There have been several interesting industry developments recently that I wanted to share with you.

First, in the Pacific Northwest the latest numbers on repossessed manufactured homes (courtesy of Don Miner at the Oregon Manufactured HousingAssociation) indicate a stubborn but steady decline in repossessions. Lenders report that the combination of declared and pending repossessions have declined by 22.6% in Washington, 26.2% in Oregon and 13.6% in Idaho since December 2002. These are very positive signs that we are working our way through the repossession "hangover" and that this inventory is slowly but surely being absorbed by the marketplace. However, it's important to note that manufactured home community owners have dramatically increased their purchases of repossessed manufactured homes from lenders recently. Therefore, these homes, while no longer repos, may still be sitting in communities for sale or lease by the community owner. Regardless, this is good news and is reason to feel optimistic.

At Commonwealth we are experiencing a slow increase in new homes moving into our communities. In both Western Washington and Western Oregon we are seeing an overall improvement and have had several new homes move into vacant spaces this Spring. We are also experiencing a slow increase in home resale's and new resident applications. These are all positive signs and I feel represent more than just a seasonal upswing. Unfortunately, we are not seeing the same level of improvement in Eastern Washington and Oregon, where the market is still very slow and land/home manufactured home sales represent the vast majority of manufactured home sales in those areas.

Our industry suffered a major national blow last week when Fannie Mae announced substantial changes in their manufactured home mortgage loan program, including the elimination of 25 and 30 year mortgages, larger down payment requirements, .50% interest rate increase over site-built mortgages, limit on cash-out refinances to 65% loan-to-value, increased mortgage insurance premiums. All of these changes will make manufactured homes much less affordable and increase costs to consumers. After a call to action from MHI and our State Associations, which resulted in hundreds of phone calls and faxes to our government officials and to Fannie Mae, some of the changes have been altered. Fannie Mae will continue to offer 30 year mortgages, but will require a 10% down payment. The interest rate will remain the same as site-built, but the will charge an additional .50 basis point loan origination fee. These restrictions are not required of other types of housing and don't go far enough to bring parity to manufactured housing. We must continue to work with our Members of Congress and see to it that Fannie Mae does not make changes that will cause our industry further harm and make us less affordable and competitive with other types of housing.

It is essential for the health and viability of our industry and our prospects for the future that each segment of the manufactured housing industry be profitable and successful. Although Fannie Mae financing relates only to land/home mortgage financing and does not have a direct impact on the "park" or land-lease community business, it has a huge impact on our industry as a whole. Without competitive land & home mortgage financing we will see the closure of more retailers, manufacturers and lenders, further crippling our industry and creating another obstacle that will get in the way of our much needed industry-wide recovery. I urge you to contact your State Association and find out how you can help.

We feel that 2003 will be an overall good year for the manufactured housing business in Washington and Oregon compared to last year. While national projections predict a new home production decline compared with 2002, the Pacific Northwest was hit harder sooner than the rest of the nation. We've been dealing with these challenges longer than other regions so many of our efforts to reverse these trends are already starting to produce positive results. While we still continue to struggle with the problems associated with repossessions and the lack of chattel financing, everyone has rolled up their sleeves and decided to work harder than ever at bringing new life to their communities and attract a new wave of manufactured home buyers to the marketplace. There's a lot of work yet to be done, but we feel good about the direction we're headed.

I hope you have a good week...

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