Seniors Delay Moves to Retirement Homes, Wait for Real Estate Rebound 

By Kelly Nolan and Dawn Wotapka, Wall Street Journal 

December 18, 2008 

When Ingeborg Schuetz moved into an independent living facility in Boca Raton, Fla., she thought it would be easy to sell her luxurious two-bedroom condo, replete with marble floors, stainless steel appliances and a wrap-around balcony with views of a private beach.

But now, more than 18 months later, the condo languishes on the market, even after a 30% price reduction. After being slapped with a $10,000 assessment for building renovations, a fee that coincides with her investments taking a 50% hit, the 85-year old German native may have to leave the retirement community. If she does, she risks losing most of her $200,000 entry fee.

"If I could get rid of the condo, I would be the happiest person," she said. "Everything is very easy for me here. I have a nice place to live."

Ms. Schuetz isn't the only senior facing tough decisions because of the battered housing and financial markets. More people are having to delay moving into retirement facilities, or like Ms. Schuetz, they're worried about having the financial means to stay in one. Insurance isn't always enough, and families can't always help - they're also likely to be hit by job losses, falling house prices or evaporating wealth.

That's leaving some retirement community operators struggling to fill beds, which is forcing price cuts or specials. Financial advisers, meanwhile, report increased questions from frantic seniors and family members struggling to afford what were supposed to be the Golden Years.

"When you look at the wealth portfolio of older people, so much of their wealth is tied to the value of their homes or the stock market, when both of those markets collapse as they've been doing, people are not going to have the flexibility anymore," said Rich Johnson, a retirement policy expert at the Urban Institute, a nonprofit research organization.

The Housing Hit

The housing downturn, the worst this nation has seen in decades, is causing the most pain. Years ago, a home was a key asset purchased for the long term, with a goal of paying off the mortgage and tapping accrued equity to fund senior living.

But plummeting housing prices, bloated inventory and tightened lending restrictions for even the most sterling borrowers have largely frozen the market, particularly in former bubble markets and troubled areas such as Detroit, which is hurt by the automobile industry's latest turmoil.

As a result, more seniors healthy enough to wait -- and hope -- for price appreciation are staying put.

In Detroit's Garden City suburb, Faye Myers pulled her three-bedroom, two-bath house off the market this autumn after six months. The nearly 81-year-old woman, who had to shave twice the original asking price of $149,900, said the only offer she received was an "insult."

Because she wants to relocate to a nearby independent living facility, she'll probably try again in the spring.

"I don't have to move to move; I just want to move and get away from the responsibilities, like snow blowing," she said.

Nearly 30% of seniors are making changes in homes to remain there longer, a recognition "that I'm going to be staying put for a while," said Elinor Ginzler, AARP's senior vice president for livable communities.

Others are opting for in-home services such as Elect Home Care, a Memphis, Tenn-based company that provides non-medical services such as laundry and errands and personal-care assistance including bathing and grooming.

Seems like business would be booming, but it isn't. Although Jonathan Jones, the six-year-old company's director of business development, said operations are holding steady. Family members without jobs have more time to devote to mom or dad, while his services make an obvious target for seniors looking to trim budgets.

"The primary way people pay for these services is out of their own pocket," he said. "Everybody's in the same boat, wondering what their savings (are) going to do, what the market value of their investments is going to be."

Empty Beds

The uncertainty is affecting operators of retirement facilities, a largely fragmented industry that is seeing occupancy rates fall, particularly in independent living facilities where the need to move isn't as dire.

In Tampa, for instance, independent living facilities in the third quarter were 84.5% occupied, down from 95.6% in the first quarter of 2007, which is considered the industry's peak, according to NIC MAP, a group that tracks the fundamentals of the senior housing market in the nation's top 100 metro markets. In Riverside, Calif., occupancy was 88.1%, down from 93.6% in the same period.

Some operators are having problems filling pricier and bigger units.
"The larger units that traditionally used to be the first to go are now the last to go," said William T. Smith, president and CEO of Aging In America Inc., which operates the 120-apartment Hertlin House on Long Island. "Seniors are opting for the studios or the small one bedroom."

Meanwhile, continuing care retirement communities, which offer more health services as seniors age and typically require an entrance fee -- sometimes hundreds of thousands of dollars -- as well as a monthly fee, are feeling stress. Home sales are often part of the funding to enter these facilities.

One Cameron Park, Calif., couple in their 70s is committed, but can't make the move because the golf-course ranch they've owned for 18 years didn't sell. They need to pay a $300,000 membership fee to move into a two-bedroom at the Eskaton Village Carmichael, a luxury, gated development they said has gourmet meals, a hair salon, walking trails and even a post office.

The couple, who didn't want their name used, were on a waiting list but have turned down open units.

"Unless we get the money for the house, we can't" move, the wife said.
Bargain Rates

In the meantime, some retirement facilities are cutting rates and offering specials.

After seeing its occupancy slip from 100% to 90% this year, the Hertlin House, is offering $1,000 off a month's rent for residents who bring in new tenants, who also get the deal. Its "Weather the Winter With Us" program lets seniors try out the nonprofit, independent living facility that costs between $3,000 and $4,000 per month, before inking an annual lease. In that deal, Hertlin House funds furniture rental, and the pieces can be purchased at discount if the potential resident decides to stick around.

The center's waiting list includes seven seniors, some on the list for several months, hoping to sell.

Las Vegas' Oak Hill Senior Living opted to slash prices to fill its two dozen or so empty unit - its all-inclusive studios that come with three meals a day, utilities and weekly housekeeping rent for $995 a month, down from $1,295 previously. The rates have dropped "to the point where we're kind of eating costs and losing money," said Executive Director Anisa Holmes.

"We would probably have about 12 move-ins now if they could sell their homes," Ms. Holmes said. "They're just sitting and waiting. When they finally do, then they'll call us."

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