Loan delinquencies trending down in senior living, rising in skilled nursing

Loan delinquencies among senior living community owners trended down for the second quarter of 2024 after reaching their peak in 2023, yet nursing home delinquencies continued to rise in the quarter. That’s according to a new lending trends report from the National Investment Center for Seniors Housing & Care covering the first half of 2024.

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The report includes data trends over eight years for senior living and nursing care construction loans, mini-perm/bridge loans, permanent loans and delinquencies from the third quarter of 2016 through the second quarter of 2024. The report is based on survey contributions from 17 participating lenders.

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NIC defines senior housing/living to include independent living and assisted living, with memory care being a subsector of assisted living.

“As of the first half of 2024, delinquencies [in senior living] represented 3.9% of total loans, down from the peak of 4.4% in late 2023,” NIC Senior Principal Omar Zahraoui said in a blog post last week. “In contrast, delinquency rates for nursing care loans have continued rising for three consecutive quarters, reaching 2.7% in 2024, up from the time series low of 0.6% in late 2023.”

Foreclosures reported for the first half of 2024 totaled $51.8 million for senior living and $43.2 million for nursing care, “indicating the continued pressures facing some borrowers in both sectors,” Zahraoui said.

Loan applications and approvals ticked up in the second quarter of 2024, “signaling cautious optimism for the permanent lending market,” according to Zahraoui.

Loan activity

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Data show that new permanent loan volumes for senior living increased by more than 200%  from the first quarter of 2024 to the second quarter. Loans for nursing homes also increased by almost 60% quarter to quarter.

“This growth reflects a more measured and gradual recovery for the nursing care sector amid improved Medicaid reimbursement rates and occupancy trends,” NIC noted in the report.

Construction loans in senior living lagged behind historical standards, according to NIC, but the sector did see some improvement in the first half of the year.

“While there has been a modest uptick in lending, the number of senior housing units under construction continued to hover near its lowest levels since 2015, reflecting ongoing caution among lenders and developers. Construction starts, which have been weak in 2024, have yet to recover meaningfully,”  Zahraoui said.

Construction loans for nursing homes were a nonstarter this year, however. According to NIC, no loan activity occurred in skilled nursing during the first half of 2024 among lenders who participated in the survey.