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US Market Improving (slowly)
Friday, November 18th, 2011
I know I do go on about the US market, but I find it endlessly fascinating. Of course that’s partly because there is so much data on the US market. We have so little data in Canada that it is usually quite difficult to figure out what’s going on.
The chart below, courtesy of NIC, shows a steady improvement in occupancy levels in independent living (IL) and assisted living (AL) communities in the US since the seniors markets bottomed out in the first quarter of 2010. It’s interesting though, or maybe depressing is the better word, to think about how long and how deep the slide has been, really since the latter part of 2006. Not only that, over the same period of time the 75+ population in the US increased by over 800,000 people. To put that number in perspective, in Canada there are a total of just over two million people over the age of 75.
So while things are getting better, they are still a long way from good, thanks largely to the still extremely sluggish US housing market.
Tags: Aging, Housing Market, Seniors' Housing
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Construction activity down but prices at high end up
Friday, November 4th, 2011
The National Real Estate Investor just reported that 14,942 units of private pay service-enriched and skilled nursing facility beds are under construction in the US. That’s up modestly year-over-year although well below pre-recession levels. But it’s way below the peak of 1998, when an astonishing 57,800 similar units were under construction. Of course a lot of those projects eventually went broke thanks to over-supply in many markets. I wonder what the Canadian situation is? Sadly, no one has any idea.
But prices for high end US projects have been climbing steadily since the recession. Reports from NIC and Real Capital Analytics indicate that in the first quarter of 2008, the top 25 percent of project prices was about $169,000 per unit. That number fell to about $101,000 a unit by the fourth quarter of 2009. Prices for the properties in the top quartile have increased since then to $170,141 per unit. That’s a big jump.
One of the transactions highlighted in the report is in Raleigh North Carolina. Prudential Real Estate Investors sold the project in 2004 for $29 million and just bought it back for $53 million from the same company they sold it to. Some improvements were made in the meantime (eg 14 cottages added) but it sounds on the surface like a very good deal for the interim owner.
Tags: Housing Development, Housing Market, Seniors' Housing
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Primary Market Areas
Tuesday, July 26th, 2011
Historically, market areas in the seniors’ housing industry in Canada have been defined for the service enriched segment of the market. Primary market areas (PMAs) are considered to be those areas from which 75-80% of the residents of a project will come. Sometimes radiuses are used, 10 miles being a popular one as in “This is a 10 mile business”. Occasionally the 10 mile rule even works but it is a risky thing to hang your financing on. Bridges, municipal boundaries, socio-economic neighborhood characteristics, competing projects—any of these, plus dozens of other factors, can and do affect the determination of primary and secondary market areas.
And of course there is the big one, the location of children. From the perspective of market analysis it would be comforting to think that the location of children is a neutral factor when it comes to estimating demand from primary and secondary market areas because it is a difficult factor to estimate. But it is far from neutral. It may even be as important as the presence of seniors themselves in a market area. Job-generating market areas will attract more seniors than they lose, which is why Alberta attracts and retains more people over the age of 65 than BC (strange but true).
As is almost always the case in Canada, there is very little hard data indicating whether the definition of primary market areas has any basis in fact at all, beyond the research Lumina has done with the BC Senior Living Association. Operators know where their residents come from of course but there has been no systematic collection and analysis of data that shows how reliable the 75-80% estimate really is.
But things are different in the US, where the industry sees the value of research and actually spends money on it! Wow – what a concept. The most recent NIC Insider Newsletter references a 2003 study that found that 22.5% of a large sample of new residents moving to CCRCs (Continuing Care Retirement Communities) had moved from farther than 15 miles away. Results of this study have been supported, in a way, by a just-published Reuters/University of Michigan survey. Of respondents to that survey aged 70+, 20.4% said that where they live was not convenient from the perspective of where their children live. NIC sees this as supporting the results of the 2003 survey and I suppose in a very indirect way it does.
Tags: Aging, Aging in place, Housing Development, Housing Market, Market Study, Retirement, Seniors' Housing
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Interprovincial Migration to BC (no no it’s not boring!)
Tuesday, July 12th, 2011
Readers of my book and this blog will know that I have what is probably an unhealthy, or at least an unnatural, interest in migration patterns. But anyone who is interested in seniors housing markets, or indeed any other kind of housing market, should pay close attention to who is moving where and for what reason. We just finished a market analysis in Saskatoon. Interprovincial and international migration to Saskatoon has been positive (ie in-migration has exceeded out-migration) for about 4 years now, after at least 40 years of more people leaving than moving in. The impact of that on almost every aspect of life in Saskatoon has been, if not quite profound, certainly noticeable.
Which, then brings me to BC. Immigration from other countries to BC is fairly constant from one year to the next. And almost all immigrants settle in the Lower Mainland, so it is a factor of less interest to other communities. Interprovincial migration on the other hand is hugely variable and affects communities throughout the province. Contrary to the urban myth that BC is a giant magnet for retirees, almost all interprovincial migration depends on economic conditions in BC compared to our eastern neighbours, particularly Alberta.
It sounds simplistic but it really isn’t—when interprovincial migration to BC is positive, things are good. When it’s negative, things are bad.
That’s why it was alarming to see in BC Stat’s First Quarter 2011report on interprovincial migration that for the first time in 9 years, quarterly migration has been negative. The report cautions that numbers are preliminary but states: “we can be reasonably assured that interprovincial migration to BC appears to be trending down”.
That is a sobering thought. In future posts we will talk about the sub-provincial impacts of these changes. As readers of my book know, great information on inter-, intra- and international migration trends is available from your friends at the Canada Revenue Agency. Your friends at Lumina Services pay close attention to this information in our unceasing search for the truth.
