Searching for Wisdom of Solomon & Needing Courage of a David!
Your Response to ‘CONSPIRACY THEORISTS, GATHER YE ROUND!’
State of the Manufactured Housing Industry & Landlease Communities….
Your response to ‘Conspiracy Theorists, Gather Ye Round!’ last week was overwhelmingly positive. The sole area of disagreement related to my contra view of our industry’s largest advocacy body’s desire to
“Eliminate unrealistic methods for appraisal (of) manufactured housing. Site – built oriented appraisal requirements have little applicability to manufactured housing and ultimately penalize manufactured homeowners.”
And those few rejoinders came entirely from chattel finance lenders and service firms. Hmm. Such single source response prompts one to ponder, ‘Why?’ There’ll be more views and verbiage on this controversial topic in a future blog posting. Want to input?
On the other hand, here’re remarks from blog floggers (readers) supportive of conspiracy perspectives offered:
• “GOOD JOB! Needed to be said. But will anyone listen? Now that’d be a FIRST, sadly enough. Will our ‘mystery leader’ step up? Keep up the good fight.” JK
• “KUDOS! This takes courage. I’d love to be part of such a conclave, should it occur. Please keep me posted, and best wishes in this effort.” TK
• “Let me tell you…nicely written. Am ready to step up and speak my mind. I’d love to take this job on, but my resources are limited. Let me know more.” JD
• “Good post George. You’ll get flack over some of those comments. Trouble with conference participation, is those who should participate, won’t do so.” SR
• “Here, Here, George! Well crafted and said, sir.” N
So, where do we go from here? That’s up to YOU, and the unnamed ‘charismatic, respected, well known, successful businessman or woman’ to whom last week’s blog post was directed. I know more than one individual, meeting that leadership description, read last week’s blog posting. So now we wait…Perhaps YOU need to encourage them to step forward.
Did YOU, as a member of the Manufactured Housing Institute, contact Thayer Long, or the institute’s chairman, Joe Stegmeyer? If not; why not? Furthermore, did YOU, as a member of the Manufactured Housing Association for Regulatory Reform, contact Danny Ghorbani, or the association’s new chairman, John Bostick? If not; why not? I can do no more, for YOU and our industry and realty asset class, than identify the collective, critical, and timely challenges and opportunities in play, then suggest corrective measures and alternative. It’s up to YOU to initiate and support appropriate action. If YOU have done so, good for YOU! If not; for the third time, why not? Or are YOU content, to simply sit back and continue to complain about how difficult and unfair the present national business climate is for our type factory – built housing? If so, shame – shame on YOU!
State of the Manufactured Housing Industry & Landlease Community Asset Class
‘An Industry in Search of the Wisdom of Solomon & Needing the Courage of a David!’
Let’s begin with HUD Code housing shipments for the past three years. All right there, at only 50,000+/- per year! That’s down down down, from the 372,843 renascence high in 1998. Year 2011? Just another 50,000+/- shipment year, unless there’re new sources of third party chattel finance.
Did you know? Clayton Homes has garnered a 48 percent national housing market share, where HUD Code manufactured homes are concerned. And that Cavco recently bought Palm Harbor out of bankruptcy, just as it did Fleetwood a year earlier.
Trends. More new homes being sold into landlease (nee manufactured home) communities. Why? Fewer ‘repos’ & ‘resale’ homes available for purchase and installation on – site; so, some LLCommunity portfolio owners/operators now routinely buy several new HUD Code homes at a time, at a discount, to market and sell on – site ‘at cost’ or various profit margins, depending on the nature of the local housing market in which the property is located. Homes designed for LLCommunity in – fill are now known as Community Series Homes or CSH – often singlesection, with front load porches, or small multisection homes. And CSH models are marketed to income – producing property owners, by Business Development Managers (‘BDM’) employed by the HUD Code home manufacturers.
Finance. The ‘Big Four + One’ group of chattel lenders is still active in the MHIndustry, but not originating and underwriting many chattel loans on new and resale manufactured homes. These firms are 21st Mortgage Corporation, Triad Financial Services, CU Factory – built Housing, U.S. Bank – Manufactured Housing Finance; and, Vanderbilt Mortgage and Finance, Inc., Clayton Homes’ in – house lender.*1
Then there’s the landlease community real estate asset class. While reasons very, for the segue from ‘manufactured home’ to ‘landlease’ community trade terminology, it won’t hurt to review the matter here. Unlike years between 1976 and roughly 2006, when this income – producing property type only sited ‘mobile homes’ (pre – 1976 vintage) and ‘manufactured homes’ (post – 1976 vintage); contemporary LLCommunities, depending on the nature of local housing markets, now also site modular homes; ‘park model’ RVs, a.k.a. ‘granny flats’; transient ‘RVs for a season’; even stick – built homes constructed on – site (in Florida) to look like HUD Code manufactured homes. It simply makes sense to apply a label that better describes the presence of as many as six different types of housing to be found on – site; hence landlease community, or LLCommunity, for short.
Some salient ‘stats’ from the 22nd annual ALLEN REPORT*2:
• There’re approximately 50,000+/- landlease communities in the U.S., and 500+/- portfolio owners/operators (i.e. each owns and or fee manages a minimum of five such properties or 500+ rental homesites)
• Average LLCommunity portfolio size during 2010 = 24 LLCommunities
• Average property size during 2010 = 222 rental homesites
• Most LLCommunity owners/operators are domiciled in CA, MI, IL, & FL.
