Extended Home Ownership a Boon for Home Care Sector
Aging adults staying at home to receive care has been a growing trend nationwide, creating demand for home care providers, but having a more mixed impact on the U.S. real estate market. Specifically, it may be contributing to the nation’s overall low housing stock, as illustrated in a recent story in the Baltimore Sun, and backed up by numbers from real estate firm Trulia.
The country’s shortage in homes has been a growing trend in recent years, with home inventory dipping to a “new low” in the first quarter of the year, continuing its decline for eight consecutive quarters, according to Trulia’s Inventory and Price Watch. In a five-year analysis of first-quarter performance between 2012 to 2017, the firm found that the number of starter and trade-up homes have fallen over the past year, at 8.7% and 7.9%, respectively.
This low inventory has consequently pushed up home prices. In the first quarter of 2017, the percentage of income needed to purchase a starter home rose to 38.3% (up from 35.4% in Q1 2016), while the percentage of income needed for a trade-up home increased to 25.6% (up from 24.0% in Q1 2016).
There are various economic factors that can be affecting low home inventory: Investors may be buying foreclosures and converting them into rentals; the prices of homes vary among different markets, making it difficult for trade-ups; and slow home value recovery is preventing current owners to break even on their homes, according to Trulia.
This economic factor of slow home value recovery may be the reason why many older adults elect to maintain their homeownership status, particularly as “aging in place” becomes a rising trend.
In fact, homeownership among the elderly has risen to more than 70% of households who are in their early 50s, and to more than 80% among households who are in their early 70s, according to a study by Harvard University’s Joint Center for Housing Studies (JCHS).
“Aging in place” is forecast to be a growing trend for the demographic, particularly as the sample of adults age 85 and over—who often seek out home health care—is expected to increase from about 14% of the group’s current population to 21% in 2050, according to the AARP.
And while this trend is creating an impact on the nation’s real estate inventory, its effect on the home health industry has become a boon for the sector, particularly as access to medical care continues to improve and current technology is enabling this population to live independently.
Analysts forecast the home health care sector to flourish in the coming years, as it is expected to reach $349.8 billion by 2020 from $227.5 billion in 2015, growing at a compound annual growth rate of 9%, according to MarketsandMarkets.
Written by Carlo Calma