Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Should You Invest in Senior Housing for 2021?

By Matthew Frankel, CFP® - Dec 8, 2020 at 7:23AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Senior housing hasn't exactly done well in 2020. Could 2021 be a different story?

While many forms of healthcare businesses have held up very well throughout the COVID-19 pandemic, senior housing is a big exception. With lockdowns and virus concerns, move-out rates at senior housing facilities have been quite high, while move-ins have been far below normal levels.

However, could 2021 be a different story? In this Nov. 17 Fool Live video, three experts from The Motley Fool's real estate brand -- Millionacres real estate analyst Matt Frankel, CFP, Millionacres editor Deidre Woollard, and Millionacres contributor and senior housing expert Jason Hall -- discuss the near-term and long-term outlook for senior housing, and whether it's worth an investment now.

Deidre Woollard: One last thing I want to bring up as we close out is, senior living. Senior living, you mentioned earlier has just been so hard hit and I think even the news of the vaccine doesn't really have the same impact quite yet on senior living from what I've seen because it's still way too early. Do you think it's going to take until there is a vaccine, until we get to that third stage roll out where you're going to see senior living start to come back even a little bit? Or is it really going to take more time because there's a big psychological component there as well?

Matt Frankel: Well at any moment Jason's going to start screaming about Care Trust Realty ( CTRE 1.84% ).

Jason Hall: I'm bidding my time, I promise.

Matt Frankel: Senior Living has been the weakest part of most of the major healthcare REITs and for good reason. Move out activity has been high. Move in activity has been low. A lot of them are reporting that tours are down. Prospective residents coming to look are way down.

Jason Hall: There's also a lot of local regulation that you could have like a big player, like Welltower ( WELL 2.49% ) that's in dozens of municipalities that each individual property has different guidelines and is an investors heart to figure all that out.

Matt Frankel: That's true. When Welltower specializes in high barrier markets like say, the New York City suburbs, where a lot of people might just not be allowed to accept new movements right now.

Jason Hall: Right.

Matt Frankel: You're going to see that come back. Senior living is a long tailed growth market, there's no question about that. The 85 and older population, which is their bread and butter is expected to roughly triple over the next 30 years. It's going to be a huge growth market. The question is, how long does this take to come back, and will all the senior housing operators survive? Because a lot of the senior housing operators, not the REITs, the companies that actually operate them are not in the best financial condition and weren't before the pandemic. The question is, like Brookdale Senior Living ( BKD 2.77% ) for example, they are not the most financially secure. Brookdale is not the best example, but there's a lot of them that are struggling financially. That's the question, will this come back in time for all of them to make it through the pandemic nicely? It could take a few years. I'm guessing about a three to four-year window before senior housing really returns to pre-pandemic health levels, I guess you'd say.

Jason Hall: But it's important to say too, you have to think about you as an investor. What is your stock? What are you looking for, if you're looking at REITs for income today? Stay away from the sector. Because you're building in risks to something that you have to have. But if this is a 20 plus year portfolio, maybe the REITs makes sense because it creates opportunity to buy.

Matt Frankel: For sure. There's definitely some opportunities here. I prefer to look at the diversified healthcare REITs, I've mentioned, Healthpeak ( PEAK 0.56% ), where about a third of their money is in senior housing, a third is in life science like you said. The other third is in medical offices. It's a nice diversified approach.

Jason Hall: Pure play baby, pure play.

Matt Frankel: I'm not as adventurous on it as Jason is and I think life science is a big potential market.

Jason Hall: True.

Matt Frankel: I like the ones that have exposure to both of them. I like Healthpeak, they were in bad financial shape because of some of their senior housing properties. They ended up divesting their skilled nursing assets a few years ago and I don't think the markets ever really forgiven them for that. I think they're a totally different company now and they're still not priced like it. But that's my thought on senior housing, it will come back eventually, just not yet.

Jason Hall: Yes, and I agree, and like I said too, think about what are your goals as an investor and then you can find what's appropriate, what's not.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

HCP, Inc. Stock Quote
HCP, Inc.
PEAK
$34.27 (0.56%) $0.19
Welltower Inc. Stock Quote
Welltower Inc.
WELL
$85.11 (2.49%) $2.07
Brookdale Senior Living Inc. Stock Quote
Brookdale Senior Living Inc.
BKD
$6.12 (2.77%) $0.17
CareTrust REIT, Inc. Stock Quote
CareTrust REIT, Inc.
CTRE
$22.66 (1.84%) $0.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
633%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.