Volume Buyers

Keeping you informed and updated!

Will there be a rate hike? How will that affect us?

Growth in the housing market is an indication that the future is bright for our industry but as people whose lively hood is consumed by market performance we need to be prepared not for just growth, but any market movements.  In the past two decades, through two major market implosions we’ve seen how a trend in growth can indicate and in fact cause a market downturn.  Growth is great but over heating of any market creates volatility and usually a painful correction.

Currently statistics from the Multi-Indicator Market-Index (MiMi) reveals that the housing market has grown 6% from 2010 and is seeing its best year since 2007.  This growth has been spurred from both sustained low interest rates and employment growth.  This growth in the market is expected to continue through year end but employment growth will not be enough to sustain the market moving into 2016.  For growth to stay steady in 2016, wages will have to increase.  Home appreciation rates have outgrown wage growth and the Federal Reserve is concerned that, similar to our last two housing market crashes, homeowners and potential buyers are experiencing false equity.  One measure creating this concern is that construction and replacement costs have risen 3% over the last year while resale and purchase prices have risen 13%.  This 10% gap is potentially caused by inflated appraisals where homes are being sold for more than they are worth simply because there are enough buyers out there who are willing to pay the price.

Inflated appraisals and false equity in the resale value of an existing home may seem far removed from any concerns that we have in the Modular and HUD home industry, but this problem doesn’t take too long to become relevant to us.  If the market continues to grow at an increasing rate and the Federal Reserve finds that false equity is occurring as a mechanism to keep up with housing demands then the Fed will enact an interest rate hike.  The safest way to keep an overheated housing market in check is not in the costs of the home, but in the costs of borrowing money.  The Federal Reserve understands this, and this is where we will be affected.  We are already dealing with a demographic that has restricted credit options and an interest rate hike would restrict our demographic further.  This rate hike could cause a decrease in sales, which is its intention, and could be harmful if unprepared for.  This is still better than the alternative of an overheated market running out of flame.

To see the graphs better, please click on them

1            2

To demonstrate this I’ve provided two graphs and a couple statistics to illustrate what happens when a housing market’s overheating simply becomes too hot.  In the 90’s the manufactured housing industry was on an incredible rise, sales and prices were steadily increasing and the demand seemed just as steady.  In the mid-late 90’s, specifically 1996 and 1997, because of apparently unending demand home prices rose and in 1997 the average home price was $20,290 more than in 1996.  This is equivalent to an overnight increase of more than $30,000 in today’s dollars.  With a constant interest rate on a 30 year mortgage and adjusted for inflation this price increase would make monthly payments for a 1997 buyer increase by $143.61 over a 1996 buyer.  Home sales in numbers fell 2%, the first decrease in five years, while home sales in dollars rose 54%.  This rapid increase in price to curb demand led to a five year slide in home sales that averaged a 16% loss in sales for five straight years.  This same practice of inflated pricing happened in a more openly fraudulent way in the late 2000’s and as long as people are willing to take major risks to earn money we will always have to watch out for markets crashing.  So, by all means ride the wave, just hold onto your life vest.

Advertisements

November 7, 2015 Posted by | General Information | , , , , , , , , , , , , , | Leave a comment

HUD Monitoring Contractor

In an article I recently read, Mark Weiss, President & CEO of the Manufactured Housing Association for Regulatory Reform (MHARR) raises his concerns about the HUD Monitoring Contractor.  Weiss’s goal is to demonstrate to consumers and federal regulators that the 2000 HUD reform law aimed at making homes more affordable and accessible is not being followed.  HUD’s inability to adhere to the reform law is, as Weiss argues, a direct result of the HUD Program’s contracting system which over the years has become excessive, unchecked, and expensive for State partners, the industry, and consumers.

As the HUD program currently works there is a privately operated Monitoring Contractor hired to oversee other privately owned third party inspection agencies.  In a perfect world this monitoring contractor would understand the HUD code and contract inspection agencies that can inspect homes and ensure their HUD code compliance.  Weiss claims that this perfect world does not exist.

The same Monitoring Contractor, though sometimes operated under different corporate names, has been the only Monitoring Contractor for the HUD code since its inception in 1976.  Do to its long running oversight of the HUD code this privately operated agency has become highly profit driven, for itself and for the other third party agencies it contracts for inspections.  Weiss argues that the Monitoring Contractor circumvents HUD’s consensus committee and has added new regulations and inspection policies not originally found in the HUD code.  These new regulations have become a time consuming financial burden on manufacturers while being extremely profitable for the Monitoring Contractor and the inspectors it hires.

