Official MHIndustry Briefing Format

Official MHIndustry Briefing format @ April 2010

Have you wondered what Wall Street analysts, investment bankers, and major real estate investment portfolio managers pay thousands of dollars to hear and learn? Well here’s one example that’s used frequently and updated monthly…

An Overall Perspective of the MHIndustry as a ‘double dual industry & realty asset class’

HUD Code manufactured housing is one key type of factory – built housing, characterized by federal regulatory oversight via a preemptive, performance – based national building code. First half the ‘double dual’ characterization = housing design and manufacturing; then, housing distribution per towed steel chassis, with marketing thru ‘company stores’ and a declining number of independent MHRetailers. Today however, an increasing number of landlease (nee manufactured home) communities, throughout the U.S. regularly market, sell and often self – finance new and resale homes on – site! Housing market share, measured by annual shipment volume (e.g. only 49,789 new HUD Code homes shipped during 2009), not sales volume! Clayton Homes = 46%+/- of national HUD Code market share. Trends? Consolidation (e.g. Fleetwood acquired by Cavco; Champion acquired out of bankruptcy by three creditor investors) of housing manufacturers. Production/shipments continue to trend downwards, and will continue to do so sans reliable, continuing source(s) of chattel (personal property) financing for new and resale home transactions! At present rate of annual decline in shipments, it’s estimated only 250 homes will be ‘shipped’ during year 2020.

The second half the ‘double dual industry & realty asset class. The landlease (nee manufactured home) community, a.k.a. ‘LLCommunity’ income – producing property type, historically sited ‘mobile homes’ (pre – 1976 vintage) and manufactured homes (post – 1976) Today? Add modular homes, ‘park models’, RVs for a season, and stick – built homes constructed to look like manufactured homes (in Florida), to the historic mix, hence recent evolution in trade terminology. National inventory = estimated 50,000+/- such properties; 85% of which = fewer than 100 rental homesites piece in size. 500+/- portfolio owners/operators of LLCommunities (i.e. minimum portfolio size threshold = five properties and or 500 rental homesites). See additional stats in 21st annual ALLEN REPORT available via this website:

Examples of recent ground – breaking joint initiatives and efforts between HUD Code home manufacturers and LLCommunity owners/operators: nearly three dozen business Development Managers (‘BDMs’) appointed a year ago to increase manufacturers’ market share of new homes going into this property type (some factories now have 50% of production headed into LLCommunities); recognition of special design, size and features for LLCommunity – sited homes = Community Series Homes or CSH; and, regular scheduling of Super Symposiums & Showcases of Homes, in IN, OH, IL, GA & NY, with dual goals of teaching LLCommunity folk’ how to market, sell and self – finance new and resale homes on – site’, and exhibit CSH product for purchase consideration. Symposiums also replace regional shows (e.g. Louisville, KY.), which have been canceled of late.


Manufactured housing valuation. Historically, and for the present – per GSE preference, ‘book valuation’ (replacement method) still very much in play. Book value adjusted per condition of housing unit being valued, and location of home. Valuation by ‘market comps’ is preferred method by MHIndustry and LLCommunity businessmen and women desiring to move beyond near automatic depreciation of MHousing values per ‘book valuation’ method. Datacomp in MI sets the pace and standard(s) in this effort. Difficulty of conversion from ‘book value’ to ‘comp value’ also hinderd by local housing market practices and prejudices, oft instigated and perpetuated by real estate sales licensees and brokers; and sad to say, some folk within the manufactured housing industry.

Current Market Trends. Local housing market trends are ‘all over the place’ per climate (e.g. Sunbelt vs. non – Sunbelt), economy ($ available for home purchases and lending), employment increasing or decreasing, & active workforce or retirees, etc.); competition (e.g. site – built housing repossessions & presence/lack of multifamily rental or apartment communities, etc.) NATIONAL. Relative to HUD Code home manufacturers: beyond above – referenced consolidation, 80/20 mix of singlesection vs. multisection homes swinging again, in part due to $ available for housing purchases and increased interest in siting new homes in LLCommunities. (This did not happen prior to five years ago!). Relative to LLCommunities: consolidation here too (e.g. 25 portfolio ‘players’ 21 years ago; 500+/- today, including three REITs), as well as a near perpetual ‘seller’s market’ due to scarcity of product (new properties not being developed due to NIMBY, LULU, & BANANA*1); ‘recession proof’ nature of the property type (explain); very low annual turnover rates for homes and homeowner/lessees; lowest operating expense ratios (‘OERs’); more opportunities for AITR (‘alternative income to rent’) than any other realty asset class; and, innate ability to ‘add value’ by marketing, selling, and self – financing new and resale homes on – site…from a few million $$$ in 1999 to $3 ½+/- billion, among 500+/- major ‘players’ alone, by end of year 2009. Downside? Due to too high rents (first with REITs, then greedy private operators), some large LLCommunities are now in foreclosure or forbearance. Occupancy trend? Down slightly, but not nearly as bad as would have been the case without on – site home sales. In fact, national physical occupancy among portfolio LLCommunities is higher, for the first time in memory, than percentage experienced by conventional apartment communities during 2009

Impact of subprime collapse and housing crisis on the manufactured housing industry. To answer this, be aware MHIndustry continues to endure its’ subprime lending collapse and housing crisis, that began eight years earlier than site – built housing, from when 372,843 new manufactured homes were shipped in 1989 – down to only 49,789 last year! Impact of contemporary subprime and housing crisis among stick – built homes, on MHIndustry? Varies from local housing market to market. Yes, some folk with bruised credit have ‘returned’ to HUD code housing (After all, site – built housing boom stole half our traditional market of the ‘newly wed & nearly dead’), but there’re still 1,000,000+/- repossessed site – built homes to be resold as bargains (competing with non – repo, new MHomes) before we’ll see any groundswell of new homebuyers. AND, since MHIndustry lost its’ access to third party chattel (personal property) financing post 2000, our ability to loan to 600 FICA score borrowers is sorely limited – except for on – site sale and self – financing of new and resale homes in LLCommunities! Bottom line? Minimum impact at this time. And there is one major bugaboo on the asset class’ horizon: the unknown impact of the federal S.A.F.E. Act once implemented on a state by state basis. At present, this legislation has the potential to put most on – site, self – finance operations out of business…

Here ends the Official MHIndustry Briefing format ‘exercised for hire’ several times each month. If you’d like to comment about it, offer suggestions, etc., do so via this website or phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

SPECIAL ANNOUNCEMENT. Manufactured Housing $$$ Primer being printed and bound as this blog is posted! The 100 page guide contains original work prepared by two dozen MHIndustry experts. This is the first such text ever published on the complicated subject of chattel (personal property) finance, as it applies to HUD Code manufactured housing. This is a limited print run, so if seriously interested in owning a copy of this historic and helpful publication, respond directly to this Blog or via (317) 346-7156. Some copies will be available for purchase (Price indeterminate, but likely $19.95+/-) at the Manufactured Housing Congress in Las Vegas @ April 13 – 15, 2010. Call (703) 558-0678 to register for this important industry event!

George Allen, Realtor®, CPM®, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024
Indianapolis, IN. 46247
(317) 346-7156

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