As we gleefully say goodbye to 2003 and welcome the opportunities and challenges of 2004, let's take a minute and discuss what will probably be the hot topics and highlights of the New Year.

First, you can't deny the incredible impact Berkshire Hathaway's (Warren Buffett) entry into manufactured housing is already having on all of us. Trust me....whether you're directly effected by his investment or not, it's a terrific shot in the arm for every segment of manufactured housing. Within days of Mr. Buffett's announcement last spring outlining his intentions to purchase Clayton Homes, stories began circulating about new sources of financing entering the manufactured housing industry, stock prices of rival publicly traded companies spiked, and several of us had this stupid grin on our faces, enjoying the positive chatter that lit up the phone lines. In the land-lease and rental communities, stocks in REIT's are on the rise and new developments are back in the planning stages now that the slow but clear revival of chattel financing seems to be underway, albeit not nearly fast enough to satisfy our needs.

At the very least, perception is reality. His investment in manufactured housing gives Wall Street the perception that this is an industry with a bright future. After all, who argues with Warren Buffett for crying out loud? The guy's a genius and almost everything he touches turns to gold. His next step (actually, Claytons) was to buy Oakwood Homes, which includes Marlette and Golden West, and he's probably not done buying yet. There are strong indications that he is looking to purchase related or ancillary companies that will compliment and profit from these core businesses. Add to this his limitless access to low cost capital for Vanderbilt Mortgage and Oakwood Acceptance and you've got yourselves the beginning of an industry-wide recovery. Not that it's time to start doing the happy dance just yet, but it's good news and I love it. Even as a competitor you should be proud to talk about how Warren Buffett's Berkshire Hathaway, Inc. felt the future of affordable, energy efficient manufactured housing was a good place to invest a few billion bucks. Hey Warren...I hear property management companies are the wave of the future too!

Next, take a look around most manufactured home communities and you will see a few less repossessions than last winter. Not that they're dropping like flies, but statistics indicate DECLARED repossessions are running about 25% lower than the same period last year. Even at that, repossessions are running 300%+ higher than in the "good old days" and this inventory must be absorbed by homebuyers before we'll experience a significant recovery in new home shipments. But there's one problem with these "declared" repossession numbers that are very misleading. Today, more and more community owners are being forced to purchase these homes rather than run the risk of having them removed from the community by people who place them on lots and package them for sale to real estate buyers. Therefore, while the homes no longer show up on the lenders repossession reports, many of them are still out there, vacant and for sale, producing no income for the community owner and competing for that new home buyer. Because of this phenomenon many of our property management clients have reluctantly become home collectors versus sellers and are experiencing slow turnaround's on these homes, but we're hoping this is partially due to the time of year. These homes are priced to sell fast (many at a net loss to the seller) so we hope to see an increase in pre-owned and "repo" home sales in the first quarter of 2004. If that occurs AND new declared repossessions continue to diminish, that combination is a clear indication that we are slowly recovering from the repossession hangover and that supply and demand are closer to being equal once again.

We must create an industry-wide, nationwide data base of manufactured home comparable sales information, and we must bring credibility and consistency to manufactured home appraisals. Lenders, ALL lenders talk about transparency of manufactured home loan transactions when they talk about what's wrong with our industry and the fears they have when contemplating becoming more aggressive in manufactured home lending. Their large losses are attributable in no small part to the lack of a formula for determining the proper loan value of a manufactured home. Gub Mix has talked about this from his Soapbox for some time now, and as usual, he's right on the money (no pun intended). There is some movement towards this problem, but it's too soon to see if it's for real or not. It's all about credibility and professionalism, folks. Licensing sales people, escrow-type closings, appropriate regulation, maybe a few new laws, added safeguards, increased transparency. These ideas ruffle and lot of feathers and cause a fair amount of heartburn, but why? Are we in the REAL housing business or aren't we? How much money are we going to lose before we recognize what needs to be improved upon and implement these changes ourselves...on our terms...on our timetable....with our input...and with our own personnel. Our share of new home starts has shrunk to single digits. In 2003 we found out that government talks a lot (and complains a lot) about what's wrong with the manufactured housing industry but does nothing substantive to help us, so let's help ourselves. Besides, when was the last time government's "help" really helped you anyway! If it gives us credibility it will bring sales and profits with it, because credibility attracts customers. Good customers.

Manufacturers should be applauded for designing and building new homes that are specifically designed to fill small home sites in older communities. The demand is substantial but retailers and community owners have been reluctant to invest in these new homes while repossessions continued to compete for their inventory dollars. Retailers are missing a real sales opportunity if they're not stocking one or two of these homes and educating their salespeople on the home sites in their areas, especially in 55+ communities, that are vacant and ready for smaller single and multi-section manufactured homes. This trend is taking off in Northern California and headed this way. We expect to see an increase in this segment of the market in 2004 and we're already seeing a dramatic increase compared to last year in inquires for rental home sites from new home buyers and retailers.

The largest manufactured home show west of the Mississippi River is next month in Salem, Oregon. The 2004 Oregon Manufactured Home Show at the Oregon State Fairgrounds starts with industry days Tuesday March 2 and Wednesday March 3, 2004, and continues with retail days Thursday March 4 through Sunday March 7, 2004. Don't miss your only opportunity to browse through the latest products on the market and visit with all of those suppliers and vendors who have the answers to your questions and the solutions to your problems. To register for the show or inquire about exhibitor space contact OMHA at 503-364-2470.

While we're promoting industry events, don't miss the 2004 National Congress & Expo for Manufactured and Modular Homes, April 13-15 at Caesars Palace Hotel in Las Vegas. MHI, with the assistance and input from Gub Mix and others, does an outstanding job organizing this event and this years program includes the most concise, on-target array of useful seminars I've ever seen at the Congress & Expo. For registration information contact MHI at www.manfuacturedhousing.org or call MHI at 703-558-0654.

Most importantly of all, next week is the Commonwealth Industry Summit 2004 in Wilsonville (Portland), Oregon, Wednesday, January 28th from 8:30 a.m. until noon. In one room you have community owners and developers, lenders, appraisers, retailers, manufacturers and insurers, having a blunt and open discussion of the real issues that face the manufactured housing industry. It is a terrific way to meet those that offer solutions that address your needs, and it keeps you up-to-date on our ever changing business climate. Seats still remain for the Oregon Summit. You can register on line at www.cwres.com or call Commonwealth at 503-244-2300. The total cost, including a hot buffet breakfast served at 8:00 is only $35.00. It's a bargain....hope to see you there.

Thanks for taking a few minutes to read this update. I look forward to your comments and feedback.

Greg Harmon - President
Commonwealth Real Estate Services
E-mail: greg@cwres.com
Telephone 503.244.2300 Ext. 101