Providers to Homeowners: We Feel Your Pain

Members | August 03, 2011

Declining home values are putting a crimp in the plans of homeowners who assumed they would use home equity to finance their retirement. Those drooping values are also creating headaches for assisted living and retirement communities.

Declining property values are forcing homeowners around the country to lower their expectations about the kind of retirement they’ll be able to buy with their home equity. And providers of long-term services and supports are feeling their pain.  

The individual stories may vary, but the theme is the same, according to a recent USA Today article, which included these examples:  

  • The 65-year-old information technology professional who has put off retirement indefinitely because his $350,000 home is now valued at $184,000. 
  • The 62-year-old accountant who’s opted for a retirement condo instead of a retirement home because he’ll be lucky to get $225,000 for his $325,000 house. 
  • The 50-year-old entrepreneurs who no longer expect any retirement income to flow from the sale of their home, which has a mortgage that exceeds its value.

If you think these are isolated instances, think again. AARP reports that nearly 32% of adults over age 50 say their home has declined substantially in value over the past 3 years. And, according to USA Today, those homes aren’t likely to recover their value before the owners reach retirement age.

Declining Values = Low Occupancy Rates 

Declining home values are creating major headaches for assisted living and continuing care retirement communities (CCRC). Average occupancy in both settings has declined from 91.8% in the fourth quarter of 2006, to 87.9% in the first quarter of this year, according to the National Investment Center for the Seniors Housing & Care Industry. CCRCs have taken the hardest hit because prospective residents need a high sale price to pay entrance fees.

The stagnant housing market has led to some creative marketing approaches, however. LeadingAge Member ACTS Retirement-Life Communities is "offering incentives we never have before and probably never will again,” spokesman Michael Smith told USA Today. Those incentives include reduced entrance fees, payment deferrals and help with closing and moving costs. Assisted living communities are getting creative too, by offering: 

  • Bridge loans to help residents cover costs until their homes sell.
  • Advice about filling financial gaps through public benefits or life insurance policies.
  • The opportunity to pay less by sharing an assisted living unit with another resident.