The bullish case for senior living-focused REITs, like HCP and Health Care REIT, has been America's aging population and this segment's increased need for housing.

As more baby-boomers enter the market for senior living, investors will want to keep a close eye on the relationship between the amount of demand in the market place and the supply of units. If the industry oversupplies units, these REITs could see margin compression.

In the following video, Motley Fool banking analyst David Hanson discusses the current occupancy rates for senior living units and how the growth in demand is keeping up with the pace of supply.

David Hanson has no position in any stocks mentioned. The Motley Fool recommends Health Care REIT. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.