Boomers Prefer to Die at Home: Enormous Glut of Senior Housing

-edited

Developers keep building housing for seniors. The problem is, seniors don't want it.

Senior housing faces a budding glut as Boomers Prefer to Stay Home.

The rise of technologies that help the elderly stay in their homes threatens to upend one of commercial real estate’s biggest bets: Aging baby boomers will leave their residences in droves for senior housing.

People don’t want to go to a place where there’s only a bunch of other old people,” said James Crispino, head of the senior practice at design firm Gensler.

The aging-in-place technology trend marks a challenge to the numerous real-estate developers who have been rushing to build senior housing to accommodate the roughly 72 million Americans born between 1946 and 1964, representing about 20% of the U.S. population. In about one decade, boomers will start reaching their mid-80s, the typical move-in age for senior housing.

Senior-housing developers added 21,332 new units in 2018—more than double the number that was added in 2014, according to the National Investment Center for Senior Housing & Care, an industry organization. Senior housing is now one of the fastest-growing commercial real-estate sectors, ahead of office, retail, hotels and apartments, according to Green Street Advisors.

But developers might have jumped the gun a bit and now some worry there is an emerging glut of senior housing. Senior-housing occupancy fell in the third quarter of 2019 to 88% compared with 90.2% in the fourth quarter of 2014, according to the National Investment Center for Senior Housing & Care.

Some companies specializing in senior housing are suffering. Shares of Ventas Inc., a big health-care real-estate investment trust, fell close to 9% one day last month after it said the occupancy rate of its senior-housing communities declined to 84.1% on June 30, compared with 84.5% a year earlier and 88.5% in June 2014.

Moreover, the average age that people enter senior housing has been rising, partly because of improving health. It is about 84 to 85 years today, compared with 82 one decade ago, according to Green Street analyst Lukas Hartwich.

Complicating the Problem

Developers are scrambling to come up with facilities where seniors do want to live.

Assuming they succeed, what about all the already built developments that do not fit the bill?

And if they don't succeed, it's even worse.

Build for Millennials?

Perhaps builders would be better off building developments where millennials want to live. But student-debt ridden millennials cannot afford to buy much of anything.

Housing Bubble Reblown

As noted in Housing Bubble Reblown: the Last Chance for a Good Price Was 7 Years Ago.

Moreover, millennials delay family formation because of debt, so fewer need a home.

Still others are squeezed by rent.

Squeezed Out of House and Home

Millennials are Squeezed Out of House and Home.

They cannot afford to buy and they cannot afford to rent.

This will force more millennials to move back home.

Others will move back home (if they are not already there), to take care of aging parents.

Secular Deflationary Implications

To top it off, millennials' attitudes about housing and family formation have changed.

Millennials do not have the same values as their parents.

That is a secular change, not a cyclical one, with huge deflationary implications.

Mike "Mish" Shedlock

Comments (72)
No. 1-23
Casual_Observer
Casual_Observer

The biggest reason is the prices are just way too high. It costs on the order of 4k to 5k per month to live in most of these facilities. That is much higher than even a boomer with decent retirement money can afford.

Mish
Mish

Editor

C_O correct on price

Webej
Webej

It would make a lot more sense for many of these boomers to give the house to their children (who are priced out of the market).

stillCJ
stillCJ

Editor

Sometimes having a kid stay with parents is not so bad. When my grandfather was widowed he let his daughter's family move in with him, and they took care of him. Seems like a win/win to me, and also seems to me that was pretty common in the "old days". An old friend of mine retired to Florida and has one kid in NY, one in Washington state and one in France. Not very close family, poor guy.

shamrock
shamrock

There will really be a glut when the boomers all die off.

soupcon
soupcon

Seniors understand that selling their home and moving to expensive senior housing is a death wish. Accommodations are tiny, food is terrible and there is nothing for them to do. At least in their own home they can eat what they want or not, make as much noise as they like and they have something to do.... look after their home. My grandmother always lived with one or another of her children. She in return looked after her grandchildren during the day and cooked the evening meal. Win win for both. During her last years they looked after her and were happy to do so.

Bam_Man
Bam_Man

I plan on dying at home with a glass of Petrolo Galatrona in my hand.

davebarnes
davebarnes

My parents died in 2018 at the ages of 95.5.

Even though my mother had dementia for the last 6 years of her life, my stubborn father did not move them to "Sunset Living" until 3 weeks before he died. She lived in the memory care unit at $6000/mo for another 8 months. Good news. He was really good at investing his engineer's salary and they had plenty of money.

