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

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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

Upcoming Events!

There are quite a few of upcoming events, open houses and meetings coming  up in the near future for the Volume Buyers members.

  • 9/11 – 9/13   Champion/Claysburg  (1-800-932-5121)
  • 9/12 – 9/13   New Era  (1-800-678-5581)
  • 9/12 – 9/14  Penn West  (1-800-727-4566) – (Commodore)
  • 9/12 – 9/16   Titan Homes  (1-800-937-3911)
  • 9/12 – 9/16   Eagle River  (1-717-656-2381)
  • 9/13 – 9/15   Commodore/Colony  (1-800-876-6870)

If you would like more information please feel free to call the numbers above. 


On September 14th, 2011 there will be a Group Meeting from 8:30am – 12:30pm.  This meeting will take place at the Holiday Inn in Clarion, PA.  The agenda and additional information will follow.

We do have some rooms set aside on the evenings of 9/13 and 9/14 for those members not staying as guests of our manufacturing partners.  The rate is $75 per night and you can call (814) 226-8850 and ask for the Volume Buyers rate.

-M. Cicardi

August 1, 2011 Posted by | Events | , , , , , , , , , | 2 Comments