NIC Analytics released the 1H 2024 NIC Lending Trends Report. This complimentary report includes data trends over eight years for senior housing and nursing care construction loans, mini-perm/bridge loans, permanent loans, and delinquencies from 3Q 2016 through 2Q 2024. The report is based on survey contributions from 17 participating lenders.
Survey Comments from the Field:
The survey not only gathered data for inclusion in this report, but also commentary on what is driving lending trends. As noted by contributors, rising interest rates, driven by an increase in the 10-year U.S. Treasury yield, led to higher borrowing costs and debt-service coverage constraints. As traditional banks and finance companies tightened credit availability, lenders focused on stronger borrowers, loans with lower loan-to-value ratios, and robust sponsor profiles. These conditions, coupled with reduced transaction-related lending, limited deal flow in the first half of 2024. Despite this, the pace of loan applications and approvals picked up in 2Q24, hinting at cautious optimism for the second half of 2024 and beyond.
New permanent loan volume closed for senior housing rebounded to its highest level since 2020.
Despite high borrowing costs and limited deal flow early in the year, loan application and approval activity gained momentum in 2Q24, signaling cautious optimism for the permanent lending market.
New permanent loan volumes for senior housing increased by over 200% from 1Q24, surpassing $2 billion. This growth reflects a rebound in lending activity with levels exceeding those observed at any point since 2020. Loan volumes for nursing care also rose by nearly 60% in 2Q24. This growth reflects a more measured and gradual recovery for the nursing care sector amid improved Medicaid reimbursement rates and occupancy trends.
This shift highlights renewed confidence in long-term investments, even as lenders navigate the challenges of a higher interest rate environment.
New mini-perm/bridge loan volume activity stayed low due to high borrowing costs and lender caution.
New mini-perm and bridge loan volumes remained low for both senior housing and nursing care in the first half of 2024, reflecting continued caution among lenders. High borrowing costs, driven by the Fed’s target rate of 5.25-5.50%, impacted short-term lending. This environment made bridge loans less attractive to buyers and more difficult for lenders to underwrite.
Lenders primarily focused on selective deals with existing borrowers and properties demonstrating strong performance metrics. Despite an increase in requests for bridge financing, the actual deal flow was limited, reflecting the overall tightening of credit availability. The challenging conditions highlighted a cautious approach among lenders navigating high-interest rate environments while prioritizing stronger credit profiles.
New construction loan volume for senior housing showed slight improvement but stayed below norms.
Construction loan activity for senior housing showed slight improvement in the first half of 2024 but remained well below historical standards. While there has been a modest uptick in lending, the number of senior housing units under construction continued to hover near its lowest levels since 2015, reflecting ongoing caution among lenders and developers. Construction starts, which have been weak in 2024, have yet to recover meaningfully.
In contrast, construction lending for nursing care remained virtually nonexistent, with no activity in the first half of 2024 among contributing lenders. The high cost of borrowing and uncertainties surrounding the sector’s operational challenges have further constrained new development. Overall, construction lending trends highlight a slow recovery in senior housing and a continued lack of momentum in nursing care.
Total delinquent loans for senior housing continued to decline, while nursing care delinquencies increased.
Delinquency rates for senior housing loans appear to have peaked last year and continued to improve in 2024, declining for the third consecutive quarter. As of the first half of 2024, delinquencies represented 3.9% of total loans, down from the peak of 4.4% in late 2023. However, it is worth noting that loans in forbearance are included in the delinquent loan data for some debt providers, slightly influencing these figures.
In contrast, delinquency rates for nursing care loans have continued rising for three consecutive quarters, reaching 2.7% in 2024, up from the time series low of 0.6% in late 2023. This increase highlights ongoing operational challenges in the nursing care sector. Additionally, foreclosures reported in 1H 2024 totaled $51.8 million for senior housing and $43.2 million for nursing care, indicating the continued pressures facing some borrowers in both sectors.
Download the complimentary 1H 2024 NIC Lending Trends Report for full details on these and other trends in senior housing and skilled nursing lending.
Note: This data is 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.
The 2H 2024 NIC Lending Trends Report is scheduled for release in May 2025.
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 to future lending trends surveys, 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 all other responses. 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.