Does a coronavirus vaccine make household stocks older than buy?

To put it bluntly, the COVID-19 pandemic has not been a good environment for the high-end housing industry. With many major housing facilities suffering a deadly outbreak of the virus, inflows have fallen, and property investment trusts in high-rise home ownership have come under pressure.

However, with vaccines around the corner, and with former residents living to be among the first groups to receive vaccinations, is now a good time to take another look at high housing REITs? This December 1 Amadan Beò video clip, two experts from our Millionacres real estate brand, Matt Frankel, CFP, and Deidre Woollard discuss what investors should know about the current state of old housing and what investors should expect as a vaccine.

Mata Frankel: So, yes, it is certainly good news for health care REITs, especially old homes, which is really a more struggling part. Just to name a few, Welltower (NYSE: WELL), the largest healthcare REIT specializing in high focus properties, has seen its high housing package steadily decline from around 86% to around 78%, just since the beginning of this year . That is a very significant decline. People are moving out of old residential facilities at a higher than average rate. People are moving in at a slower rate. If you have older relatives, now is not the time you might want to put them in old houses, if you can help it.

It has been a very difficult environment for old houses, especially the REITs that target old houses like Welltower. Vaccines that come are all they need to start getting back into business. It’s not going to be at the same time, anyway. It will take some time. I will see a ramp of at least a year or two in the industry, once the vaccine is widely available. However, they have not issued official instructions to my knowledge, but health care workers and home nursing residents are the first to receive the vaccine. It is certainly good news.

Deidre Woollard: Exactly. I wanted to bring up this stat from Nareit, which follows those kinds of things. The year to date result on these, I think they found 16 or 17 healthcare REITs, down at the end of October by just over 25%. Now, compare that to 2019, total output went up 21%. If you are an investor in some of these REITs, it has been a challenging year. But we are also seeing some of these REITs change their records. Out of old housing, even before this, I think, partly, partly because, from what I’ve seen, there has been a glut in prime people living in general because I Many developers and companies thought that people were going to be ready for an older lifestyle at a slightly earlier age than demographics had decided to go high. live, because I think that people thought that people were going to start turning to older people living around the age of 75 like, 76, that area. It seems more aggressive when people can no longer live alone, more likely than in the early 80s.

Frankel: Yeah, the 85-and-up demographic is the real sweet spot for high-end housing.

Woollard: Yeah.

Frankel: To be fair, this is an organization that is going to grow over time. The population is expected to triple 85-and-up in 2050. This is going to be a growth market. Older housing will be required. But when you have a high-growth commercial property market, they have the potential for over-construction. That is especially true in times like these when capital is so cheap. It is so cheap for especially the REITs with high credit quality. It is so cheap for them to borrow money right now to build new buildings. Lots of REITs were trying to get ahead of this growth curve, and it got a little ahead of itself. I mentioned the fall in Welltower ownership from 86% to 78% this year. Eighty-six percent was not a good place to start. That wasn’t already where you want it to always be. If you have 100 units in the main housing facility, that means 14 of them are empty. That’s not really where you want to be. That is not a big economy. Some cases have been too high, and this has been a range of buildings that struggled even before the pandemic.

Woollard: That is true, and certainly the numbers that have come out when human pandemic disease is affecting. I feel like that has a one- or two-year, at least, psychological and emotional impact on anyone who is considering putting their parents in one of these homes or are looking at these places for themselves. Even after we get vaccinated, I think that’s just what human behavior is going to happen. It always gives us time to move. We move one way and then we move another way. I think a bit of that will happen where people are not quite ready yet.

Frankel: It is a comfort factor and an essential feature.

Woollard: Yeah.

Frankel: I mentioned the Welltower property. I keep mentioning that number, but it’s a good stat. It has declined by about 8% since February. That represents hundreds of thousands of people when you look at the high-end housing industry as a whole. Not all of them are going to come back overnight. You’re not going to rent up more than 20% vacant. It is not to be rented overnight. This is going to take some time. It’s going to be a comfort, for one, like you said. People need to be comfortable with the safety issue, and there has to be a demand for it. Demand really needs to ramp up, and it’s going to come back slowly – the same with many other types of REITs that are heavily impacted. Hotel REITs are not going to jump back overnight. Apartment REITs in cities are not going to bounce back overnight. It will take some time. That is to be expected. We’ll see who the winners are, but many companies, as you said, have been pushing away from old houses in recent years.

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