Senior Housing, Skilled Nursing Loan Volumes Hit Series Low
New permanent loans for nursing care were 47% of that for senior housing.
Closed new permanent loan volumes in the senior housing and nursing care sector hit a new series low in the third quarter of last year, falling by more than 21% and 37%, respectively.
According to the National Investment Center for Seniors Housing & Care, new permanent loans for nursing care were 47% of that for senior housing. New construction loan volumes also declined during the quarter, with those for senior housing falling by more than 61% on a same-store quarter-over-quarter basis, the largest quarterly decline since 2017. Meanwhile, skilled nursing construction volumes fell to their lower level since Q1 2020.
Total loan balances decreased for both sectors, with senior housing falling 1.6% and skilled nursing falling 3%. The number of delinquent loans ticked higher in Q3, with delinquencies as a share of total loan volume clocking in at 1.2% for senior housing and 1.3% for nursing care. However, no foreclosures were reported.
Seniors housing construction starts “are grinding to nearly a complete stop,” Charles Bissell, Managing Director, JLL Capital Markets, told GlobeSt.com in December. But “demand is on the precipice of a 20+ year spike due to the aging of the baby boomer generation.” As of Q3, construction starts for seniors housing in the markets NIC Map Data Service tracks stood at 2,412 units, down from as high as 12,000+ units in Q4 of 2017.
While deal flow has slowed considerably, opportunities remain. Steve Jorgenson, CEO and president of Solterra Companies, told GlobeSt.com in a previous interview that on the acquisition side, “stabilized assets are a really good option at this point in time. What investors can buy will be cheaper than what they can build for the time being. New development will likely increase in the second half of 2023 based on where construction costs and interest rates are in the near future.”