise ships. It is Bryant Park, Central Park, Washington Square, Battery Park, and Rockefeller Center, each saying much with just two words.

The Cascade at Ground Zero

And it is the Ground Zero Memorial with its twin central square cascade pools that seem bottomless and eternally deep.

New York City’s intensity is something, I guess, that you have to be born to, like an English Manor. It is hard, very hard, to walk in on. Too much information, too much noise, too much, much. I understand that it is a rite of passage: high school, college, degree, the West Village. Something for your resume, something to tell the grandkids. San Francisco is like that; I did that, for twenty years, and then decamped to the suburbs. Others are still doing it today (part of the reason for SF’s almost 10% increase in rents during the last year).

New York Checklist:

• Did I enjoy the visit? Yes.
• Did I eat and drink well? Yes.
• Was it interesting? Yes.
• Would I recommend it to my friends? Depends on the friend.
• Will I go back? Yes, sometime.

Stay Tuned . . . . .