In 2012 the MHARR under the Freedom of Information Act requested HUD to provide documentation showing the roles and responsibilities of the Monitoring Contractor.  In his article, “Monitoring Contractor’s Domination of Federal Program Must End”, Weiss sites 17 different responsibilities of the Monitoring Contractor that illustrate the power and influence it has over HUD.  Also the documentation stated that the Monitoring Contractor’s latest contract with the HUD Program is a 5 year 25+ million dollar contract.

Weiss and the MHARR have been lobbying against HUD’s conduct in hiring a monitoring agency for many years.  Weiss views the current relationship between HUD the Monitoring Contractor & third party inspection agencies has become an abusive, profit driven operation rather than a uniform way of ensuring consumer safety.

October 14, 2015 Posted by | General Information | , , , , , , | Leave a comment

Commercialization of mobile home parks

Recently I’ve been reading a substantial amount of material published by Frank Rolfe.  Many of you have may have heard of him, but if not, Frank is on the leading edge of the commercialization of mobile home parks for the Great Plains and Southwest regions of the Country.  Frank’s park enterprise currently consists of more than 17,000 lots in 20 States.

Along with continuing in his own acquisition of privately owned parks Frank and his business partner travel the U.S. teaching courses from their Mobile Home Park University, a program designed to help deliver the tools for others to use parks as a lucrative source of income.  The University’s core platform is that mobile home parks have traditionally been privately owned by Mom & Pop style management teams, this type of management has kept park rental fees much lower than the rising rates of competitors such as apartment complex owners.  Over several decades of not increasing lot fees the average mobile home park rent is about $1,000 less than the average apartment (monthly).  These low fees have left the average mobile home park generating about $5 per square foot, lower than practically any other conceivable use for real estate.

The article covers several of the implications made by these chronically low rates, including why Rolfe sees such a great earning potential.  With roughly 44,000 parks in the United States and only 2,000 of them commercially owned, people looking to invest in the commercialization of mobile home parks are in a position to make a lot of money.  Rolfe explains that most of these parks could have their rental fees doubled over a period of time without having to greatly increase operating expenses.  The commercialization of these parks stands to create better living conditions for park residents as well.  Currently park managers earn about half of what apartment complex managers earn leaving the most experienced and qualified property managers headed toward apartment complexes.

It is a very logical conclusion that increased cash flow would allow for a park to dedicate a marginally larger piece of revenue to maintenance and grounds keeping, however this does not mean that all commercially acquired Mom & Pop style mobile home parks will result in better living conditions for residents.   I currently live in a park that was purchased by a commercial outfit and the first move they made was to increase lot fees.  Also, they have been less active and less approachable than the previous Mom & Pop management team.  This individual case does not discredit Rolfe’s hypothesis that commercialization will potentially lead to higher living standards; it does however demonstrate that lot fees can be increased without the commercial buyer having to increase operating expenses.

Click here to read the article.

September 9, 2015 Posted by | General Information | , , , , , | Leave a comment

Baby Boomers, Millennials, Retirement and Student Debt

Looking at home ownership and the economy as a whole we can begin to see several key entities that are going to play major roles in the near future.  These entities are the Baby Boomers, Millennials, retirement, and student debt.  These four factors, if not prepared for could begin a major decline in housing and economic activity.  However, as with any obstacle, proper planning could make a potentially harmful situation beneficial.

First, let’s look at the housing market and see how these factors will play their separate but intertwining roles.  Baby Boomers make up the largest portion of home owners in America and as they are growing older the side effects of aging are leaving the Baby Boomers looking to downsize.  Some will stay in their homes but the trend has been showing that most wont.  So what is happening to these large empty homes?  At first glance it would seem likely that Millennials would swoop in and buy these recently vacated homes, but this is not the case.  Millennials are a very spending concise generation, mostly because of student debt.  Student debt is now at 1.3 Trillion and is the largest source of personal debt in this country.  Since 1989, also the year home ownership began its decline in America, the tuition for a four-year degree has risen 1200% while the purchasing power of the minimum wage dollar has dropped 25%.  Carrying this type of debt and trying to also juggle a median price home mortgage leaves the dream of home ownership in the dust for most Millennials.

How do millennials offset this issue?  What we’ve seen is that most millennials choose urban living and renting over homeownership and being land owners.  This trend has freed millennials from putting themselves into greater long-term debt, but lacking homeownership is hurting net worth potential and killing the middle class.  Affordable housing has been a hot topic issue in our nation, but affordable housing will not save us.  We need affordable home ownership.  Manufactured housing has proven to be an affordable alternative to site-built homes while having the equity building power that renters will never be able to take advantage of.

