Wow.  Things are changing at such a fast and furious pace it’s hard to keep up.  I will try not to be redundant since most of you actively keep up with the latest financial news (sub-prime lending troubles, etc.) but there are a few tidbits worth examining.

I was particularly interested in the interview with Angelo Mozillo on CNBC yesterday.  Mr. Mozillo is CEO of Countrywide Financial and was once a lender in our industry himself.  Also, Angelo started IndyMac as Countrywide’s sub-prime subsidiary and IndyMac evolved into an independent mortgage conglomerate (www.indymacbank.com) that once included IndyMac Manufactured Housing Finance, of which I was a Regional Vice President 9 years ago.  Angelo Mozillo is a really smart guy and he set the record straight in his interview.  While the imminent collapse of a couple of sub-prime lenders is big news, most of the established lenders in the industry (Wells Fargo, Countrywide and Washington Mutual) have strong balance sheets and their portfolios are in good shape.  They have the reserves to cover losses and have no intention of abandoning sub-prime lending all together.  Sub-prime is not a dirty word, but you wouldn’t know that by the news reports lately.  He was quite critical of lenders who had lowered their standards so low that nearly anyone who could fog a mirror got a home loan but he predicted a much stronger, more sustainable sub-prime lending business going forward, once the carnage is over with and the wreckage has been cleared from the racetrack (sound familiar?).

Also, Warren Buffet weighed in, calmly talking about how housing will always be here and be the anchor of the economy.  Paraphrasing, he said “our companies will always be building homes, building bricks, making carpet and furniture.  We’ll be doing that forever and that will never change.”  He was very circumspect and welcomed a correction in the red-hot real estate market.  Both he and Mr. Mozillo also predicted lower interest rates as a result of this correction – making the point that as lenders tighten their loan qualification requirements the loans will be of better quality and perform better than current portfolios.  That’s not to say that foreclosures won’t be on the rise for a while --- some of these new interest-only and negative amortization products were doomed from the beginning.  But just like in our industry, the buyers and sellers should share the blame.  What were people thinking of by signing those documents?  Renting with an interest deduction.  That’s all they were doing. 

Congratulations to Gail Cardwell, who was selected as the new MHI President.  Click here to read statements from MHI’s announcement. 

In Washington and Oregon, our core marketplace, we are constantly combating proposed legislation unfriendly to manufactured housing.  First right of refusal bills in Washington and bills related to utilities and regulation have kept MHCW and Executive Director Ken Spencer working overtime.  In Oregon its tough too --- the landlord/tenant coalition is close to passing a reasonable park closure bill that will include relocation payments to the residents from the landlord coupled with a tax credit from the State of Oregon.  Manufactured Home community closures have slowed significantly in Oregon and Washington but they will be a part of our business for the foreseeable future so we might as well get it out in the open and deal with it.  Many of these older parks are exactly that --- trailer parks that were terrific little communities in their day but are now on busy thoroughfares surrounded by new developments and slated for re-development themselves.  Addressing the issue and helping the residents by minimizing the pain of relocation seems fair to me. 

The latest new home shipment numbers released by MHI are so low it is nearly incomprehensible (shipments in January 2007 were down 41% from January 2006).  I can only chalk it up to a particularly cold winter and the liquidation of excess inventory by retailers that was not replaced with new home orders.  Personally I do not believe that 2007 is going to be much slower than 2006 overall, so I suspect shipments and sales will rebound nicely in the second half of the year.  Add to that the tightening of real property sub-prime lending and that change may bear fruit for the land lease manufactured home community business.  You can own a nice, energy efficient manufactured home in a very nice community for between $900 to $1200 per month (home, space and utilities), which is VERY affordable in most areas.  At the price of site built housing nowadays isn’t $60,000 - $75000 an extremely affordable way to put a roof over your head?  Especially a nice new manufactured home roof?  It’s a no brainier to me.

ANNOUNCEMENT.  As part of our desire to become a stronger force in manufactured home community acquisitions and management in the Western States, Commonwealth Real Estate Services is proud to announce our expansion to Colorado, with an office opening in Denver later this spring.  Details to follow in our next Industry Update.

Any industry participant interested in expanding their knowledge base, learning from the best and networking with the brightest should attend the National Congress & Expo for Manufactured & Modular Housing, April 10-12 in Las Vegas.  This is the best manufactured housing event you can attend.  Go to www.manufacturedhousing.org to register on line.

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