4Q 2023 Lending Trends in Senior Housing and Nursing Care Remain Low

by Omar Zahraoui  / May 22, 2024

Research  • Market Trends  • Blog

NIC Analytics released the 4Q 2023 NIC Lending Trends Report. The complimentary quarterly report includes data trends over seven years for senior housing and nursing care construction loans, mini-perm/bridge loans, and permanent loans from 3Q 2016 through 4Q 2023. The survey reflects the contributions of 17 lenders.

For the sample of lenders in the NIC Lending Trends Report in the fourth quarter of 2023, government-related sources accounted for 72% of total loan balances, while banks represented 13%, and other lenders comprised 15%.

Market Forces Recap

At its May meeting, the FOMC voted unanimously to maintain the fed funds rate in the target range of 5.25%-5.5% for the sixth consecutive meeting.

The FOMC comments highlighted that risks to achieving the Fed’s employment and inflation goals have moved toward a better balance over the past year. However, the Fed reiterated its stance on rate cuts, stating that it does not expect to cut rates until it has greater confidence that inflation is moving sustainably toward 2%.

Looking ahead: In May, the Fed stated that starting June 1, 2024, the Fed will slow the pace of quantitative tightening, reducing the cap on the amount of treasury securities rolling off the balance sheet. While recent months have delivered mixed results on key inflation indicators, many market expectations include a potential rate cut by late 2024 or early 2025.

Takeaways from the 4Q 2023 NIC Lending Trends Report

  • Permanent financing for senior housing and nursing care remained inconsistent across lender types, reflecting ongoing challenges in the lending environment, including tighter lending standards, wider spreads, and lower loan proceeds.
  • Mini-perm/bridge debt issuance for senior housing showed a slight uptick but remained near the time series low.
  • New construction loan closings for senior housing saw a slight uptick from the previous quarter, which had somewhat non-existent activity. However, the volume remained well below historical standards.
  • Related to construction activity, analysis in the previously released NIC SHARK report showed indications of increased activity in the Mid-Atlantic region, with construction figures showing positive growth in the fourth quarter of 2023 compared to 2019 levels.
  • Fourth quarter survey data reveals a reduced total balance of delinquent loans for senior housing, down by 13% from the time series high recorded in the third quarter of 2023. Delinquencies as a share of total loans also decreased among contributors to 4.1% for senior housing, down from 4.4% in the third quarter of 2023. Conversely, the delinquency rate for nursing care rose to a time series high of 2.1% from 0.6% in the third quarter.
  • Total loan balances for senior housing decreased, on a same-store quarter-over-quarter basis. This decline may reflect a combination of factors, including market conditions, lender caution, some loans coming off the books, and possibly distressed properties.

From the Field: 4Q 2023 Survey Comments

As part of the survey process for the NIC Lending Trends report, we ask data contributors questions about the lending environment for senior housing and nursing care. The following summarizes responses related to changing capital market conditions, lending patterns, and any notable trends they are observing in the market.

The lending market for senior housing and nursing care in the fourth quarter of 2023 continued to show improving T3 NOI over T12 NOI, movement in the positive direction, but investment opportunities remain suppressed due to higher interest rates and limited investment sales.

Some lenders maintained their existing lending positions set forth in the first half of 2023, while others expressed optimism about potentially loosening requirements in 2024.

Many contributors reported primarily focusing on current relationships and stabilized properties, as rising rates affected credit quality, requiring lower requested loan amounts to meet the minimum DSCR. However, many contributors reported that there was an increasing pace of applications underwritten and approved throughout the fourth quarter. This suggests that while challenges exist, there is a continued interest in lending to the senior housing and nursing care sectors, with lenders adjusting strategies to navigate the current market conditions.

Download the complimentary 4Q 2023 NIC Lending Trends Report for full details on these and other trends in senior housing and skilled nursing lending. 

Note: These data are not to be interpreted as a census of all senior housing and skilled nursing lending activity in the U.S., but rather reflect lending activity from participants included in the survey sample only. 

Interested in participating? The NIC Lending Trends Report helps NIC Analytics deliver on NIC’s mission to enable access and choice by further enhancing transparency of capital market trends in the senior housing and care sectors. We very much appreciate our data contributors. This report would not be possible without them. 

If you would like to participate and contribute your data, please contact us at analytics@nic.org. As a courtesy for providing data, data contributors receive this report early before publication on the website. The information provided as part of the survey will be kept strictly confidential. Individual answers will be combined with the answers of all other respondents. Data acquired from this survey will only be reported in the aggregate, and therefore, the resulting aggregated data will not be attributed to you or your company upon distribution.