Without a doubt, 2008 will be a pivotal year in the manufactured housing business. While retailers and manufacturers will continue to struggle through the first half of the year, community owners will also confront challenges that will directly affect their future. The first is “park closure” regulation that on a local, regional and national level continues to make headlines. In Oregon we have battled changes to existing ordinances with mixed results and in many other states similar battles will be won and lost in 2008 as resident groups and policy makers square off with community owners over what is and is not fair when a community is no longer viable and a change of use is imminent. It is up to community owners and operators to face this issue head on, educate policy makers and listen to residents. If living in a land-lease community is a bad investment for homeowners they won’t stay and retailers won’t suggest land-lease communities. We have some work to do in this area and must provide homeowners with a value proposition that makes sense for them and for us. Without it our future is very limited.
Today MHI distributed their Economic Flash Report, which shows November 2007 down 5.5 % from November 2006. The seasonally adjusted shipments of new manufactured homes was 89,000 in November, down from 92,900 in October. Annualized, 2007 shipments are down 19.2% as compared to 2006. Frankly speaking, 2007 is shaping up to be, once again, the worst year in the history of the manufactured home business based on new home shipments (I was sure 2002, 2003, 2004, 2005, and 2006 were the worst). States important to Commonwealth had mixed results --- Colorado was up 66.7% in November, California was down 35.2%, Washington was down 20.2%, Oregon was down 6.7%, and Idaho and Montana were flat. Remember, these are year-to-date shipment statistics comparing them to November 2006. If we are going to get a rush of business because of the tightening sub-prime mortgage requirements in the site-built business I sure wish it would hurry up and get going.
Interestingly, we are experiencing a surge of business in many of our land-lease communities and it is directly related to the changes in the site-built business. One major benefit of the skyrocketing price of a new site-built home or bare land is that buyers are recognizing the true affordability of land-lease communities. Our monthly site fees provide consumers an affordable alterative to buying land and the value of clubhouses, swimming pools or other amenities are more appreciated than ever. With the average price of a new manufactured home in a land-lease community easily reaching nearly $100,000.00 we can still make a compelling argument that this IS affordable housing. The challenge for us it creating and maintaining communities that make this a real value proposition for the consumer. By that I mean we have a responsibility to keep the community viable so that the homeowner’s investment is sound, the resale environment is vibrant and the demand for homes in the community is sustained through good community management and ownership.
Having said that, most people in the industry are uncertain about what 2008 will bring. Many large retailers and manufacturers and making a strong move toward “lower end” homes. According to the latest news from Palm Harbor, who lost money again in their final quarter, they are seeing an increase in orders for lower priced HUD and Modular homes. Clayton affiliates are selling a lower priced product with basic “specs” as is Fleetwood and other well know and respected manufacturers. Conversely, there are still a few manufacturers building a product that is more sophisticated all the time and they are just as convinced that the market is moving their direction. We are not overly concerned with what shape the latest land/home oriented product is taking but there does seem to be some indecision among community operators on which way to go. We believe the better built homes are the future.
Our results have proven that a cheap product just doesn’t work. Cheap homes create rundown-looking communities and that does nothing for the long term stability of the neighborhood or home resale values. Besides that, there just isn’t much difference in price between the cheapest manufactured home available and a moderately priced, properly equipment mainstream manufactured home. Yet the quality, workmanship, durability and manufacturer support is almost priceless and always, without exception, leads to more sales and more importantly, happy homeowners. After all, we have to live with these people for many years and we want them telling everyone they know that they made a good decision by buying a home in our community. What’s that worth?? Millions.
Chattel financing for these homes has not changed much. There are very good single-digit rates available for qualified customers and no financing available for unqualified customers. Just the way it should be during these turbulent times. Oil is at $100.00 a barrel and the “recession” card is being played up constantly by Presidential candidates and media-types alike, so there is no need trying to combat the sky-is-falling chatter currently being bantered about. Simply put, you do something about the things you can control, and in the manufactured home business we can control a few things --- Our integrity, our customer service, the value of our product, and our reputation. Do it right and good things will happen to you in any market.
Commonwealth has elected to skip our Manufactured Housing Industry Summit this year. There have been many industry meetings recently and we did not want to add one more meeting to compete with the others. To stay informed and involved we recommend you attend the following industry gatherings this year:
Louisville Manufactured Housing Show – January 15-17, 2008 - The Kentucky Exposition Center.
MHI’s National Communities Council Winter Meeting – February 11-12, 2008 - The Fairmont Hotel, Dallas TX.
George Allen’s National State of the Asset Class (Manufactured Home land-lease community operators) February 26-27, 2008 – Fountainview Estates, Tampa FL.
Oregon Manufactured Home – February 27th (industry only day) to March 2, 2008. Oregon State Fairgrounds, Salem OR.
The National Congress & Expo for Manufactured and Modular Housing – April 22-24, 2008, Paris Hotel, Las Vegas NV.
MHI Midyear Meeting – June 2-3, 2008 - Hyatt Regency at Union Station, St. Louis MO.
I encourage you to attend one or more of these meetings, volunteer on a local or state level, support your state manufactured housing association, join MHI, and participate in the legislative process. The industry cannot grow and prosper without your involvement.
Have a great January.
Greg
Harmon - President
Commonwealth Real Estate Services
E-mail: greg@cwres.com
Telephone 503.244.2300 Ext. 101