Tags: Aging, Housing Market, Migration, Seniors' Housing
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And you thought the US housing market couldn’t get worse: reverse mortgages in default
Wednesday, July 6th, 2011
If you did think that that US housing market couldn’t get any worse, think again.
Apparently a significant number of seniors who entered into reverse mortgage arrangements to provide an additional income stream are facing the possibility of foreclosure and could lose their homes. The problem is that reverse mortgage holders must pay property taxes and must maintain house insurance or they are considered to be in default. Nobody knows for sure how many people are in this situation but the industry estimates that there are 30,000 or so now and that that number is bound to rise. The US Department of Housing and Urban Development (HUD), which insures all reverse mortgages, is looking for ways to help homeowners in distress because it is “loath to foreclose on senior citizens”. I would think so. The Vice-President of the National Council on Aging said: “Nobody really wants to see situations where older homeowners end up on the street.” That too seems like a masterpiece of understatement. The President of the National Reverse Mortgage Lenders Association reported that the Association was making dramatic (my word not theirs) efforts to help their clients—sometimes helping them get food stamps for example. How’s that for heart-warming?
Tags: Housing and Urban Development, Housing Market, National Council on Aging, Reverse Mortgage, Seniors' Housing, US Housing Market
Posted in Housing Market, News, Seniors' Housing | Comments Off
State of the US Housing Market
Tuesday, June 14th, 2011
The Joint Centre for Housing Studies at Harvard University (JCHS) just released its 2011 State of the Nation’s Housing report. These reports are a gold mine of information on the US housing market. The 2011 edition makes for very sobering reading thanks to the ongoing impact of the Great Recession.
Single family completions in 2010 sank to lows last seen in the middle of World War II. Note this refers to absolute numbers of completions, not population adjusted numbers. Total housing starts in 2010 were just 587,000. If we apply the usual “10% in Canada” rule, that would suggest fewer than 60,000 starts in Canada in 2010 if housing markets were in similar shape in the two countries. In fact there were 189,930, triple the US number on a population-adjusted basis. Over the last 30 years, the lowest level of housing starts on record in Canada occurred in 1995, when just over 110,000 housing units were started. I remember that event well—it seemed calamitous at the time. And it was, but it still reflected a healthier housing market than what the US is experiencing today. It’s no wonder senior housing providers continue to face occupancy challenges.
Among many other topics, the report addresses the impact of the baby boomers on the US housing market. The demand for smaller homes is forecast to increase significantly in view of research indicating that 58% of 65-74 households who move downsize. As explored in my book The Future of Seniors Housing: Planning, Building and Operating Successful Seniors Housing Projects research on this topic in Canada is somewhat inconclusive. A 2005 Statistics Canada survey found that 43% of movers over the age of 65 downsized, which means that a majority either upsized or moved to a new house that was the same size as the old house.
Tags: Baby Boomers, Housing Market, Seniors' Housing
Posted in Future, Housing Market, News, Seniors' Housing | Comments Off
All you condo-sceptics out there take note:
Friday, June 10th, 2011
Some of you may have seen the inaugural copy of the Westbridge Group Valuation Partner/Lumina Services newsletter. If you haven’t seen it, it is pretty amazing even if I do say so myself. One of the articles discusses the question of condos with services—whether they make any sense from an investment point of view. Many people argue that they don’t because the resale market is so much smaller than the market for a conventional condo. The article concludes that in the case of the two projects analyzed—Tapestry at O’Keefe in Vancouver and Mayfair Gardens in Port Coquitlam—price appreciation did in fact occur, although at a somewhat reduced rate compared to the standard condo market.
I just happened to notice a unit at Tapestry listed for sale in yesterday’s Vancouver Sun. It’s a large two bedroom unit—1,236 square feet in “picture perfect condition” (according to the realtor), list price $728,000. I immediately referred to our data base on service-enriched condos, available for a very modest price from the estimable Landcor folks. The same unit has sold twice before, once when the project opened in 2003 for $405,421 and again eight months later in February 2004 for $470,000.
If the unit sells for its list price, that represents an 8% per annum increase in value since 2004. Over the same time period, the price of the benchmark apartment condo in Vancouver Westside increased by an identical 8% per annum. So no reduction at all for the mandatory service package, assuming the unit sells as listed of course. We will keep our eyes open and let you know what happens in future posts.
Tags: Condominium, Housing Development, Housing Market, Seniors' Housing, Service Enriched Housing
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News from Saskatoon
Thursday, May 19th, 2011
As I mentioned in my last post, I am working in Saskatoon this week. The seniors housing market here is very interesting. Vacancies are low and rents are high. The faith-based not-for-profit communities in particular, of which there are many, have extremely long waiting lists—many have stopped taking names. The for-profit communities aren’t in that position but are still doing pretty well in comparison to many other centres in Canada.
There are three high rise seniors’ projects in downtown Saskatoon, which in itself is interesting. In the whole Lower Mainland, with 10 times the population of Saskatoon, there are only a handful of high rises (five that I can think of off the top of my head). One of the Saskatoon high rises, the Franklin, is now owned by Revera. The other two are locally owned. Rents at the two that offer two meals per day are fairly similar to rents at The Mulberry, one of the Lower Mainland high rises. For example, two bedroom rents at The Mulberry range from $3,430 to $4,130; at the Franklin from $3,465 to $4,215.
There is one new project under construction in the city—Preston Park. Phase I opened recently and Phase II will open later this year. More on Preston Park in my next post—I am touring it this afternoon.
Tags: Housing Market, Seniors' Housing
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