Senior communities hit by economy, too
Few are the industries that have escaped the effects of the recent economic downturn, with the construction and real estate industries chief among the sufferers.
But an observer might be forgiven for speculating that retirement communities would be an exception.
After all, baby boomers are reaching retirement age in huge waves, at a pace that would seem to leave the construction industry struggling to keep up.
Shouldn’t boomers be beating down the doors of senior citizen communities?
Just the opposite, it seems – although there are signs of a turnaround on the way.
At one Henrico County senior community, where prospective residents are accustomed to facing long waiting lists, there were 24 vacancies last fall.
And at Imperial Plaza, located near the Richmond-Henrico border, Business Development Coordinator Donna Buhrman reported recently that movement on the wait list is “very stagnant.”
According to Buhrman and a number of senior housing experts, the lack of new applicants is just one more effect of the depressed economy.
“[There is] much reluctance,” said Buhrman, “to put a house on the market during a recession with housing market rates slow and 401k declines. Many prospects have retired from companies that do not offer pensions.”
Although seniors have always been reluctant to give up their independence and make the transition from private home to senior housing, the current economy has caused them to procrastinate more than ever.
“They are waiting longer to go [into senior housing],” said Paige Carpenter of Spring Arbor, asked to name the top trend among applicants to the upscale assisted living community. “They blame it on finances and investment portfolios.”
Holly Raidabaugh, director of marketing at Lakewood Manor, agreed that just as the lackluster market has affected private home construction and sales, it has correspondingly affected retirement communities.
“We used to hear, ‘I’m not ready yet,’” said Raidabaugh. “But for the past several years it has been, ‘I can’t sell my house.’”
Although seniors may say they can’t sell, experts in the field say the more accurate statement is that they won’t sell – at least not at the going rate.
After 16 years in the real estate business, Cathy Saunders of Long and Foster is accustomed to seeing foot-dragging and procrastination among prospects for senior housing. Since the recession, however, the spike in the number of at-home hold-outs has been unprecedented.
“The last couple years, a lot of people who needed to move haven’t done so,” said Saunders, “because they are disappointed in the price they’d get.” They may have seen their house increase in value from, say, $200,000 to $250,000 during the boom years, only to see the post-recession value plummet back to $200,000. “I can’t sell at a loss!” they tell Saunders, who is a gerontologist and certified senior real estate specialist.
But Saunders’ response is, “It’s not going to get back [that value]. Or even if it does, how many years will it take?” “Meanwhile,” she tells prospects, “the house you want to purchase is increasing in price, or the retirement community you want to move into is increasing its fees.” Seniors who wait for their house to appreciate back to pre-recession levels, Saunders cautioned, may well find themselves priced out of the senior housing market.
Raidabaugh agreed. “Seniors want to sell their house for the same amount that their neighbors did in 2005,” she said. “That is not realistic for seniors or anyone else.”
Older adults who procrastinate about moving may not only face higher prices, but run the risk of a health crisis catching up with them before they have moved to a community.
“People we are seeing walk through our doors are almost nursing home patients,” said Carpenter, noting the tendency for even seniors in poor health to hold out as long as possible at home. “They’ve been trying to piecemeal care together with relatives [until it’s almost too late].”
A ‘perfect storm’ of problems
Aside from the drop in home values, another factor that seems to be contributing to senior community vacancies is the trend for middle-aged adults who have lost their homes to move in with parents -- leaving the parents unable to sell their home and therefore unable to afford the move to senior housing.
Marti Miller, director of marketing at The Hermitage at Cedarfield, said that demographic and generational trends also played a part in the dip in occupancy levels (then typically close to 98 percent) that began at Cedarfield in 2008.
“It was a ‘perfect storm’ of change that affected our sales,” said Miller, noting that cottage homes at Cedarfield were the first to be affected. “The housing market was the biggest factor; can’t sell a house, can’t move. Also, the uncertainty of their financial future for this age demographic was a huge concern to our prospective residents,” said Miller, adding that the current generation of prospects tends to be cautious about large investments (such as the entrance fee required for Lifecare communities like Cedarfield) until regaining confidence in the economy.
At the same time, said Miller, another trend that hurt sales and occupancy levels was the shift to the next generation of older adults: the generation known as the Silents.
“There are not as many of this group as the WWII Generation, so now we -- all long-term care communities -- don’t have as many prospects to draw from,” said Miller. “This will continue to play a part in sales and occupancy challenges until the baby boomers [transition to senior housing].”
New tactics, upward trends
So what are retirement communities doing to adjust to the changing market? For one thing, Carpenter said, they’re getting more competitive.
“Places you have never heard advertise before are advertising,” said Carpenter. “All places are taking a look at all factors. It used to be you’d come in [to a community] and it would be A, B and C. Now places are starting to negotiate more and consider more bargaining.”
At Imperial Plaza, said Buhrman, prospective residents’ financial needs are evaluated case by case, and incentives may include anything from a free month’s rent to a reduced community deposit.
At Lakewood Manor, future residents are given additional time to move in, said Raidabaugh, and may be allowed to defer the payment of the entrance fee, or even trade their house for their entrance fee.
At Cedarfield, new sales initiatives and the introduction of a second residency agreement have combined with an upturn in the economy to produce brisk sales once again, said Miller. “Occupancy has climbed back to where it was in 2009,” said Miller – echoed by a Cedarfield resident who remarked, “All of a sudden they’re just pouring in here!”
Raidabaugh confirmed that the pace of sales is picking up at Lakewood as well. “Houses are starting to sell,” she said, “and expectations are starting to shift.”
Carpenter pointed out that although the decision to transition into senior housing is always difficult, baby boomers – known as the sandwich generation because many are raising children as they simultaneously care for aging parents – are perhaps more prone to procrastinate than other generations.
“They are balancing it down to the penny,” said Carpenter of the coming generation of retirement community residents. “How long can they stay in their own home, with help, versus moving?”
But too often, Carpenter believes, at-home hold-outs like these don’t realize that once they need to hire eight hours of help daily, it’s easier and more cost effective to move.
“Believe me, it’s cheaper to come here,” said Carpenter, “where it’s 24 hours, 365 days a year. When the light bulb in the bathroom goes out, someone is there to replace it – around the clock.”
Saunders echoes Carpenter’s remarks, and points out that seniors who are turned off by the idea of “institutional living” or by meals served only at prescribed hours are often pleasantly surprised to find that retirement community life agrees with them.
“They find out that there’s so much to do, “ said Saunders. “Even folks who might not have been as social while living in their own home; now they’re in a situation with lots of friends, and suddenly they’re playing bingo and playing bridge again.”
What’s more, said Saunders, seniors who have stayed at home through years of declining health often struggle with maintenance issues that are eliminated in a senior community. She cites the example of one client who owned a home with numerous large trees, and went through a huge ordeal each fall finding help he could hire to do the yard work.
“He told me, ‘Just get me out of this house before I have to worry about these leaves!’” recalled Saunders.
Of all her clients who have moved to retirement communities, said Saunders, only one couple has expressed regret, and that couple moved to an assisted living facility where most residents were much sicker than they were.
The rest of her clients, said Saunders, express only overwhelming relief at being free of the day-to-day worries and tasks of maintaining a home.
“So many of them tell me,” she said, “‘I wish I hadn’t waited so long.’”
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