Clark's e-news: ABQ Housing + Senior Housing

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Samantha Clark, Associate Broker                                     Real Estate Services

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ABQ Housing + Senior Housing

Reports the NM Business Weekly, the country has come through the worst of the recession. However, the pain is not over yet. That’s according to Bernard M. Markstein III, vice president of forecasting and analysis for the National Association of Home Builders. He spoke at the monthly meeting of NAIOP Commercial Real Estate Development Association in Albuquerque. He was joined by John Covert, director of Colorado-New Mexico Metrostudy. The local housing market still needs to go through some adjustment and there will be downward pressure on housing prices here, Markstein said. From June 2003 to June 2009, housing prices rose by 39.2 percent in Albuquerque and 40.9 percent in New Mexico, while they were up just 24.5 percent nationally. That said, Albuquerque is still good on affordability, with a 73.8 score on the housing opportunity index, which measures affordability. The U.S. is at 72.3. Santa Fe is at 54.3, indicating how much more expensive that market is. Covert said he thinks the housing market here has reached bottom. The excess supply in the Albuquerque market is slowly getting better, he said. But new homes are making up a smaller percentage of sales than they did at the peak in 2005 when they represented 30 percent of home sales. Now they represent 15 percent, Covert said. Quarterly home starts peaked at 8,100 in 2005. In the third quarter of 2009, there were 1,300, although Covert expects that will rise to about 1,500 by the fourth quarter. “That’s a huge drop-off in housing starts,” he said. There also has been a dramatic shift in pricing over the past five years. About five years ago, 75 percent of new homes were below the base price of $200,000. At the peak of the market, only 25 to 30 percent of new homes were in that range. Albuquerque needs to “repair the buyer pool,” Covert said. Now, about half of all new homes are priced at $200,000 or under, so the city is starting to balance that supply a bit better, he added. There are much higher levels of supply for homes that are finished, but standing vacant, in the $400,000 or higher price range, he said. Covert did promise there are brighter days ahead for the state, and Markstein said New Mexico is one of the states the NAHB calculates will get back to normal more quickly after the recession.

Senior Housing

Reports CityFeet, traditionally considered a recession-proof sector, the senior housing market is starting to become a bit strained under the weight of the downturn. On the performance side, vacancy rates are going up, while the tough conditions have forced developers to sideline or stall projects. As with most other commercial real estate sectors, the lack of liquidity is the number-one chal­lenge for those in the seniors housing niche, according to Jones Lang LaSalle’s 2010 outlook for the segment. The weak housing market, which makes some older homeowners hold off on sell­ing their properties in favor of senior living, is also playing a major role. The good news, however, is that significant technological advances and new architectural de­signs will play a role in maintaining the segment’s strengths as discerning seniors will increas­ingly demand more innovative amenities. Over the next two decades or so the number of seniors in the country is expected to more than double to about 75 million. “Society must adapt to this aging population,” remarks Michael Berne, head of JLL’s seniors housing capital markets team. Once the credit markets stabilize, JLL believes demand for the various types of senior housing—independent living, assisted living, skilled nursing facilities, dementia facilities and continuing care retirement communities—will rise. The one difference is that the amenities offered at these properties will be significantly different than those found today. Specifically, there will be more technological advances, medical and medical-related programs and more creative design—most of which will be products of residents’ desires. In terms of design, senior facilities of the future will look less like sterile institutions and more like homes, fostering the ability for residents to socialize in a warm comforting community environ­ment. Light, sound, water and greenery will all play major roles, as will the acceptance of pets. Kelly LeMon of Albuquerque’s American Property Consultants & Appraisers, remarks that from 2007 to 2008 there has been a rise in failing assisted living properties across the country. Higher unemployment rates have meant that more people are taking in their parents instead of placing them into facilities. And recently, inexperienced operators have bought properties which subse­quently failed. Real estate sales are down and CAP rates have risen 2% in one year. Typical CAP rates are now around 10.25%, including FF & E, business and real estate . Operating expenses tend to run around 75% of income in a mid-sized facility of around 12 beds. LeMon recommends that anyone considering buying an assisted living facility should make sure the facility is licensed. Also consider if the previous owners were professionals, such as nurses, and will require additional staff salary to be replaced. Check with the state to see if any com­plaints have been filed against the facility. And senior centers can provide typical pricing of ser­vices.

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com  or 505.401.1561

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