• National Average Physical Occupancy during 2010 = 89.2 percent.
• National Average Operating Expense Ratio during 2010 = 41.8 percent, compared to the Allen Model @ 40 percent OER.
• Estimated value of self – finance ‘contract sale’ paper held among 500+/- portfolio owners/operators during 2009 = $3 ½ billion; 2010 = $5 ¼ billion; and estimate for 2011 = $5 ½ + billion.
• No new construction of LLCommunities reported during 2010.
• Professional property management in LLCommunities: 13 Certified Property Managers® reported, as well as 37 Accredited Community Managers®, and 171 Manufactured Housing Managers. Are all your property managers certified?
Trends. Consolidation of LLCommunities into portfolios slowed to a crawl during 2010, given the difficulty in obtaining realty financing, but likely to resume during 2011. Read the 13th National Lenders’ Registry for details, and a list of 18 realty loan originators.*3 Maybe see self – finance (i.e. ‘buy here – pay here’ & ‘captive finance’ methodologies) slow during 2011, as more portfolio owners/operators switch to carefully crafted Lease Option programs on – site. Look for one or two new REITs (real estate investment trusts) to be formed, as they initiate IPOs (initial public offerings – of stock) during late 2011 and early 2012. At least for the time being, ‘park closures’ are not the hot item they were, mainly due to constraints on development financing. More and more ROCs (resident – owned communities) are appearing outside Florida and New England.
A ‘Hot Button’ Trend. Watch as more and more LLCommunities drop any mention of ‘manufactured’ from print and online advertising of homes and properties! At least one HUD Code home manufacturer, Skyline Corporation, has done likewise. Some LLCommunity portfolios are even rebranding, introducing new contemporary housing – like websites! One wag has already identified this evolving (‘Nix manufactured from housing’) phenomenon, as the default National Image Improvement Campaign the manufactured housing industry wasn’t able plan, fund, and effect during the past several years.
Announcements. Have you met Lisa Brechtel yet? She’s the new MHI executive who heads the National Communities Council (‘NCC’) division. Her direct phone number is (703) 558-0666. If you haven’t done so already, contact her for information about attending the annual NCC Forum on 26 April, and the Manufactured Housing Congress on 27 & 28 April, both in Las Vegas.
In case you weren’t aware, the seminar ‘How To Estimate Affordable & Risky Price Points on New & Resale Manufactured Homes In & Outside Landlease Communities’, that was so popular at the Super Symposium II in Albany, NY., last month, will be repeated on Thursday, April 28th, at the MHCongress in Las Vegas. If YOU market and sell new & resale homes, and don’t know how to use AMI (Area Median Income per postal zip code) and or AGI (Annual Gross Income of a homebuying individual or household) to estimate ‘affordable’ &/or ‘risky’ price points (Really need to know both, to help customer make up their mind!) in any local housing market in the U.S., YOU owe it to yourself to be present for this rare opportunity to learn How To Do So, and receive the FREE ‘Ah Ha! & Uh Oh! Formulae Worksheet’! To register, phone Lisa Brechtel @ (703) 558-0666.
Some thoughts on the future of HUD Code manufactured housing and the landlease community real estate asset class.
For many, active in the MHIndustry & LLCommunity asset class, Randy Rowe’s Five Point Plan to facilitate a shipment rebound, anytime in the near future, will require:
• Better manufacturer home warranties, customer service, and responsibility for home installation..
• More chattel financing sources than we have at this time
• Ensure economic security of homebuyers/site lessees
• Multiple listing services and other features of a secondary market for manufactured home sales
• A national marketing (image improvement) program of some sort
Randy introduced this Five Step Plan at the 19th International Networking Roundtable in Phoenix, during Fall 2010; and, David Lentz of American Land Lease, presented it at Super Symposium II in Albany, New York, earlier this month. FYI: This year’s Roundtable is tentatively scheduled for 14 – 16 September. *4
So, where does all this leave us today? A lot depends on your reaction and response to the Great and Greater Conspiracy challenges described in last week’s blog posting. Perhaps YOU should go back and read it again, to be inspired and motivated to do your part in returning the HUD Code manufactured housing industry to good economic health!
As opined at the beginning of this State of the MHIndustry & LLCommunity asset class, we are indeed an ‘Industry in Search of the Wisdom of Solomon & Needing the Courage of a David!’ What we await now, is for one or more industry leaders, replete with Solomonesque Wisdom & Davidic Courage, to step forward and free us from the bondage of ‘This is the way we’ve always designed, built, shipped, then sold, and sometimes serviced, manufactured homes’, to renewed Free Enterprise Success as builders of the most affordable, energy efficient, quality sufficient homes in the U.S.!
George Allen, Realtor®, CPM®Emeritus, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247 k (317) 346-7156
1. This information taken from the Manufactured Housing $$$ Primer, available from PMN Publishing for $29.95 postpaid. Phone (317) 346-7156.
2. 22nd annual ALLEN REPORT available for $250.00 (includes a one year subscription to the Allen Letter professional journal) by phoning: see # 1 above.
3. 13th National Lenders Registry (realty & chattel) available FREE by phoning #1.
4. For an invitation to attend this annual seminal event for LLCommunity folk, see # 1 above