My brother and I sold the house for $500K and it scraped and replaced by a $1.8M house.

My wife and I expect to leave our daughter between $29K (Fidelity's worst case) and $12M (cfireSim's best case) when my wife dies at 95.

Danno1
Danno1

I sold my paid off 2500 sq ft home for $330k and downsized to a 400 sg ft apt for $700 a month...wish I had a bit more room but I'm not paying $2000 for something that a builder wants based on THEIR needs for income vs my needs for space and economy....

FarleyAgain
FarleyAgain

My in-laws moved to a single level condo-duplex in a gated community for their old age. Most of the people there were middle aged or elderly, but there was a swimming pool in the community for the grandkids to enjoy. I think similar communities with moderate accommodations for slightly disabled folks is a great idea. I also like the roommate plan layout. You may love each other, but sleeping together and sharing a bathroom is not as much fun as it was in your 20's.

Aaaal
Aaaal

Is this assisted living housing? Or any type of care inclusive housing? These will be expensive, costing from a minimum of $4k up to $10k. If this is about unassisted senior housing, then they definitely need more of it in CA. The wait lists for these are hundreds to thousands long.

Resjudicata
Resjudicata

Eureka!! We should create a system where hard working up and comers who are trying to form families carry the weight of the poor, the elderly, The wars , the government, etc. Just think, the elderly can live retired in their lake house for 50+ years, play golf and never have to baby sit if they don’t want to (carried by SS, Medicare, etc from the up and comers). Then Mish can write blogs about why they aren’t moving into $4-5k daycares. Let’s see what that does to our society!! Oh wait... It’s a failure. Family formation from anyone who should be making families has ground to a halt!

Resjudicata
Resjudicata

Never mind we’ll import the new economy.

Tengen
Tengen

Senior care won't be as much of a problem moving forward for a few reasons. Boomers are the last generation that can possibly afford these inflated prices (my aunt's facility cost over $10K a month before she died, and that was in the Midwest). American health care is permanently uninterested in competitiveness, so rather than lowering costs the number of care homes will dwindle.

The other issue is that life expectancy has fallen for what, the last five years? By all indications that will continue into the future and accelerate in any significant downturn. In the coming decades fewer people will live into old age. Eventually, people won't believe things like the 2020 election where every major candidate is in their 70s!

Carl_R
Carl_R

I don't see the problem here. Boomers are far to young to be customers of these facilities just yet. Wait 15 years, and these places will be full, and have waiting lists, unless they go crazy building more in the interim. Yes, when the baby boomers die off, there will be too many of them, but long before we get there, there will be too few of them.

jivefive99
jivefive99

Sounds like a great opportunity for some website to become the "Amazon" of senior living openings ... a little competition in this situation would bring the price of entering nursing home living waaaaayyyyyyy down. ;)

ksdude69
ksdude69

Looking at my property tax statement this am, we could use some deflationary pressure. And a whole lot of it. Yeah, wishful thinking that would bring my bill down. Just really depressing.

ksdude69
ksdude69

My dad lives with us, and im not that young anymore. He cant walk anymore. Scared to death of nursing homes and after my wife had worked in a few in years past cant say I blame him. He lives on our property in a separate house but one of us is always around. Im there now helping him go to the bathroom which is every 3 days or so and usually a 2 hour ordeal. Then ill be back here at 2pm and then go to work for 10 hours. When I get old im just screwed because we decided not to have kids and who says they would've done what we are anyway. Ive also decided im not going to a home so when the time comes im checking out on my own. Problem is not coming down with a sudden sickness thats so bad im not able to do that and end up at the death camp. This isn't crazy talk. Dad's the 4th elderly person ive dealt with and seeing his struggles etc im telling you straight up how it is. I will say I think this country does a piss poor job of taking care of their own. I work with some tawaiese and they are nothing like the US habit of dropping the old off in the trash bin.

Rvrider
Rvrider

LMAO

Rvrider
Rvrider

After the corporations that own these senior care facilities go bankrupt, the cities will take some of them over and convert them into low-income housing and/or homeless shelters.

Ted R
Ted R

I am a firm believer in euthanasia. Death with dignity.

john of sparta
john of sparta

Boomers 'prefer' to... but their children will decide.

dmar9
dmar9

If they want the boomers to move in to the housing then make it for the Millennials, or better yet gen X. Then the boomers will climb over each other for more loans to prevent it or take it for themselves and move right in.