It’s a common belief that many baby boomers will sell their homes and move into senior housing in the coming decade — but what happens if nobody buys those boomers’ houses?
Baby boomers may have difficulty selling their homes in the future, a recent Zillow report found. The idea is that younger generations — particularly millennials — may have trouble affording these homes, or may simply find them unattractive, leading to a housing glut in some major metro markets over the next 20 years.
The Zillow numbers are not the only indication of this looming problem. A March 2019 Wall Street Journal story also focused on the issue, highlighting that more expensive homes in particular are already sitting on the market for long periods of time, and often selling for steep discounts.
Warning that the problem likely will become more widespread in the next decade, the WSJ article noted that two of out five U.S. homes are owned by baby boomers today.
This trend could spell trouble for some senior living providers, as many older adults use their home equity to fund a move into senior housing. Some nonprofit life plan communities have already started to adjust pricing accordingly, while one large for-profit provider — Discovery Senior Living — is creating a more affordable model that could be attainable for boomers that can’t command high prices for their homes. Meanwhile, providers are well-advised to consider other tools at their disposal to help prospective residents move in while their home is still on the market.
Flexible pricing models
If boomers can’t sell their homes, it could complicate the long-term outlook for many life plan communities that rely on large upfront buy-ins from residents. In response, some of these nonprofits have started increasing entrance fees at a rate less than the growth in local real estate prices.
But even senior living providers with rental fee structures should take heed of this burgeoning trend, according to National Investment Center for Seniors Housing & Care (NIC) Senior Principal Lana Peck.
“Many seniors housing residents will rely on the proceeds from the sale of a home to fund a senior living lifestyle,” Peck told SHN. “And not only entrance fee life plan communities may be especially challenged by lack of market for [residents’] homes in the future.”
Residents who delay a move into senior housing because they can’t sell their homes may also enter the continuum of care at a point later than they should, affecting their quality of life in the end, Peck said.
“It could limit so many folks who would benefit from an earlier lifestyle move to a later needs-based move, causing them to miss out on the amenities and services that prolong health, wellness and quality of life,” Peck said.
If baby boomer home sales are to be a significant barrier to senior housing move-ins, then it would follow that affordability of senior housing is among the most useful tools to overcome that barrier.
“Affordability of seniors housing comes into play even more, as boomers who may have difficulty selling homes will wait longer to move, similar to what we saw in the Great Recession,” Peck said.
Finding new ways to reach the so-called “forgotten middle” of senior housing residents is at the forefront of many industry players’ minds. That is true for Bonita Springs, Florida-based Discovery Senior Living, which is using a combination of data analytics, more affordable a la carte services and new mixed-use development to help attract a younger senior living demographic.
“Potential residents who more heavily rely on home sales to create a nest egg will be looking for more affordable options,” Discovery CEO Richard Hutchinson told SHN. “Even without this potential boomer home sale issue, the industry should be looking at more affordable ways to provide our products and services.”
Hutchinson believes that the senior living industry is at an inflection point on its ability to evolve and provide flexibility on pricing. That’s evident in Discovery’s “Experiential Living” active adult concept, which offers residents senior apartments with a la carte services or no services at all. The concept is currently being designed and built in several locations.
Additionally, Discovery has a flex spending plan in many of its communities so that new residents can enter the market at a $1,800 to $2,300 a month price point, Hutchinson previously told SHN.
While the Experiential Living concept wasn’t specifically designed to address a possible boomer home sale crunch, it could help with such an issue by making senior living services more affordable in the process.
“[The Experiential Living concept] was more to address what we see as our current and future residents’ desire to have more choice and optionality of their living experience,” Hutchinson said. “A very attractive byproduct of that is clearly creating more financial flexibility.”
Other options for providers
Discovery Senior Living isn’t the only provider thinking about how future housing trends could affect the industry. Priority Life Care, a Fort Wayne, Indiana-based provider that manages 30 communities in 10 states, is also keeping an eye on the trend of baby boomer home sales — though CEO and Co-Founder Sevy Petras sees the issue as more of a concern for providers in tertiary markets, where millennials may not be as keen on buying real estate.
“There are some situations where the sale of their home is dependent on their ability to move in,” Petras told SHN. “If they can’t utilize those funds, then you’re looking at adult children who sometimes dont have the funds either.”
For Petras, the solution lies in having an open mind and being willing to collaborate with many potential partners who can bring a fresh perspective to the equation.
“We’re selling community-based living. We’re telling our residents: don’t go it alone,” Petras said. “But I think we need to practice a little of what we preach.”
Making services more affordable is just one way providers can help entice baby boomers who are having trouble selling their homes. There are a whole host of other tools providers can utilize — including some that helped the senior living industry weather the Great Recession, according to Sharon Brooks, who serves as president of senior living marketing firm GlynnDevins’ Richmond, Virginia office.
“Bridge loans, promissory notes, delayed entry fee payment, guaranteed buyer programs and many more marketing approaches were utilized during the downturn, and could be looked to again if needed,” Brooks told SHN.
Offering a branded program of home sales and move-in support — something Discovery currently does — is also a good marketing strategy, she added. The same is true for other programs that help connect prospective residents with home stagers or senior move specialists.
For example, dedicated senior move managers specialize in working with older adults and their families on various aspects of the home-selling process. In a tough market for sellers, helping seniors go through the sometimes emotionally difficult process of selling, donating or otherwise disposing of possessions while a house is still on the market can make a property more attractive.
“The biggest barrier the mind of older adults and their families is the house,” Mary Kay Buysse, executive director of the National Association of Senior Move Managers, told SHN. “[They feel] it’s so looming and large and cluttered, and how are they going to do it all?”
GlynnDevins’ Brooks isn’t sure how widespread the problem will be in the end, as there are a number of factors that could affect or even counteract Zillow’s projections, she said.
“Interest rates appear to be holding at levels that encourage home purchases [and] I hear reports of housing shortages and see builder stocks skyrocketing, so demand is there,” Brooks said. “Possibly, the focus will shift to renovating existing housing stock to meet the demand.”
Discovery’s Hutchinson also has doubts on the scope of the issue. For one, market forces will drive down prices on unsold homes, potentially making them more attractive to younger generations. And, many residents already go through an initial “downsizing” process when they retire, so they may not have a spacious home to sell by the time they’re ready to move into senior living.
“Having said all that, I do believe it makes sense to start thinking about these dynamics and ways to offset these headwinds,” Hutchinson said.