Moving on to the economy, Baby Boomers are retiring at a ferocious rate and as they do their disposable income is in decline.  We’ve already seen the Millennials are a spending conscious generation and as baby boomers hold 80% of the American wealth, they are also the largest portion of our consumer spending.  As they retire, and their disposable income declines, so will their propensity to spend.  Interest rates, supply, demand, trade tariffs, domestic policy, foreign policy, all of these have effects on the economy and how it performs, however 70% of economic function is based on the consumers desire to spend.  With one generation retiring and losing disposable income and another generation too burdened with debt to spend there needs to be some form of relief to keep people borrowing and keep people spending.  Affordable home ownership is a viable solution, and manufactured housing is affordable home ownership’s saving grace.

August 1, 2015 Posted by | General Information | , , , , , , , , , , , | Leave a comment

Saving the Middle Class

Affordable Housing has been a hot-topic issue since before the housing crisis and has become even more of a burning issue since the fall out.  Affordable Housing has always had its share of the housing market but demand is on the rise.  Overall home purchases are down for the ninth straight year in a row and home ownership has dropped to 65%, the lowest it has been since 1995.

Since the housing crisis there has been a strong trend toward apartment rentals, friends rooming together, and moving back in with mom and dad.  The percentage of 25-35 year olds living with their parents is at 36%. This was a slow and steady trend for the least four decades that jumped from 32% to 34% in just the two years of the 2007-2009 recession, and reached its peak in 2012.

Bill Matchneer, a lawyer and former council member for the CFPB, states that manufactured housing is a dire need in the affordable housing market and that its increase in market share is inevitable.  As most of us know the mobile home industry has had a stigma against it from historical quality issues and the disparity of land leased communities.  Due to the HUD code, set in place in 1976 and revised in 1994, the quality standard of manufactured homes has taken tremendous strides in both structural and environmental impact quality.  Bill Matchneer is quoted, “The modern manufactured home is equivalent to site-built at about half the price”.  On the topic of land lease communities, Paul Bradley of ROC USA and organizations like it are helping to increase the quality and appraisal value of homes in land lease communities by assisting residents in the purchase of the community.  ROC USA consults with residents, helping them to form a co-op to purchase the community as well as lending the co-op the necessary funds to purchase at affordable rates.  These co-ops are also given some preferential treatment such as being allowed the first offer when their community is put up for sale.  Studies have shown that communities owned by residents have higher property value, more stable rental fees, and maintain a higher quality of living than their counterparts.  Megan Neff of NextStep, an organization that works through a channel of non-profits, is also helping to increase structural and lending quality by creating a connection between the needs of buyers and the vision of manufacturers.

Datacomp Appraisal Systems, having conducted an appraisal study comparing manufactured homes to site-built homes, came to the conclusion that the old adage of “location, location, location” equally applies to both housing categories.  Datacomp, with no bias toward either industry stated, “When properly sited and maintained, manufactured homes will appreciate at the same rate as other homes in surrounding neighborhoods”.  This revelation of appraisal values is important to understand as the majority of middle-class wealth is comprised of home ownership.  Studies from the Federal Reserve show that homeownership is the cornerstone of middle-class wealth.  The average middle-class home owner has a net-worth of $194,000.00 about 36x that of their renting counterparts who have an average net-worth of $5,400.00.

This information poses some serious questions about the manufactured housing industry.  The first and most obvious question is, “Can manufactured homes save home ownership?”  The second question, only visible when examining what home ownership in America truly represents, “Can manufactured homes save the middle-class?”

June 3, 2015 Posted by | General Information | , , , , , , , , , , , , , , , | Leave a comment

4,780 New HUD-Code Homes Shipped in February 2015

In February 2015, 4,780 new manufactured homes were shipped, an increase of 9.7 percent from February 2014. The trend reflected gains across the board, with shipments of single section homes and multi section homes up by 13.6% and 6.1 percent respectively, compared with the same month last year.  Total floors shipped in February 2015 were 7,263 an increase of 8.3% compared with February 2014.

Compared with the prior year, 2015 recorded shipment increases in January & February. For the first two months of this year, shipments totaled 9,722 homes compared with 8,668 homes in 2014, a net increase of 12.2%

The seasonally adjusted annual rate (SAAR) of shipments was 67,398 in February 2015, down 4.9 percent from the adjusted rate of 70,837 in January 2015. The SAAR corrects for normal seasonal variations and projects annual shipments based on the current monthly total.

The number of plants reporting production in February 2015 was 121 and the number of active corporations was 38, both unchanged from the previous month.

Information provided by MHI

May 12, 2015 Posted by | General Information | , , , , , , , , | Leave a comment

4,942 New HUD-Code Homes Shipped in January 2015

In January 2015, 4,942 new manufactured homes were shipped, an increase of 14.7 percent from January 2014. The trend reflected gains across the board, with shipments of single section homes up by 28.8 percent compared with the same month last year, and shipments of the multi-section homes showed an increase of 4.1 percent. Total floors shipped in January 2015 were 7,567, an increase of 10.8 percent compared with January 2014.

