Sector fundamentals are improving, really

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John O'Connor
John O'Connor

By any measure, the past few years have not been kind to the nation's overall economy — or businesses sensitive to its unpredictable mood swings. So it's no surprise that many key numbers in the senior living sector have been a bit worse for wear lately. While the sector may be Great Recession-resistant, it's not Great Recession-proof.

Even today, housing prices in many markets are only a fraction of what they were a half decade ago. That's worth keeping in mind. For in many ways, housing has become the engine that drives our nation's economy.

As a result, many seniors who might have otherwise moved into assisted living or continuing care retirement communities instead have opted to postpone the transition. Sensibly, they concluded that their homes were either not sell-able, or would have to be sold at a huge discount.

But there are some tangible signs that things are getting better for the senior living sector, and probably for the overall economy as well.

Mike Hargrave is the Chief Market and Data Strategist for the National Investment Center for the Seniors Housing & Care Industry. During a McKnight's Online Expo webinar on capital Thursday, Mike shared NIC data that clearly document an upswing in progress:

  • Occupancy rates are rising for skilled care, assisted living, independent living and continuing care retirement communities.
  • The same is true for rents.
  • Capitalization rates continue to go down in almost all the major senior living sectors (with the exception of skilled care, which seems to be permanently anchored around 13%).
  • Senior housing and care property transactions totaled $9.6 billion last year.

Add in that banks and other lenders are making capital more readily available, and there's little doubting that we're seeing a sector on the mend.

To mix a few metaphors, we may not yet be completely out of the woods. But at least we're no longer whistling past the cemetery. Some might call it a rebound edging toward kinder times.

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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Emily Mongan.

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