“It’s a tale of two markets and many influencing factors as we move further into 2023,” National Investment Center for Seniors Housing & Care Chief Economist Beth Burnham Mace wrote Tuesday in a blog post.

Most pundits, according to Mace, speculate that the Federal Reserve’s course of tighter monetary policy and higher interest rates will continue until mid-year. At the same time, senior housing market fundamentals are heading in a positive direction with rising occupancy rates, strong demand patterns and some inventory growth.   

The nation’s economy is “beset by uncertainty and risk,” Mace said. Unemployment slowed in January to 3.4% — the lowest rate since 1969 — and monthly jobs increased by 577,000 positions. Eonomists, however, have been bracing for a recession since July 2022, she said.

Transactions in the senior housing market were slow last year. According to preliminary data, closed volume for 2022 totaled $9.7 billion, a decrease of more than 50% from 2021.

“Like other commercial real estate property types, much of the slowdown in transactions activity occurred in the second half of 2022 as buyers and sellers reacted to the sudden and rapid shock of surging interest rates orchestrated by the Federal Reserve,” Mace said.

Transactions activity is unlikely to rebound at least for a few months, she said, as lenders wait for a sign that the Fed may slow or even stop interest rate increases later in the year. By then, Mace said, the Fed may have “sufficient evidence” that the rate increases have been successful in slowing inflation to turn the clock back to the 2% target range.

The annual inflation rate for 2022 was 6.4% compared with 4.7% for 2021 and 1.2% for 2020, Forbes reported. Inflation reached a high point when data from the Bureau of Labor Statistics showed inflation at 9.1% for the 12 months ended June 2022. The 9.1% increase was the highest 12-month increase since the 12-month period ended November 1981, according to the BLS.

“For senior housing operators and capital providers, there are certainly near-term challenges, uncertainties, and risks ahead, but there are myriad promising opportunities as well, if the proverbial crystal ball can extend beyond this near-term business cycle,” Mace said. 

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