Edie Tolchin, a 56-year-old widow living in upstate New York, had decided to sell her house and move to a retirement community in Boca Raton, Fla. Although her 2,200 square foot townhouse was worth $300,000 during the boom, she listed it $235,000 in September 2010. Nothing happened. A year later, the property is still not sold. Tolchin needs the money from her home sale to purchase a retirement home. “I had not anticipated being in this type of situation,” she says.
As housing prices continue to fall, more seniors like Tolchin are finding themselves trapped in their homes, forced to delay long-planned moves. It’s a “fairly widespread situation across the country,” said Tom Wetzel with the Retirement Living Information Center. Many retirees remain in their homes by choice, a trend that is likely to increase as Baby Boomers hit retirement age. But other seniors would prefer to downsize and simply can’t afford to, according to Stephen Melman, director of surveys at the National Association of Home Builders. And while younger retirees like Tolchin may be able to hold out for a rebound in the housing market, those in their 70s or 80s may not see a turnaround in their lifetimes.
Though many seniors have paid off their mortgages, they often must tap their home equity to afford the entrance fees charged by continuing-care communities. Depending on the level of care and the nature of the community, those charges can range from $100,000 to over $1 million, according to LeadingAge, an association of providers of aging services. That’s in addition to monthly fees and rent. "[Seniors] have to be able to sell their home to afford those payments," says Wetzel.
That’s leaving some retirement communities scrambling to fill beds, even as the first wave of Baby Boomers turns 65. Nationwide, the occupancy rate for seniors housing (sales and rentals) was 87.9 percent in the first quarter of 2011, down from 92.7 percent in the first quarter of 2007, according to the National Investment Center for the Seniors Housing & Care Industry. The drop is significant, according Harvey L. Sterns, director of the Institute for Life-Span Development and Gerontology at The University of Akron, considering that senior housing represents only two to four percent of the total housing market. The NIC says occupancy rates have edged up a bit recently.
Communities in Sun Belt states, where the housing markets are deeply depressed, have been especially hard hit. Kathy Sadis, executive director of Desert Winds Retirement Community in Peoria, Az., is used to having her company’s four rental properties fully occupied. The communities, including two in Peoria, one in Surprise and another in Sedona, are now at 89% occupancy, down from 98% a few years ago.
Some retirement community developers are attempting to lure buyers with promotions. Jan Kokes, president of Kokes Family Builders in Whiting, N.J., which provides housing for those 55 and older, started building three new facilities just before the recession hit. When he opened up a community in the past, “people would line up a quarter of a mile to buy our homes,” he says. “Now the demand has just dropped off the cliff.” A few weeks ago, he chopped $96,000 off the price of homes that were listed at $300,000 to $450,000. Since the promotion began, Kokes says he’s had six new buyers.
Other retirement communities are addressing the problem by buying seniors' homes. At Brookdale Senior Living, the nation’s largest owner of senior living communities, entrance fees range from $160,000 to $300,000. To help fill its 2,490 independent living units, Brookdale will purchase potential residents’ existing homes at the appraised price after they had been on the market for at least 30 days. Since it began the program in 2008, the company has bought 250 homes.
Chris Bird, Brookdale's divisional vice president of operations in Brentwood, Tenn., says the occupancy rate at the 13 communities he oversees is 85%, down from 93% in 2006. The home-buying program has helped, and also gives seniors a realistic idea of their home value. "When we're able to give that customer that backing, they feel more confident" about making the move, he says.
But for those left to sell their house on their own, the problem remains daunting. Steven Gaynes and his wife, both 66, have been trying to sell their house in Fairfield, Conn. since September 2009. They initially listed the house, which they bought for $347,500 in 2000, for $499,000. The latest assessed value of the home from the town was less than $300,000. But they've recently invested $6,000 in external painting and other touches and are relisting it at $440,000. With a $377,000 mortgage, they’re eager to sell, and hope the price reduction will help. “Right now I would just like to get it sold, take what little equity we'll have left and pray that we can find a house and get a mortgage," Gaynes said. "This is for us, as for many other senior couples, a very sore subject."