Ripples from housing crisis slow senior living

By Kim Dixon

WASHINGTON (Reuters) - The free fall in U.S. home prices is forcing many elderly Americans to postpone plans to move into senior housing developments until they are able to sell their homes.

Occupancy rates have flattened in the estimated 2.1 million senior housing beds professionally managed by both companies and nonprofit organizations. The facilities are an alternative to nursing homes and range from housing that offers light housekeeping for independent residents to assisted living units providing health care for residents with some medical needs.

"We've felt the pinch," said David Freshwater, who three years ago sold his chain to Sunrise Senior Living, and now runs a group that invests in the sector. "People don't want to sell when they have a price in their mind and Millie down the block sold her house for that amount."

Assisted Living Concepts and Capital Senior Living are among the companies reporting weaker occupancy rates. Assisted Living's occupancy rate fell to 71.7 percent in the first quarter of 2008, down from 83.7 percent in the same period of 2007, while Capital had a more modest decline.

Brookdale Senior Living had a 1.5 percent decline in occupancy in the first quarter and said it expected "relatively flat" occupancy in the near-term due to the sagging housing market and the overall economic slowdown.

At the same time, share prices in the sector are down about 14 percent this year.

Overall, the outlook for senior housing companies remains bright. The number of Americans age 75 or older is set to jump about 20 percent in the next decade thanks to the baby boom that occurred immediately after World War II. That compares with about 14 percent growth for that age group this decade, according to Brookings Institution research.

But industry officials acknowledge the U.S. housing crisis has had an impact, especially in hard-hit markets such as south Florida, Las Vegas and some parts of California where foreclosures are skyrocketing and home values have fallen.

"Some of the operators are starting to see that even people that have moved in recently are moving out" because they are unable to sell their homes, said Derrick Dagnan, an analyst at Avondale Partners.

CONFLUENCE OF EVENTS

Elderly Americans on fixed incomes are fighting many foes at once.

Among those 65 years and older, nearly a third are postponing retirement due to stock market losses, according to a recent survey by elderly advocacy group AARP, formerly known as the American Association of Retired Persons.

"Many are seeing their income decrease, because their annuities are tied to the prime rate. It's a whole confluence of really bad things happening at the same time," said Jim Dau, a spokesman for AARP.

A fast-growing industry segment called continuing care retirement communities will be hit first, experts said. The campus-style housing has varying levels of care up to skilled nursing, and usually residents live out their lives there.

Continuing care units typically require a down payment or "entrance fee," of $50,000 to $1 million. Most such properties are not-for-profit, but public companies have started to move in, including Sunrise and Brookdale.