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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.

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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