While the manufactured housing industry continues to scratch and claw its way out of what has become a nearly decade long decline in home sales, the latest upheaval in the conventional home business may prove to be good news for our industry.
As an example, while conventional home sales have fallen recently we have experienced a noticeable “up-tick” in activity, both in home sales and apartment rentals. We are almost to the point when we will have a waiting list in our apartment communities and we can’t remember the last time that happened. Whether it is perception or reality, homebuyers have become wary of purchasing a site built home in certain markets and now prefer a more conservative approach --- either buy a more affordable manufactured home or rent and wait to see what the market is going to do. The question is---will our industry pursue this trend or ignore it? In my mind, our affordability story should be told louder and more frequently now than ever before. The market is ripe for a media blitz touting the affordability and energy efficiency of today’s manufactured home. We have fallen off many people’s radar and we need to remind them that there is a third alternative to buying site-built or renting. And we are not just an alternative we are a great first choice!!
Specifically in the Pacific Northwest new home sales, production and shipments have declined over 2006, down double digits in Oregon, Washington and Idaho. Production of manufactured homes in Oregon’s manufacturing facilities increased slightly in September but remains about 24.9% below 2006. These facilities ship homes to Montana, Nevada, California and Utah along with Oregon, Washington and Idaho so the production numbers do not accurately reflect the exact home sales activity for our region but they have been a reliable measuring tool when tracking consumer activity. Regardless, shipments to the three Pacific Northwest states all have declined. The entire Pacific Region, which includes California and Alaska is down -36.7% this year over last.
Nevertheless, there are opportunities in all markets. In the Pacific Northwest specifically more affordable housing is needed. Several companies are exploring the possibility of building new land-lease manufactured home communities adjacent to highly populated cities to accommodate this need. Even in this tough market we have had great success in selling new homes in land-lease communities and filling our vacant home sites. Our vacancy rate is at an 8 year low and continues to improve. High end manufactured homes in age restricted 55+ communities fair the best but affordable homes in all-age communities are selling well too. For example, new homes selling in the $80K range or less do particularly well as financing has remained stable and buyers appreciate just how affordable $80,000 is to put a roof over your head, much less a new, well built, energy efficient “roof”. Coincidentally, as I was writing this newsletter I was interrupted by a caller who told me that the latest edition of Automated Builder Magazine includes an article that spoke very highly about the future of manufactured home land-lease communities.
The Pacific Northwest benefits from one BIG additional weapon in its arsenal to fight lagging home sales. That is the Northwest Pride regional public image/awareness campaign currently running on network television. The new commercials (undoubtedly the best ever produced from this group) hit the consumer right between the eyes with great visuals and a direct approach to drawing consumer awareness to manufactured housing. The pictures of manufactured homes are bright and colorful shot in neighborhoods where the homes look fantastic. The characters in the ads are likeable and credible and the script draws the viewer into watching before they know what it is about. I have been drawn away from my morning newspaper three times by these ads, each time not knowing it was a Northwest Pride commercial until 5-7 seconds after it caught my attention. Honestly.
Research has shown that consumers continue to be largely unaware of what today’s manufactured home is like and that they are objectionable to the old-fashioned car lot/sales lot approach to displaying and selling the product. This is perhaps why sales of manufactured homes sited in communities or on single family lots ready for move-in are selling easier than homes from the traditional retail sales lot approach. Consumers are educated and do not want to buy a protracted construction process --- they want either a turn key model home or a home distributor who will take full responsibility for the home purchase, zoning and permitting, land improvement, delivery and installation process.
At George Allen’s International Networking Roundtable for Manufactured Home Community Owners, Developers and Investors two weeks ago the atmosphere was definitely one of optimism. You could tell that those in attendance saw a potential for new development as the site-built industry downsized. The trick here is to move quickly but cautiously and pick your markets carefully.
Who knows what this winter will bring. It is public knowledge that a major shareholder in Fleetwood Enterprises is pushing for a sale of the company to Champion. In Washington State Fleetwood just announced the closing of their Woodland, Washington manufacturing facility which had operated continuously for nearly 30 years. Clayton Homes continues to swallow up smaller home producers and gain market share in both the HUD code and Modular sectors. Clayton also recently entered into an agreement to sell all of their land-lease communities to an investment group lead by Gary McDaniel’s Base Camp Capital, although that acquisition has not closed. Smaller niche manufacturers are doing okay but some of the larger ones are still shouldering the ongoing overhead associated with operating numerous manufacturing facilities whose capacity exceeds demand. Look for more consolidations, mergers and closures this winter as the industry continues to right-size itself.
With adversity comes change. Many state associations are renaming and re-branding themselves to represent a broader spectrum of the automated home building marketplace, which makes perfect sense. MHI’s new energy and enthusiasm under President Gail Cardwell and Chairman Barry McCabe’s leadership is intoxicating. And it is exciting to see all of the activity swirling around MHI as the forward-thinking leadership makes sweeping changes to react to today’s challenges and opportunities. This group understands what needs to be done and is taking real action to address real issues. How refreshing.
There are two important industry events you don’t want to miss. The first is the MHI Annual Meeting, just three weeks away on Hilton Head Island S.C. October 21-23, 2007. You can visit the MHI website at www.manufacturedhousing.org for meeting information and online registration. Also, save the date---the 2008 National Congress & Expo for Manufactured and Modular Housing is April 22-24, 2008 at the Paris Hotel in Las Vegas. For community owners and managers this year’s National Communities Council day (Tuesday April 22nd) will offer two parallel tracks, one for community owners and investors and the other for community managers and operators. So regardless of which category you fit in, or if you just want to learn more about the manufactured housing land-lease community business this is the program for you. MHI will have registration information available soon at their website.
Thank you and have a terrific week.
Greg
Harmon - President
Commonwealth Real Estate Services
E-mail: greg@cwres.com
Telephone 503.244.2300 Ext. 101
