The Federal Reserve’s decision on Wednesday to raise interest rates by 0.75% could slow new construction in seniors’ housing, said the chief economist at the National Investment Center for Housing and Development. aged care, Beth Burnham Mace. McKnight Business Daily. “But it’s sort of a silver lining for our industry, because it serves as a tailwind for the occupation,” she said.
The Fed’s action, aimed at curbing inflation, marked the biggest increase in interest rates since 1994.
The consumer price index rose 8.6% in May from the same month a year ago, marking the highest figure since December 1981, the Labor Department noted Friday.
“The Fed is really trying to show with today’s increase that they take inflation very seriously,” Mace said. “The target inflation rate is 2%. … The idea is that [raising interest rates] will slow down the economy. The slowdown in demand should eventually reduce the pressure on prices.
The downside of rising interest rates for seniors’ housing, she said, is that fixed mortgage rates will rise, which could make it harder for seniors to sell their homes and earn money. move into residences for the elderly. The proceeds from home sales are often used to finance moves for seniors.
The other negative, Mace said, “is that the stock market is completely freaked out by this change in the interest rate market. They’re worried about the recession.
Many seniors looking to move into senior housing have invested in the stock market, she noted, and rising rates will affect overall confidence. Because independent living is primarily an option based on choice rather than need, Mace said, interest rates could be a factor in the decision making. Assisted living, on the other hand, is generally needs-based, so raising rates will have less of an effect on that sector, she said.
People will increasingly fear that the Fed will overshoot and the economy will slide into a recession in 2023, the economist predicted. With inflation at record highs and in anticipation of rising interest rates, Mace outlined his thoughts on the effect on the senior housing industry in the NIC Insider Newsletter last month.
Another interest rate hike could come when the central bank meets again in July, Federal Reserve Chairman Jerome Powell warned Wednesday afternoon. press conference.
“Looking ahead today, a 50 basis point or 75 basis point increase looks very likely at our next meeting. … We expect the ongoing rate increases to be appropriate,” he said. he declares.