Wednesday’s announcement that the Federal Open Market Committee will raise interest rates may have a slowing effect on the currently booming senior housing industry. Rates will go up 0.25% after a seven-year hold at or near 0% since the 2008 recession.
The decision signals optimism about the strength of the economy, but all commercial real estate sectors are on the alert. Capital costs, development, refinancing, and acquisitions are all somewhat affected by the change.
Beth Mace, chief economist and director of capital markets outreach for the National Investment Center for Seniors Housing and Care, says REITs with a higher dependency on issuing debt may be more sensitive to rate changes, but overall, the market is prepared.
Seniors themselves may stand to benefit from higher rates since they promise a better return on savings. Retirees living on pension funds have suffered in recent years due to low interest rates.
Sources: McKnight’s Senior Living. What Fed rate hike means for senior living. Bankrate. Six reasons retirees are so ready for the Federal Reserve to raise interest rates.