So, in comparing markets, there are more limited construction opportunities in many of California's markets. Three of the top four largest markets with the highest occupancy levels that NIC tracks are in California: San Jose, Sacramento and Modesto. NIC tracks 11 markets in California, and all 11 except for Bakersfield, Fresno and Riverside had occupancies higher than average. Texas markets that NIC tracks include the combined the Dallas/Ft. Worth metroplex and Houston, and these rank as the fourth and fifth largest MSAs in the nation with more than 7 million residents in each. In Texas, we track four other big markets. These markets do not have the high occupancy rates you see in California; they tend to be lower than average largely because new supply has come into these markets at a faster clip than demand can respond. Demand has not been strong enough to take into account the new supply that's come into the market.

The most notable markets for supply and demand imbalances in Texas are San Antonio and Houston. Houston has had the double whammy of a slowdown on the broader economy from the drop in oil prices, which fed into slow employment growth, which fed into weaker absorption and demand characteristics, causing a drop in overall occupancy rate.

Like all CRE, it's about location, location, location—there are gross generalizations you can make about the broad economy, but it's also important to drill down into the local markets to really get a sense of what's happening. And just like CRE, seniors housing success depends on local demand and supply characteristics.

GlobeSt.com: What factors influence senior-housing market performance in the better-performing and lesser-performing markets?

Mace: It depends on how you define best and whether you're an operator, owner or resident. The strongest occupancy rates are on the West Coast, so that's good if you are an operator. But for the consumer, it's better in terms of bargaining power in the lower-occupancy markets. New supply in my mind is often a good thing, but the question becomes does demand match it? If inventory is old, new inventory may be a good thing to introduce new design concepts and features, for example. However, incumbent operators in some Texas markets will need to roll up their sleeves to maintain occupancy and rents because of more occupancy and competition.

On the demand side, it's not just a matter of the number of seniors in the market, but also the number of adult children who are often the decision makers for where their parents reside. The characteristics that matter here include density, the income of the adult children and the performance of the broad economy because that's what's generating overall wealth or income growth. Broad macroeconomic conditions like consumer confidence also affect a market's performance—people are more willing to move when they're feeling bullish about future prospects for growth of the economy. Many seniors use the wealth and equity of their homes for the fees associated with living in a seniors-housing property, so the ability to sell their homes and the velocity of sales and pricing characteristics of their home contribute to the overall health of seniors housing. Also, the cost of land, labor and capital play into a market's performance. The cost of debt is important as it relates to interest rates. There was an increase in interest rates announced by the Federal Reserve last week of 25 basis points, and there are likely to be another two increases this year. This implies the cost of borrowing will increase. Even that increase has an impact on the cost of doing business and on the cost of debt, which could cause a slowdown in activity or could cause an increase in velocity as people try to beat the increases. Also, how far along in planning people are has an impact as well.

GlobeSt.com: Which concepts are critical for gauging winning and losing markets?

Mace: Measurements of occupancy, demand and supply and one's perspective about new supply in the market—is it good or bad? It could be both, depending on who you are. For operators, new supply introduces new competition, which can be good but challenging, and for the consumer, new supply provides additional choice.

GlobeSt.com: Which markets offer opportunities with the most promise?

Mace: We have not quite come to this yet, but in a number of years, the silver tsunami of aging Baby Boomers will kick in, which will lift all markets. The caregiver ratio is starting to drop; if you look at ratio of caregivers, who are generally 45 to 64 years old, and the children of today's residents, relative to people over 80, the ratio of today is 7:1. By 2030, this number will drop to 4:1, and by 2050, this will drop to 3:1. This is all due to birth rates—people had more kids in the past than they do today. So, the demand for care will increase dramatically as we go forward. The way we care for seniors will have to shift because of these demographics, and a lot of Baby Boomers haven't saved appropriately, so there will be some significant social-policy issues in the next 20 years as to how the federal government expenditure pie will be divided. That's one pending issue, in terms of demand and supply and who will take care of the growing number of people who will need care.

There are markets that are oversupplied and some that are less so. Atlanta has supply in excess of demand, so occupancy is getting hurt. Other markets that have experienced significant supply and supply in excess of immediate demand include Houston, Minneapolis, Dallas and Atlanta. This includes projects that are currently under construction and not those that may be in planning stages at the moment.

SAN DIEGO—One can make gross generalizations about the broad economy, but it's also important to drill down into local senior-housing markets to really get a sense of what's happening—and it all depends on demand-and-supply characteristics, Beth Mace, chief economist and director of outreach at the National Investment Center for Seniors Housing & Care, tells GlobeSt.com. As NIC prepares for its Spring Investment Forum, which starts here today, we spoke with Mace about some of the topics she'll be tackling in a session she is presenting later in the week titled, “A Deep Dive into Seniors Housing Local Market Conditions.”

GlobeSt.com: What are the key differences between seniors housing in California and Texas?