The seasonally adjusted annual rate (SAAR) of shipments was 70,837 in January 2015, down 0.7 percent from the adjusted rate of 71,347 in December 2014. The SAAR corrects for normal seasonal variations and projects annual shipments based on the current monthly total.

The number of plants reporting production in January 2015 was 121 and the number of active corporations was 38, both down from the numbers in December 2014.

Information provided by MHI

March 25, 2015 Posted by | General Information | , , , , | Leave a comment

2014 posts in review

I think that 2014 was a year of adjustment for us in our industry.   In review, here are the articles that I have written this year.

-Google Analytics- A program through Google that can help track the traffic on your site

-December HUD-code Home Shipments- December 2013 shipments were up 14% from December 2012

-National Congress & Expo for Manufactured & Modular Housing

-2014 National Industry Awards

-February HUD-code Home Shipments- February 2014 shipments were up 5.9% from February 2013

-Baby Boomers- There are 76 million baby boomers to date and how they will affect our industry

-Marketing Funnel & Social Media- A funnel approach to capturing customers and keep them engaged longer

-Manufacturedhomes.com- A site that allows potential homebuyers to get information about financing, purchasing, construction and where to find dealerships in their area.

-Tiny House/Park Model Trend- Stats about how this new trend is affecting the housing industry

-Mortgage Discrimination- Mortgage Denial for women on maternity leave

-2015 Louisville Manufactured Housing Show

December 16, 2014 Posted by | General Information | , , , , , , , , , , | Leave a comment

Tiny House/ Park Model Trend

Tiny House/ Park Model Trend

Over the past couple of months I have noticed a growing trend with tiny houses.  Although I don’t think that all housing trends can translate into sales within our industry but I think that this trend might.  HGTV has several shows like “Small Space, Big Style” and shows about tiny houses from 110 sq. ft. up to 1,000 sq. ft.  They showcase homeowners that have made the most out of the limited space they have.   A growing number of people, whether young or older, are starting to appreciate the smaller living space.  Here are some stats I found:

–  68% of tiny house people have no mortgage compared to 29.3% of all U.S homeowners

–  55% of tiny house people have more savings than the average American, with a median of $10,972 in the bank

–  The average tiny house is 186 sq. ft. while the standard U.S home takes up nearly 2,100 sq. ft. That adds up to nearly 11.3 tiny houses!

–  Approximately 2 out of 5 tiny house owners are over 50 years of age

–  More women own tiny houses than men

These stats were taken from The Tiny Life.  The site offers an explanation of what the “Tiny House Movement” means and links to other “tiny house” blogs & websites.

Our industry offers park models as a version of “tiny houses” that we can sell!  I attended Titan & Commodore fall shows several weeks ago.   Both of the plants had a park model on display and they were perfect examples of how organized and efficient “tiny houses” can be.  I did some research on Athens Park Homes and Cavco Park Models & Cabins.  Both brands offer many different floor plans and options which include porch models, front kitchens, movable islands, wood interior accents, log siding etc.  Titan offers two complete series of Athens Park Homes and Cavco also offers two different series.  If you have time please check out their websites.  Click here for Athens Park Homes & click here for Cavco Park Models & Cabins.

October 2, 2014 Posted by | General Information | , , , , , , , , , , , , | Leave a comment

ManufacturedHomes.com

                 A couple of months ago, while doing some research online about our industry, I came across manufacturedhomes.com.   The site allows for potential homebuyers to search dealerships within a certain radius of where they are located.  It also allows homebuyers to view floor plans and search them based on the number of bedrooms & bathrooms, sq. ft. & modular or manufactured.   The site also offers the homebuyer additional information about purchasing, financing, construction, warranty and insurance. 

               When the homebuyer clicks on “Manufactured Home Lenders”, under the “Discover” tab, it gives them information about several lenders.  Several of the lenders that they have listed are ones VBI members have been dealing with: Cascade Loans, C U Factory Built Lending, Triad Financial Services, and 21st Mortgage.  Under each financial company the website offers the homebuyer more information about the company, and their contact information.

               Under the “Feed” tab the homebuyer can look at a blog, videos and manufactured home tours.  Currently the site has 4 manufacturers listed:  Magnolia Homes, Kit Home Builders West, Kabco Builders and Sunshine Homes.

               I requested a dealer success marketing package with information about lead generation, lead and client management, and task and event management.  They offer the dealerships an organized way to keep track of your potential homebuyers.  Larry Higgins from Love Homes stated that he likes the site and he is receiving 1 or 2 leads a day.  Love Homes currently has 65 floor plans listed all from Eagle River Homes. 

               In today’s market a large majority of homebuyers start their search online, this may be a useful tool for your company – https://www.manufacturedhomes.com

 

August 23, 2014 Posted by | General Information | Leave a comment