There are so many statistics dominating industry newsletters and websites lately that I dare venture too deeply into them, but let me give you a quick overview of just how the Manufactured Housing industry is doing these days, especially as compared to 2002.

According to the Manufactured Housing Institute (MHI) Quarterly Economic Report, 2003 national shipments of new HUD code homes have once again been revised downward, from 150,000 units to 137,000 units. Total shipments in 2002 were 168,500. Through June of 2003, we are 20.7% behind 2002, so it's going to have to get BETTER in the second half of the year in order for us to hit the latest revised projection. MHI is estimating 2004 shipments to be somewhere in the range of 145,000 - 155,000 units "based on all information and analysis available to us at this time." By comparison, shipments in 1999 were 348,700 units.

In the Pacific Northwest, regional production is often gauged by the number of HUD labels issued to Oregon manufacturers by the Oregon Building Codes Division. Since 9 of the Pacific Northwest's 16 manufactured home plants reside in Oregon this label report is one way to judge retail sales and consumer demand for new manufactured homes. Through August 2003, issued labels are down about 10% year-to-date as compared to 2002. In the month of August, labels issued were 57% below August 2002, but most manufacturers consider this a fluke and expect September to be more consistent with the rest of 2003. Overall, most manufacturers are reporting lackluster sales and have largely been disappointed by the highly anticipated seasonal increase in new home orders that never materialized. According to MHI, "depending on how one dates the peak in MH shipments, the industry is either in its fourth of fifth year of retrenchment in new home shipments. When concluded and fully analyzed, it will likely rank as the worst recession in our history even though we are talking about higher value added products today than the 170,713 shipments bottom of the last economic cycle for the industry in 1991."

Oakwood Homes future will be determined in the near future, as the bankruptcy court in Greensboro N.C. extended their deadline to file their final reorganization plan, which was originally due June 30, 2003, to October 31, 2003. As the deadlines loom, a portion of the debtor-in-possession financing used to keep Oakwood afloat during bankruptcy proceedings was recently decreased from $140 Million to $90 Million. The company has borrowed $30 Million on that line. Warren Buffett's Berkshire Hathaway Inc., which recently completed it's purchase of industry leader Clayton Homes has often been seen as the ultimate owner of Oakwood (they are currently an investor/creditor with potentially a 40% ownership stake under the original restructuring plan) but may not merge Oakwood and Clayton after all. Berkshire has recently called their involvement in Oakwood "a bad investment" in relation to the Clayton buy. Berkshire indicated it wouldn't become a lender to the MH industry except through Clayton, which Buffett feels is the best firm in the sector. Regardless, Buffett's entrance into the Manufactured Housing industry is the best thing that's happened to us in a long time, and has brought some much needed positive attention to our industry.

The good news? Actually, there's plenty to feel good about. The "right sizing" of our industry is long overdue, and matching retailing and manufacturing capacity to consumer demand is the only way we will return to profitability and attract new investors and lenders to our industry. Smart but inexperienced people don't enter businesses when industry veterans are going broke, but they do invest in industries where the leaders have recognized what's wrong and taken swift corrective measures. What's most problematic is that organizations such as Fannie Mae like our product and admire our quality and value. Its the method in which business is conducted and the amount of fraud and misrepresentation that occurs in sales transactions that has caused them and others to pull away from manufactured housing. We don't need to build a better home...our homes are great! We need to be more professional, we need to make it harder to get into the manufactured home business, and we must implement the systems and procedures necessary to insure that honesty and fairness takes place in each and every manufactured home sales transaction.

Finally, I am honored to announce the promotion of Adam Cook to Vice President-Property Management at Commonwealth Real Estate Services.

Adam has, over the past 11 years, been a dedicated and innovative Property Manager for Commonwealth Real Estate Services. Recently, Adam used his own capital to increase his ownership stake in the company. Adam brings with him to this new position the benefits of his degree in finance from Oregon State University, a wealth of new ideas, new systems, helpful reports, better procedures and other improvements to Commonwealth that will improve our productivity and add value to our clients. Add to this Adam's increased involvement as a board member with Manufactured Housing Communities of Oregon (MHCO) and his ownership stake in Giadanj and Terri Lynn Manufactured Home Communities in the Portland area, and you've got a very talented, experienced person taking over as Vice President of Commonwealth.

Tomorrow is September 11th and it marks the 2 year anniversary of the terrorist attacks on America. Let's take a moment to honor those who lost their lives as a result of those attacks, and to honor those who have given their lives protecting our freedom. The great singer/songwriter Warren Zevon, who died Sunday after a long battle with cancer, was recently asked by David Letterman during his last public appearance what parting thought he could share with Dave about life. Warren said, "enjoy every sandwich."

Thank you for taking a few minutes to read our latest Industry Update. Enjoy every sandwich.

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