By Gayl Mileszko
Living in a State of Surprise
For all of our blessings, Americans are falling behind dozens of other countries around the world – nearly all high-income and some middle-income countries – in terms of how long we live. This is astonishing. It is a dramatic change from 1980, when life expectancy at birth was remarkably similar to allies including Canada, Switzerland, France, Japan, Australia and Sweden. The COVID-19 pandemic hit us harder than peer countries, but it is our drug use, high body mass index, elevated blood sugar and blood pressure that are driving disability and premature mortality higher here. We far outspend other large and wealthy nations on healthcare, but the CDC last reported that the average U.S. lifespan was 77.5 years versus a comparable country average of 82.2. Given the stresses and strains of living in the age of artificial intelligence, microplastics, bitterly divisive politics, wild weather, and increasing income and wealth inequality, it is actually quite surprising that we live as long as we do. Will we fare better or worse if we continue to measure our worth against billion-dollar baseball players, chat with robots at the office water cooler, get our brains chipped, apply new miracle serums, ride in flying cars, live in tiny homes or space hotels, and consume designer food pellets?
Super-Agers
At the time of the American Revolution, the average life expectancy was 38 years. That was long before angry podcasters, slow as molasses cashiers, road rage, fast food, and Alexa. But there have always been super-agers among us. Polymath Ben Franklin, born in 1706, lived to be 84 and Charles Carroll, another signer of the Declaration of Independence, died at the age of 95 in 1832. The Washington Post has been publishing a series of columns on older Americans today, and the latest just featured one remarkable New Yorker, age 102, sharp as a tack, living completely independently, riding buses, completing crossword puzzles, and volunteering at the Public Library. She, and her peers, in this rare class of folks, outliving millions of others, have a very positive outlook on life. They are hopeful, they demonstrate an ability to adapt to change, and hold meaningful relationships. With their can-do attitudes, they remain active in their communities, keep moving throughout the day, sleep well at night, and “live in a state of surprise”, treating every day as a new day and not taking it for granted. Good lessons for us all.
Education on Aging
In elementary and high school, there are not yet enough classes on healthy aging. Our nation’s most precious assets – our very young and very old – rarely meet; the former expect to live forever and swat away most efforts to instill healthy habits, and for many of the latter it is often too late to reverse years of neglect or bad luck. Is college the right time to try to prepare young Americans for a long and healthy physical and financial life and adopt a positive outlook on aging? Most adults don’t even start to think about what lies beyond their sixth decade until their days of child and parent care abruptly end. At that point, the well-to-do have many options with respect to housing, care, social and other leisure time activities. The middle class with incomes between $53,000 and $161,000 have many fewer options, and those with incomes below $50,000 dramatically less. The U.S. Census reports that there are about 101,000 men and women over the age of 100 at present. Remarkably, about 20 percent have no cognitive or physical impairments, according to one New England Centenarian Study with 2,500 participants. If technology, medicine, genetics, and lifestyle changes enable more of us to live to be 100 or 120 or more, we as a nation have a lot of work to do to get ready to meet the challenge of providing for this new class of elderly, senior, or centennial Americans .
Housing and Service Shortfalls
We frequently hear about the inability of Millennials and Gen-Z to afford homes. This year, the National Investment Center on Seniors Housing reported that by 2030 there will be a $275 billion shortfall in the development of the types of housing that will be needed by our senior citizens aged 62 and above. A good number of seniors will be able to sell their homes at great profit and move into active living, continuing care, or other communities, but some others are stuck in large homes that cannot be sold, given interest and mortgage rates. Many other, perhaps the majority, have no home equity or income streams to support their housing and care needs going forward. Experts estimate that more than 550,000 new units will be needed within 5 years. The investment required will grow to $1 trillion by 2040. But at the current pace of adding only 26,000 units a year, we are falling way short of the inventory needed due to higher those rates, inflation in construction costs, and post-pandemic challenges including the reduced commitment of capital. At HJ Sims, we are working hard to address this challenge by working with public and private partners to finance both rental options as well as ownership or entrance fee models to meet the growing demand. This year, the number of new or expanded nonprofit communities being financed through the municipal bond market has dropped significantly. In the coming weeks, we will report on the data, the progress and lack thereof. We will continue to share our pipeline of critically needed financings and welcome all inquiries from readers on how we may be of more assistance in the interim. And we plan to work with our charter school and private school colleagues on the need for more education and innovative work in this area.
