Manufactured Homes: Small Niche, Growing Profitability

Manufactured homes may not be the largest segment of the US housing market, but that in turn means high demand and limited supply.

What percentage of the market do manufactured homes represent? How are changing trends changing demand for these properties? What is the impact for investors?

Manufactured Housing Trends & Data

The Center for Enterprise Development reports that “manufactured housing has accounted for 21% of all new single family homes sold” since 1989. However, as construction and the economy plummeted, “in 2009, manufactured housing accounted for 43% of all new homes sold under $150,000 and 23% of all new homes sold under $200,000.” The fact that the average cost per square foot of a manufactured home was less than half of a regular site built home played a part, but so did other factors.

You would think this surge would have meant substantial supply. Yet, in 2014 the Consumer Financial Protection Bureau released a report showing that manufactured housing accounted for just 6% of all occupied housing.

There is also a notable difference in the availability of this type of housing depending on location. According to the Population Reference Bureau there are 3 times the percentage of mobile homes in non-metro locations. The Daily Yonder reports around 6.8 million occupied manufactured units across the US, yet more than half are in the Southeast states.

The 3 A’s Driving Demand for Manufactured Homes

  1. Appeal

Manufactured housing has become far more attractive in the last few years. It’s now acceptable if not even cool to live more modestly, and within your means. Manufactured homes have become seen as a far greener and more fashionable option. Reality TV shows, blogs, and the media have only fueled this trend. They have also begun to install smart home features, new design plans, and last much longer than they used to. Now it can be difficult to distinguish many manufactured homes from site built ones, and virtually impossible to differentiate from the inside. Plus, of course you get a lot more for your money. Given the choice between a brand new custom 3 bedroom manufactured home and a smaller, aged home that is going to need work and costs more, it’s virtually a no-brainer in favor of manufactured.

  1. Affordability

Interest rates and home prices are heading up fast. Affordability is at crisis point in America, and that only appears to be worsening. The intelligent haven’t forgotten the financial lessons of the early 2000s. Many others simply have no choice but to seek manufactured housing or mobile home parks if they want a roof over their heads. At the rate rents are increasing thousands more will be priced out of conventional apartments and the single family home market over the next year.

  1. Age

Pew Research reports that 10,000 Baby Boomers are retiring each day. Very few have the finances to see themselves through. For many manufactured housing is not just appealing, but a necessity. They are also often retiring to regions which boast more mobile home parks.

The Fourth A

There is another A in this equation too. This is ability. Never before have most individuals and families had the ability to be location independent like they do now. Thanks to technology younger individuals can work remotely and live where they please. Better technology is also enabling older Americans to live alone longer, and without needing to be next to a hospital.

Summary

Even though there has been a surged in manufactured housing demand, and shipping in comparison to other property types, Fannie Mae reports manufactured home placements actually declined 90% from 1998 to 2012. Despite some support for affordable housing, we’ve also seen some try to capitalize on high land values and luxury construction opportunities, and convert mobile home parks to other uses. The bottom line is that demand is surging to new highs, yet, there is very limited (and shrinking) availability. This bodes very well for property investors that are snapping up mobile home parks now. The dynamics in play appear to promise high occupancy rates, great fundamentals for steadily raising lot rent, and confidence in consistent income and returns.

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