Manufactured Housing Communities; what happened to them?
All good things must come to an end........but they will resurface!
From the mid 1990s to about 2001, the manufactured home market (heaven forbid if you called them mobile homes) was booming! New home interest rates were higher than 8%, the economy was good, and frankly, the quality of the manufactured housing being built was reaching new levels. During that time, a person could get a quality home for less than half ($ per sq ft) than a "stick and brick" home. This is how the mobile home industry prospered.
Companies like MHC and ARC (which I had an deep knowledge of) were taking the market by storm. These companies would come in a market; buy up communities; move out homes that did not meet their vision; help customers with homes that needed attention (renovate); rebuild infrastructure; and start refilling the communities with new homes. In my experience, it was not uncommon to enter a market like Wichita (KS), and have waiting lists from dealerships to come into the mobile home communities.
Wichita was a market essentially owned by ARC (formerly Affordable Residential Communities then American Residential Communities). They owned parks and several dealerships in the market. Wichita, in the late 90s and early 2000s, had over 30 mobile home dealerships. Think about it, around 500,000 people in the Wichita MSA, and 30 mobile home dealerships. What does that tell you?
The manufactured housing industry in the 90s, was like the current self-storage industry; investors saw them as "cash cows". Investment money, both public and private, flooded the market. This money was used to change the way people thought of mobile home parks; out with the old and in with the new. Believe it or not, lifestyles and a better sense of community, were being sold to current, and prospective mobile home buyers. A stereotype was trying to be dissolved. But what happened?
September 11th happened! It was the beginning of the fall of the manufactured housing industry. That single day did a number to the economy. Ironically, the beginning of the housing boom, was the beginning of the end for the manufactured housing industry.
With the low interest rates, buyers incentives, creative financing, subprime loans, and the need to infuse the economy, this housing boom was the Kryptonite to the manufactured housing industry. Apartments dwellers were buying homes. Young adults were moving from their parents' basement. And mobile home owners were deciding to leave their homes behind for the "America dream" of owning a home.....one without a hitch and wheels underneath.
I could bore you with more stories of how the MH industry crumbled, but let's talk about what's coming!!!
Manufactured homes shipments have been on the rise since 2009
Consolidation among producers and the exodus of lenders have left just a few businesses, including three owned by Warren Buffett’s Berkshire Hathaway Inc., to dominate a market that looks primed for growth in the face of rising prices for site-built houses and the potential for regulatory change.
Mobile home parks allow you to acquire more units for less money. It is the lowest cost investment per unit of any real estate asset class. For example, you might be spending $100,000 + per home or apartment unit, but as little as $10,000 per lot in a mobile home park. Even if you spend $20k-$50k on a home to place on that lot and rent, your are still well below a home or apartment capital cost with the same potential for monthly revenue.
Manufactured housing is coming back, the question is, will you be in the mix already, or paying a premium to get in?
Let me know if you need help on your due diligence process!