HJ Sims in the Market this Week Again
As market demand is strong and rates remain favorable, HJ Sims is in the market this week with a $149 million BBB rated transaction for Lifespace Communities. Bonds are being offered through the Iowa Finance Authority to finance 13 independent living cottages, make renovations at Newcastle Place in Mequon, Wisconsin, refinance some outstanding debt, and fund capitalized expenditures and interest. Please contact your HJ Sims representative for more information. Last week, we brought to market a $89 million BBB+ rated financing for The Brethren Home/Cross Keys Village. The BBB+ rated bonds issued through Pennsylvania’s Adams County General Authority came with a final maturity in 2059 priced with a coupon of 5.00% to yield 4.60%. We also underwrote a $29.4 million non-rated Utah Charter School Financing Authority issue for John Hancock Charter School in Pleasant Grove. We priced the 10-year bonds for this K-6 school with a coupon of 6.125%, priced to yield 6.375%.
Markets Expect Rate Cut and Pause
At this writing, the 2-year Treasury yield stands at 4.15%, the 10-year at 4.27%, and the 30-year at 4.48%. The 2-year AAA municipal general obligation benchmark yield at 2.53% is 23 basis points above the 10-year yield at 2.76% and 107 basis points above the 30-year at 3.60%. Although investment grade muni index yields have only returned about 3.30% so far this year, taxable munis are up 4.16% and high yield munis are up 9.13%. Municipal issuance is setting a record this year and expectations are that it will match or exceed the final level next year. About $42 billion has been added to municipal bond mutual and exchange traded funds, with 38% flowing into high yield funds. Major market movers this week include 9 Treasury auctions, speculation on developments in Syria, Israel, Lebanon, Iran. Russia, South Korea, and Romania; results of rate decisions by 5 central banks, U.S. inflation data, corporate earnings, and new developments in Washington, including the usual year-end countdown to the imminent expiration of federal funds. No one sees major market disruptions stemming from the White House, House or Senate in the next few weeks, but 2025 brings many possibilities for extreme volatility.
What is in Store for 2025?
Expectations for 2025 are not only for high volume but significant volatility as the debate over tax reform heats up. We are not in the camp of those panicked over the possible elimination of tax-exemption, but we encourage borrowers and prospective borrowers to contact their elected officials and associations with concrete examples of how projects that would have only been made possible by public offerings of tax-exempt bonds. Individual and institutional investors must weigh in as well: there are 511 conventional municipal mutual funds holding $798 billion in assets under plus 112 municipal bond exchange traded funds with $142 billion of AUM and $137.1 billion sitting in tax-exempt money market funds.
Reach Out for Recommendations
In acknowledging the realities of aging, good genes and a lifetime of healthy living and care count for a lot. But good financial planning, sound advice from advisors, recommendations from brokers, and guidance from our bankers can make a difference in the lives of those in need of independent living, assisted living, memory care and skilled nursing option for seniors. The Centers for Disease Control last reported that U.S. longevity of as of 2022 averaged 80.2 years for females and 74.8 years for males. In our experience, well-managed senior living and care communities are able to extend not only the length but quality of life of its residents but often offer better care than that provided by loved ones. We invite your questions and requests for information on the hundreds of campuses and facilities that we have financed
Wishing You and Yours Very Happy Holidays
Markets begin to quiet this week, although light trading will continue into the New Year. HJ Sims trading, banking, sales, analytic, and operations teams are available to assist but we note that activity starts to wind down this week and that may impact some bids and offers on your bonds. Please reach out to us to share your plans for celebrating these very special weeks and let us know how we can help to make 2025 an even better year for you and our precious centenarians. In the interim, we wish you and your families, friends, and colleagues a series of very merry days and a string of wonderful surprises in the months ahead.