Seniors Housing Weekly Update - The Looming Seniors Housing Bubble

December 10, 2013

December 10, 2013. 60 Seconds with Steve Monroe. With new development shifting into high gear, plus increasing asset values, there is talk of a looming bubble for seniors housing.

The Looming Seniors Housing Bubble

For subscribers to The SeniorCare Investor, my lead story this month concerns the possibility of a looming seniors housing bubble. It is a combination of high asset values in the acquisition market, where we are in the fourth year of the current bull market, but more importantly, the increasing amount of new development in assisted living and memory care.  A year or two ago, it was the experienced operators who were kick-starting their development teams. Now, it seems that it is becoming the sector de jour for anyone in the real estate business. And that is when the real mistakes start to happen. The state of seniors housing is quite good right now, which is good and bad news. Bad news because that means that every Tom, Dick and Harry will want to get into it, and that creates the problem. Good news because it will be a growing industry for years to come. But will there be a mismatch between the demand and the supply as more developers enter the market? Time will tell. But I would like to hear from any and all of you as to whether you think we are approaching bubble time in seniors housing, why you think so, or not, and whether it can be avoided. Thanks.



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The Bubble

Steve: Another thoughtful and entertaining post - I look forward to these each week. I just spoke on a seniors housing panel at the RealShare conference in Phoenix yesterday. This topic did get some attention, but not enough. Is there a bubble looming? Given that, according to NIC, seniors housing construction overall is at about 3% of existing inventory, AL/MC is at 5.2% of inventory, and occupancy is hovering around 90%, I don't know that the bubble is 'looming'. The fact that the AL numbers represent a 39% increase over 2012 is concerning, however. Averages and statistics, for what they are worth, are pervasive in our industry - information is so inefficient we cling to most anything that sounds compelling. Fact is, 43% of the 10,000 units under construction are in just 5 markets. I believe that indicates a little headroom for growth and is one stat that should offer a little solace. But, then again, as someone with a lot to learn (and my name isn't even Tom, Dick, or Harry), I get something wrong at least once a day. Keep up the great work!

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