Real Estate Housing Akin to a Jail Cell for Seniors

Delray Beach, FLIn a truly sad commentary on the current real estate housing crisis, seniors in need of assisted living and wanting to relocate to a home for the aged are instead stranded in homes that won't sell, held hostage by real estate that holds their nest egg like a tightly-clenched fist that refuses to let go. Real estate closings are a rare commodity.

The numbers are staggering. There are 4.27 million homes in America that are on the market and unsold. While it is not known how many of those homes are owned by seniors 65 or older, the trend of seniors stranded in their own homes is growing. Meantime, assisted-living facilities are finding that people are dropping off their waiting lists and occupancy rates are dropping in kind.

Part of the American dream, for most, was the acquisition of a home. Other pensions and investments would augment the portfolio, but for most the single-largest investment is in the family home. On paper, the idea is to sell the home when the occupant is too old, too frail or too lonely to carry on. That sale unlocks the equity, which is then used to pay the bill at the assisted-living facility.

But for too many seniors, that real estate plan has gone down the dumper. People aren't buying. While the burst of the housing bubble was driven by foreclosures, it was when the credit crisis spread from housing to the lending markets that matters worsened considerably. Banks, once falling all over themselves to lend money to people who really didn't qualify, suddenly stopped lending to everybody. Americans couldn't get mortgage funding to buy, and those who did—or had alternative sources for funding—have a huge inventory of foreclosed properties at fire sale prices to choose from.

For many, the slowdown of the real estate market means that you just won't be able to buy that bigger house you'd planned. The strategy now is to hang on, hold tight and ride it out. It's not the perfect piece of real estate, but it's a roof over your head, and you've so far managed to hold foreclosure at bay, so the fact you can't sell isn't the end of the world.

But it just might be for people like Ruth Scher, who was profiled this week in the New York Times. At 85, she's ready to move into an assisted-living facility. She has been for more than a year. But her two-bedroom condo in Delray Beach, Florida was on the market for a year, without a single offer. In fact, she even had trouble finding a broker to sell it for her.

So after a year, she just took it off the market. Her plans to move to a retirement community in Cornwall, New York and be closer to her kids are on hold, so long as she is unable to unlock the equity from her condo.

At 85, she is a prisoner of her own house. And at 85, she doesn't know how much time she has left.

While occupancy rates at assisted-living and retirement facilities across the country have dropped by a modest 2 percent in the last year, places like Florida are worse off, with some facilities reporting a drop of 20 to 30 percent over the last year. And there are other pockets of real estate hardship in the context of seniors having the ability to move forward. In southern Ohio, for example, 65 percent of the people who visited Bristol Village this year indicated they were unable to buy a unit, because they were unable to sell their homes.

The alternative to liquidating real estate housing that won't sell is to pay for assisted living through other investments or 401(k) holdings. But the implosion of the stock market has driven a stake through those investments as well, making the need to sell a piece of real estate and unlock the equity all the more compelling.

Some homes for the aged, retirement communities and assisted-living facilities are offering creative financing, or inviting clients to pay monthly, rather than annually or in one lump-sum. But it's not enough, and waiting lists that were on average two years have shrunk in many places to six months or fewer.

That's good news for anyone trying to get in somewhere, with the cash in hand to do it. But for a growing number of elderly Americans with equity locked in their homes, the American dream is in reality holding them prisoner in a home no longer conducive to their needs. As real estate housing continues to falter and real estate closings disappear from the radar, real estate for a growing number of seniors has evolved from a once-loved home and a source of equity, to a jail cell.