More good news in the manufactured housing industry as several key indicators point to a slow but steady recovery.  Production and shipments are up, as are the profits of many industry participants.  Here’s a brief summary of the latest news, compiled from various sources, including the Manufactured Housing Institute and information available on publicly traded companies.

PRODUCTION AND SHIPMENTS.   Based on the latest information available from MHI (YTD through May 2004), national manufactured home shipments are down 4.9 % compared to the same period in 2003.  However, in the west California (+22.6%), Utah (+18.9%), Nevada (+13.6%), Oregon (+8.0%), and Montana (+0.3%) are all reporting increases.  Production is up too, with Oregon leading the way at a 10.6% YTD increase over 2003.  Idaho shipments remain identical to 2003, with production down by just 3.1%.  What’s puzzling is Washington, where shipments are down 9.1% compared to 2003.  Most people believe that Washington’s housing market and economy is stronger than Oregon’s or Idaho’s, yet manufactured home shipments have decreased measurably.

EARNINGS AND PROFITS.  CHAMPION Enterprises reported net income of $23.4 million for its second quarter ending July 3, 2004, compared to $3.0 million for the same period last year.  Revenues were $306 million, up from $296 million in the comparable 2003 period.  FLEETWOOD Enterprises reported an increase in revenues of 12% for the first quarter of 2005, ending July 25, 2004, to $725 million compared to $646 million last year.  Specifically, manufactured housing sales rose 14% during this period.  Earnings or losses were not disclosed.   SKYLINE Corporation reports fiscal 2004 sales of $432.3 million compared to $419.8 million in 2003, including a $17 million increase in the manufactured housing group.  Net income was steady at $6.1 million.  PALM HARBOR Homes returned to profitability in the first fiscal quarter of 2005 ending June 25, 2004.  Net sales totaled $157.8 million compared to $155.9 million in the year-earlier period.  Net income for the first quarter of fiscal 2005 totaled $1.1 million compared to $0.8 million a year ago.  ORIGEN FINANCIAL declared a 2nd quarter dividend with the aggregate amount being approximately $1,507,000, or $0.06 per share.  Origen is a national consumer manufactured home lender and servicer based in Southfield, Michigan with significant operations in Ft. Worth, Texas.  For you deep-pocketed investors, the stock of CLAYTON HOMES parent company BERKSHIRE HATHAWAY is down to just $86,400 per share, compared to a 52 week high of $95,700.  Berkshire Hathaway is the holding company that owns all of Clayton Homes and its subsidiary’s, Oakwood Homes, Golden West Homes, Shult Homes, Marlette Homes, Vanderbilt Mortgage and Finance, and 21st Mortgage.  Berkshire Hathaway recently led an investment group that purchased the life insurance and investments unit of Safeco Insurance for $1.51 billion in cash.

FINANCING.  There are still several viable lenders offering competitive financing for manufactured housing, both personal property chattel financing and land & home mortgage products.  On the chattel side, CU Factory Built Lending is up and running in Federal Way, Washington.  CUFB is a division of San Antonio Credit Union which has other manufactured home lending offices in Greensboro, NC and San Antonio, TX.   They offer a full portfolio of manufactured home loan products, including government sponsored programs seldom seen before in the Pacific Northwest.  CU Factory Built Lending can be reached toll free at 1-866-595-7228.  US Bank Manufactured Housing Finance continues to grow and become an integral part of our business.  We are familiar with several retailers who have closed loans with US Bank and found them very cooperative and easy to work with.  They can be reached toll free at 1-866-300-8345.  Green Tree Financial is cautiously moving forward with their new loan products.  Green Tree, rebounding under the new and aggressive ownership of Fortress Financial Group is once again financing new and pre-owned manufactured homes through select retailers.  You can learn more about Green Tree’s products by calling 1-800-562-2510.  We continue to follow the progress of GMAC Manufactured Housing Finance but there is no indication that they are entering the Northwest in the near future.  Hopefully that will change, but so far, no new news on GMAC.  Washington Mutual’s manufactured housing division continues to provide conforming land & home mortgage financing through its home loan centers and brokers.  While we don’t expect Washington Mutual to re-enter the chattel market anytime soon, they are committed to providing manufactured home and land loans that follow the Fannie Mae guidelines.  Lynette Hoffman, the Washington Mutual Manager of Manufactured Housing Specialty Services is not only a great advocate of our product, but is also a key advisor to Fannie Mae regarding manufactured housing issues.

OUTLOOK.   We remain cautiously optimistic when forecasting sales for the balance of 2004 and the first half of 2005.  Several key ingredients point to a slow but steady recovery in manufactured home sales, including rising interest rates for site built buyers that will drive more marginally qualified buyers back to manufactured housing, lower declared manufactured home repossessions, more competition amongst manufactured home lenders, and a right-sizing of retail and manufacturing capacity to fit consumer demand.  In the manufactured home rental or land-lease community business we are seeing more new homes move into our communities, more interest in resale homes, lower overall vacancy rates and lower delinquencies.  Other notes of interest that point to a recovery include reports of increased customer traffic at some retail centers and the unanimous vote of support from the various manufacturers to continue the Salem (Oregon) Manufactured Home Show in 2005 and beyond.  Additionally, the innovative products being offered by the aggressive entrepreneurs at FoundationWorks may revolutionize the way our product is installed and supported, adding value and integrity to the installation process while saving the consumer time and money.  Manufacturers and lenders are sitting up and taking notice of this new permanent foundation system, and the announcement that Thom Cross has joined FoundationWorks as CEO and Director is big news.  Thom is a respected industry veteran, having served in several executive positions for Oakwood and Fleetwood.  Thom has added George Stevens as VP of Sales for the Western Region.     

Conser Homes announced last week that they are closing their manufactured home sales center in Albany, Oregon after decades in our industry.  The Conser family owns and operates a very successful land development enterprise, a rental property portfolio, a real estate agency, a manufactured home community and a custom home construction company in the Willamette Valley.  After serious consideration they have decided to devote 100% of their resources to these other ventures under the Conser Homes umbrella and exit the retail end of our industry. Over the years, the Consers have tirelessly volunteered their time and given their money to our industry, serving or chairing on numerous committees and OMHA board positions, testifying on our behalf at the city, county and state levels of government, and spearheading several noteworthy charitable causes.  It is particularly sad to see this dealership close.  We can use more family owned and operated businesses in our industry, especially companies of this caliber.  We wish James, Matthew, Greg, and Stuart the best in the future.  Hate to see you go, guys. 

Thank you for taking a few moments to read this Industry Update. 

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