4 Metros Where Housing Market Woes Could Cause Senior Living Pain

The coronavirus pandemic has been the “unexpected shock to the economies” that National Investment Center for Seniors Housing & Care Chief Economist Beth Burnham Mace feared would disrupt a boom market in January.

The fate of the senior housing sector is to some extent tied to the residential real estate market; people often must sell their homes to pay for the transition into a senior living community. As the economy cratered in the spring due to Covid-19, fears arose that the residential housing market would enter a crisis.

So far, this has not materialized on a national scale. Housing prices are up 4.8% for the 12 months that ended in May 2020, driven by continued demand among younger buyers, according to a CoreLogic index released Tuesday. However, the forecast is not so rosy: With Covid-19 surging in many areas of the country and the unemployment rate still sky-high, CoreLogic anticipates a 6.6% decline in home prices over the next year.

Furthermore, looking just at the April 2020 to May 2020 numbers reveals trouble already brewing.

Total existing home sales fell 9.7% from April to May, according to data from the National Association of Realtors. Additionally, sales are down 26.6% from May 2019.

Median home prices in 17 states either fell or remained static during the April to May period, according to analysis of sales data from ATTOM Data Solutions. This confluence of factors is making housing markets across the country vulnerable.

Senior Housing News compared this data to the top 10 markets for senior housing construction as of last September, as determined by a Marcus & Millichap review of NIC data, to find four markets where vulnerable housing markets might have an adverse impact on senior housing.

Washington, D.C.

Total senior housing units under construction: 2,140

Median home price change, April 2020 to May 2020: $415,000 to $395,000 (6% decrease)

COVID-19 cases as of July 3, 2020: 692 per 100,000

Prior to the pandemic, the nation’s capital had the building blocks in place for a bull housing market: low inventory, active buyers and rising prices. But the “peak volatility” that seized the capital markets extended to home buying, as well.

Housing prices have dropped precipitously since a March average of $419,900, ATTOM’s data revealed. Some active listings in the district, as well as in neighboring Arlington County, Virginia, have seen a 30% drop — and pricing could fall in 2021 if high unemployment persists.

This dovetails with a very active senior housing construction market in the District. The nation’s capital was already flirting with record low occupancy percentages in the fourth quarter of 2019, at 86.8%. Washington, D.C. also has a very robust senior housing construction pipeline, with over 20 developments under construction, placing further pressures on occupancy rates.

Homeowners entertaining a move to senior housing may find themselves entertaining lower bids and extended selling periods before having the money to finance the transition.

Atlanta

Total senior housing units under construction: 3,077

Median home price change, April 2020 to May 2020: $248,400 to $243,000 (2.2% decrease)

COVID-19 cases as of July 5, 2020: 1,612 per 100,000

Atlanta’s robust housing market came screeching to a halt in April. Housing sales plummeted nearly 26%, year over year, although pricing remained relatively strong, BizJournals Atlanta reported.

New listings fared especially poorly, falling 18% from March to April, and 32.2% over the previous year. If these trends continue, the pressure will be felt by senior housing developers.

Of Atlanta’s total senior housing supply in Q1 2019, 15.1% was under construction, the most among the 31 primary markets tracked by NIC. But that was trending down, and hit 13% as of Q3 2019.

Meanwhile, going into the pandemic, assisted living discounts were deeper in Atlanta than in any of the other 31 primary markets that NIC tracks in its “actual rates” data set.

“The delta between pricing and actual rate in assisted living in the Big Peach is equivalent to two months of free rent, compared to one month nationally,” SHN reported in late February 2020.

The pricing challenges were noted by several providers before Covid-19 took hold. However, they also noted that the slowdown in construction activity was a positive trend, and that success in Atlanta has been highly dependent on submarket selection.

Houston

Total senior housing units under construction: 1,825

Median home price change, April 2020 to May 2020: $244,625 to $242,725 (0.8% decrease)

COVID-19 cases as of July 3, 2020: 716 per 100,000

Space City’s housing market was on a nine-year trend of year-over-year gains before the pandemic hit the U.S.

But housing sales fell 19% in April, the Houston Chronicle reports. Compounding matters, the city’s oil industry has been adversely impacted by Saudi Arabia flooding the market with crude in an attempt to undercut Russia, sending oil prices plummeting.

Even though crude pricing has rebounded and the Saudis have raised prices in recent months, wavering consumer confidence and Texas’ status as one of the epicenters of the latest surge in positive Covid-19 cases may put further pressure on housing values moving forward.

Every housing price point has been affected, luxury housing especially. Sales volume for homes priced over $750,000 plummeted 56.3%, Houston BizJournals reports.

Houston has been flagged as a senior housing trouble spot for years. Previous setbacks to the oil economy, the effects of Hurricane Harvey in 2017, and a glut of supply from a senior housing building boom have weighed on occupancy. As of January 2020, Houston’s occupancy rate of 82.5% was the lowest among NIC’s 31 major markets.

However, demographics could help Houston in the years ahead. The city’s average annual 10-year population growth for the 65-plus demographic is 4.5%, putting it in NIC’s “high growth” category.

Dallas-Ft. Worth

Total senior housing units under construction: 3,222

Median home price change, April 2020 to May 2020: $283,406 to $288,407 (1.8% increase)

COVID-19 cases as of July 3, 2020: 224 per 100,000

Although the Dallas-Ft. Worth Metroplex saw housing prices increase nearly 2% from April to May, that statistic doesn’t tell the complete story.

Home sales in Dallas County plummeted 35% in May, the Dallas Morning News reported. Median home prices, meanwhile, fell nearly 4% year over year. Home sales in nearby Collin and Tarrant Counties fell 29% and 28%, respectively. The area also saw notable declines in new listings, while sellers retreated to the sidelines.

Realtors are hopeful that the housing market will rebound. If the downward trends continue, however, it can put further pressure on homeowners looking to sell in order to make the move to senior housing.

Complicating matters, Dallas’ construction industry has rebounded to pre-pandemic activity levels, and new deliveries can place additional pressure on senior housing occupancy.

However, Dallas outperformed other Lone Star State metros Houston and San Antonio with Q1 2020 occupancy of 84.6% and annual rent growth of 2.1%.