Volume Buyers

Keeping you informed and updated!

Julian Castro & Doug Ryan

In recent news two fairly exciting things have happened for the manufactured housing industry.  Manufactured housing has begun to escape its dated reputation for being poor in quality, dangerous, and vulnerable to predatory lending practices.  Through the hard work of manufacturers in the development of new production methods, materials, and technology the industry has taken great strides to compare with and now exceed the quality and visual appeal of their site-built counterpart.  At the same time retailers, affordable housing advocates, and consumers have worked to educate politicians, lenders, and other potential home owners of the new realities in manufactured housing.

Recently the U.S. Secretary of Housing and Urban Development, Julian Castro, gave a speech praising the manufactured housing industry not just for offering a more affordable alternative to site-built homes, but for creating safe and energy efficient homes as well. Clearly manufacturers have made enormous strides in the quality of their product if they have gone from being shunned by the general public to being the center of praise and great admiration by a man whose job is to help Americans have access to quality and affordable housing.

In conjunction with Julian Castro, Doug Ryan, a man who has been at the forefront of lending reform with the Federal Housing Finance Agency is trying to make changes that would affect roughly 35% or manufactured housing consumers.  Currently manufactured home buyers who are putting homes on land they own are able to take advantage of conventional mortgage specifications because they are able to borrow money for the homes as real estate while most people who are borrowing to purchase a home that will be in a community or other form of leased land must classify the loan as chattel or personal property.  Doug is proposing to make lending changes that would allow for better lending treatment for leased land buyers by creating incentives for Fannie Mae and Freddie Mac to become involved in leased land lending.

Without getting into too much detail about the extreme financial differences between chattel loans and real estate loans, it is appropriate to state that those difference can be a deciding factor as to whether a person decides to buy or not.  When we see Doug Ryan making strides to increase borrowing opportunities for a group of people that make up 35% of our consumers, it gives all of us a reason to be excited.

Click here to read the whole article

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December 17, 2015 Posted by | Financial Information, General Information | , , , , , , , , , , , | Leave a comment

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

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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.

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

Doug Ryan, CFED & CFPB

With the Preserving Access to Manufactured Housing Act moving through the legislative bodies lending is a hot button issue in our industry.  Recently MHLivingNews has brought Doug Ryan under fire, building a case that the CFED (Corporation for Enterprise Development) is currently engaged in a conflict of interest with the CFPB (Consumer Protection Financial Bureau).  Both the CFPB and the CFED claim to be consumer advocates.  The CFPB aims to protect consumers from predatory lending while the CFED aims to make sure lending does not become regulated out of existence.  The case for the conflict of interest with Ryan is built on questionable funding. CFED receives a portion of their funding from the CFPB and Ryan refuses to disclose how large of a portion that funding is.

In the article by MHLN the CFPB is quoted as stating that the largest MH lenders are predatory and that the producers are greedy.  It would make sense that suspicion would arise when an organization accepts essential funding from another organization that is in direct philosophical opposition.  Though the article’s purpose was to discuss Doug Ryan and MHLN’s frustration with his actions, what I found most striking was the immense difference between funding for new homes and funding for used homes.  My business deals in new MH and the lending we use is a traditional mortgage, the same as a person would seek when buying an existing or site-built home. Conventional loans are a common occurrence with our new homes.  Hearing that regulation has become so tight that lenders who once helped consumers purchase used homes in the $20K and lower range have backed out of the market because originating smaller loans has become unprofitable is unfortunate.  The CFED makes the argument that sub-prime lending for used homes is not a danger to America’s financial infrastructure the way sub-prime lending led to the most recent housing collapse.   Even though this sub-prime lending does not pose a danger to society, on an individual basis, the structure of a sub-prime loan can still create a lot of stress and potential risk toward the borrower.

The arguments on both sides of the issue are compelling and each hold merit.   Predatory lending and putting profits ahead of ethical behavior is harmful to the society an institution serves.  Likewise, if an institution is unable to generate profits it cannot operate efficiently and will then fail to be capable of serving society.  Forcing people to conduct themselves ethically is a sticky tar pit, but as James Madison wrote in the Federalist Papers #51, “If men were angels, no government would be necessary”.

July 7, 2015 Posted by | Financial 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

H.R 650 – Preserving Access to Manufactured Housing Act

Members of the House Financial Services Committee have reintroduced legislation to help our industry!  H.R 650, the Preserving Access to Manufactured Housing Act of 2015 was introduced on February 2nd by Representatives Stephen Fincher (R-TN), Terri Sewell (D-AL), Andy Barr (R-KY) and Kyrsten Sinema (D-AZ).

Last year, H.R 1779 was introduced and co sponsored by 114 bipartisan representatives.  The Financial Services Committee passed the bill by a unanimous voice vote.  Despite all of our efforts, the bill did not make it all the way through the process prior to adjournment. When it was reintroduced last week it was given a new number, and the co sponsorship list starts again at zero.  MHI has started an advocacy page to make it easy for all of us to contact our representatives and request their support.  Click here to send an email to your representative!

February 10, 2015 Posted by | Legislation | , , , , , , , , | Leave a comment