StratoDem Analytics Forecast Scenarios: Seniors Housing Recession Impacts

March 18, 2020

Change in growth rate, households age 80+ with at least $35,000 in household income, baseline versus recession scenario

Change in growth rate between baseline and recession forecasts from 2020 to 2023 for households age 80+ with $35,000+ household income.
Source: StratoDem Analytics

Key Points

StratoDem Analytics has developed scenarios around its baseline nowcasts and forecasts to understand upside and downside risk to the outlook. This introductory analysis is the second of a series on economic and demographic impacts of a 2020 US recession, and examines the sensitivity to recessions of market segments critical to seniors housing performance (income-qualified seniors and adult children):

  • All metros maintain a positive growth rate for senior households with $35,000 or more in income in the recession scenario. On a cumulative basis, three-year growth for this age and income segment shifts from a 14.6% metro average in the baseline to only 11.4% in the recession scenario.
  • The largest gap between baseline and recession senior household growth for this segment is in Las Vegas, followed by Seattle, where adult children household growth was also sharply impacted by a recession.
  • For adult children (age 45 to 64 with household income of at least $100,000), Las Vegas and many small South Florida metros are most negatively affected by a recession. Among large metro areas, Phoenix has the largest decline in household growth between scenarios, followed by Seattle and Atlanta.
  • Texas is the standout for resiliency for both adult children and senior households in a recession. San Antonio, Austin, and Houston are the strongest growth metros for adult children households in a recession, even though growth is expected to slow versus the baseline.

Read our first post on impacts on young adults →

Background

StratoDem Analytics sensitivity analysis captures the relative economic and demographic growth performance of metros and counties to the US over the business cycle and applies the results to shift the outlook for upside and recession scenarios.

This analysis examines the sensitivity to a recession of growth in adult children (age 45 to 64) and senior (age 80+) households. The Coronavirus COVID-19 pandemic has driven a sharp reduction in economic activity, which increases downside risk to the baseline forecast. Impacts on market segment forecasts are driven by three main components:

  1. Negative impacts on net migration rates for many markets, as economic conditions deteriorate and moving rates decline across the US
  2. Declining income growth, as the labor market weakens (and net worth declines)
  3. Slower household formation due to economic uncertainty

In addition, changes in economic conditions are not yet reflected in the government statistics. We expect the baseline outlook and scenarios to continue to shift downward as new data becomes available.

Senior household growth rate expected to decline by 100bps from 2020 to 2023 versus baseline

The map below illustrates the baseline-to-recession scenario forecast shift by metro for senior households (age 80+) with $35,000 or more in household income. Darker red indicates steeper declines in growth outlook for the household segment.

Change in growth rate, households age 80+ with at least $35,000 in household income, baseline versus recession scenario

Change in growth rate between baseline and recession forecasts from 2020 to 2023 for households age 80+ with $35,000+ household income.
Source: StratoDem Analytics

For households age 80+ with $35,000 or more in household income:

  • The household count across US metros is forecast to expand by 4.9% per year on average from 2020 to 2023 in the StratoDem Analytics baseline. The recession scenario average is 100 basis points (bps) lower per year, at 3.9%.
  • On a cumulative basis, three-year growth for this age and income segment shifts from a 14.6% metro average in the baseline to 11.4% in the recession scenario.
  • All metros maintain a positive growth rate for senior households with $35,000 or more in income in the recession scenario. Aging is the primary driver of this growth in the three-year outlook because the oldest Boomers have their 80th birthdays in 2025.
  • The largest gap between baseline and recession household growth for this segment is in Las Vegas, where the 22.1% baseline forecast moves down to 8.7% in the recession scenario, due to reduced migration. Seattle has the second largest gap, at 900 bps, with growth slowing to 5.8% in a recession, which may be related to migration of fewer adult children.
  • Similar to the outlook for adult children, Texas is most resilient for growth in this segment in a recession. Among large markets, Houston has the strongest growth across metros for this household segment in a recession, at 17.9% over three years, compared to 19.7% in the baseline forecast. The smallest baseline-to-recession growth gap is in San Antonio, at only 26 bps, with 16.4% growth from 2020 to 2030 in the recession scenario. Austin baseline growth is 19.9%, versus 16.6% in a recession.

Higher-income adult children household growth expected to decline by more than 100bps during downturn

The map below illustrates the baseline-to-recession scenario forecast shift by metro for adult children (age 45 to 64) households with $100,000 or more in household income. Darker red indicates steeper declines in the growth outlook for this household segment.

Change in growth rate, households age 45 to 64 with at least $100,000 in household income, baseline versus recession scenario

Change in growth rate between baseline and recession forecasts from 2020 to 2023 for households age 45 to 64 with $100,000+ household income.
Source: StratoDem Analytics

For households age 45 to 64 with $100,000 or more in household income:

  • The household count across US metros is forecast to expand by 1.9% per year on average from 2020 to 2023 in the StratoDem Analytics baseline. The recession scenario average is over 100 basis points (bps) lower per year, at 0.6%.
  • On a cumulative basis, three-year growth for this age and income segment shifts from a 5.6% metro average in the baseline to only 1.8% in the recession scenario.
  • There are 12 metros where growth in this household segment drops by 1000 bps or more in the recession scenario versus the baseline forecast. Each of these metros moves from solid growth to a decline in the count of adult children households with $100,000 or more in income. Locations most negatively affected by a recession as compared to the baseline are Las Vegas (8.9% baseline, -8.3% recession) and many small South Florida metros, such as West Palm Beach (4.6% baseline, -8.1% recession).
  • Among large metro areas, Phoenix has the largest gap in household growth for this segment, shifting from a baseline three-year increase of 7.9% in adult children households with $100,000 or more or income to a 1.7% decline in the recession scenario. Seattle and Atlanta have the next largest gap, at about 900 bps, with growth in both metros shifting from about 6.3% in the baseline to 2.6% in the recession.
  • Texas markets — San Antonio, Austin, and Houston — stand out as the strongest growth metros for this household segment in a recession, even though growth is expected to slow versus the baseline. The smallest baseline-to-recession growth gap is in San Antonio, at only 40 bps, with 9.3% growth from 2020 to 2030 in the recession scenario. Austin baseline growth is 12.2%, versus 7.7% in a recession and the Houston baseline is 8.7%, versus 6.9% in a recession.

Conclusion

StratoDem Analytics will continue to monitor economic conditions and adjust model forecasts accordingly. Future posts in this series will cover impacts on other market segments and focus on the most volatile and most resilient markets.

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