Mace: I highlight some of the differences between California and Texas in recent NIC Insider newsletter articles. In general, there is less seniors-housing development in many of the West Coast markets compared with many of the Texas markets for many of the same reasons as with any type of commercial real estate development: California has more barriers to entry. It's harder to get land entitled; there are more restrictions on land use and more competition for land among the various options for which that land could be used. Additionally, the cost of land and development are higher in general. Therefore, there is less development activity in many of California's seniors-housing markets compared with Texas.

Texas is a growth market in terms of population growth, as is Florida and many of the Sunbelt markets. There's an influx of people moving into these locations. The land availability is also greater, so there are more development possibilities in those markets, and regulatory attitudes towards development tend to be positive. Additionally, the cost of living in those markets is lower, which lays the foundation for population growth.

So, in comparing markets, there are more limited construction opportunities in many of California's markets. Three of the top four largest markets with the highest occupancy levels that NIC tracks are in California: San Jose, Sacramento and Modesto. NIC tracks 11 markets in California, and all 11 except for Bakersfield, Fresno and Riverside had occupancies higher than average. Texas markets that NIC tracks include the combined the Dallas/Ft. Worth metroplex and Houston, and these rank as the fourth and fifth largest MSAs in the nation with more than 7 million residents in each. In Texas, we track four other big markets. These markets do not have the high occupancy rates you see in California; they tend to be lower than average largely because new supply has come into these markets at a faster clip than demand can respond. Demand has not been strong enough to take into account the new supply that's come into the market.

The most notable markets for supply and demand imbalances in Texas are San Antonio and Houston. Houston has had the double whammy of a slowdown on the broader economy from the drop in oil prices, which fed into slow employment growth, which fed into weaker absorption and demand characteristics, causing a drop in overall occupancy rate.

Like all CRE, it's about location, location, location—there are gross generalizations you can make about the broad economy, but it's also important to drill down into the local markets to really get a sense of what's happening. And just like CRE, seniors housing success depends on local demand and supply characteristics.

GlobeSt.com: What factors influence senior-housing market performance in the better-performing and lesser-performing markets?

Mace: It depends on how you define best and whether you're an operator, owner or resident. The strongest occupancy rates are on the West Coast, so that's good if you are an operator. But for the consumer, it's better in terms of bargaining power in the lower-occupancy markets. New supply in my mind is often a good thing, but the question becomes does demand match it? If inventory is old, new inventory may be a good thing to introduce new design concepts and features, for example. However, incumbent operators in some Texas markets will need to roll up their sleeves to maintain occupancy and rents because of more occupancy and competition.

On the demand side, it's not just a matter of the number of seniors in the market, but also the number of adult children who are often the decision makers for where their parents reside. The characteristics that matter here include density, the income of the adult children and the performance of the broad economy because that's what's generating overall wealth or income growth. Broad macroeconomic conditions like consumer confidence also affect a market's performance—people are more willing to move when they're feeling bullish about future prospects for growth of the economy. Many seniors use the wealth and equity of their homes for the fees associated with living in a seniors-housing property, so the ability to sell their homes and the velocity of sales and pricing characteristics of their home contribute to the overall health of seniors housing. Also, the cost of land, labor and capital play into a market's performance. The cost of debt is important as it relates to interest rates. There was an increase in interest rates announced by the Federal Reserve last week of 25 basis points, and there are likely to be another two increases this year. This implies the cost of borrowing will increase. Even that increase has an impact on the cost of doing business and on the cost of debt, which could cause a slowdown in activity or could cause an increase in velocity as people try to beat the increases. Also, how far along in planning people are has an impact as well.

GlobeSt.com: Which concepts are critical for gauging winning and losing markets?

Mace: Measurements of occupancy, demand and supply and one's perspective about new supply in the market—is it good or bad? It could be both, depending on who you are. For operators, new supply introduces new competition, which can be good but challenging, and for the consumer, new supply provides additional choice.

GlobeSt.com: Which markets offer opportunities with the most promise?

Mace: We have not quite come to this yet, but in a number of years, the silver tsunami of aging Baby Boomers will kick in, which will lift all markets. The caregiver ratio is starting to drop; if you look at ratio of caregivers, who are generally 45 to 64 years old, and the children of today's residents, relative to people over 80, the ratio of today is 7:1. By 2030, this number will drop to 4:1, and by 2050, this will drop to 3:1. This is all due to birth rates—people had more kids in the past than they do today. So, the demand for care will increase dramatically as we go forward. The way we care for seniors will have to shift because of these demographics, and a lot of Baby Boomers haven't saved appropriately, so there will be some significant social-policy issues in the next 20 years as to how the federal government expenditure pie will be divided. That's one pending issue, in terms of demand and supply and who will take care of the growing number of people who will need care.

There are markets that are oversupplied and some that are less so. Atlanta has supply in excess of demand, so occupancy is getting hurt. Other markets that have experienced significant supply and supply in excess of immediate demand include Houston, Minneapolis, Dallas and Atlanta. This includes projects that are currently under construction and not those that may be in planning stages at the moment.