Archive for March 17th, 2013

The NEW NORMAL = 50,000 New MHomes per Year?

Sunday, March 17th, 2013

Blog # 237 Copyright 2013 17 March 2013

Perspective. ‘Land lease lifestyle communities, a.k.a. manufactured home communities & earlier, ‘mobile home parks’, are the real estate component of manufactured housing.’

I.

The NEW NORMAL! 50,000 New HUD Homes Shipped per Year

II.

‘REAL HOMES, REAL VALUE’, How Outsiders Look at Us!

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I.

The NEW NORMAL! 50,000 New HUD Homes Shipped per Year

(54,881 new HUD – Code Manufactured Homes Shipped During Year 2012)

Yes, you read that right! As an industry, we’ve been bouncing along this ‘new home shipment nadir’ for so long, folk now entering factory – built housing and its’ related realty component, increasingly view ’50,000+/- new HUD – Code homes shipped per year’, as the New Normal for manufactured housing production and sales. *1

Harkening way back to year 1972, when a record number 575,940 new ‘mobile homes’ were shipped; then year 1998 – our latest, too brief renascence – when 372,943 new manufactured homes were delivered, it’s obvious that while 50,000+/- new home shipments per year was NOT ‘the norm’ in the distant past, after five years of limping along, the figure is likely our par going forward. *2

Frankly, this growing contemporary nadir, or New Normal, view of manufactured housing production and shipments has become, and will continue to be, increasingly entrenched in our collective mindset – the longer the following perennial mal conditions remain unaddressed and unchanged:

• While chattel (personal property) capital, for mortgages on manufactured homes sited within land lease lifestyle communities, is available from independent, third party lenders and some local banks, it must be more accessible by prospective homebuyers/site lessees; OR, the quality (i.e. credit worthiness) of would – be homebuyers/site lessees must markedly improve! Do you see either or both these changes occurring anytime soon? Neither do I.

• Counting new home ‘shipments’ rather than new home ‘sales’. As long as HUD – Code home manufacturers continue to operate from this wholly ‘production priority’ (versus ‘marketing sensitivity’) perspective, we’ll continue to see new homes delivered into local housing markets that, based on Area Median Income or AMI, cannot afford them; that don’t want them, e.g. into markets saturated with site – built homes in foreclosure; and, their continuing insensitivity to the genuine housing needs and wants of local prospective homebuyers.

• Decide once and for all, whether HUD – Code manufactured housing is ‘affordable housing’ OR an apt competitor in enough local site – built housing markets to ensure sufficient ‘home sales cum shipments’ – or is it the other way around: ‘home shipments cum sales’? See the difference? I surely hope so. In the meantime, continue to expect to see far more ‘big box = big bucks’ manufactured homes at regional housing trade shows in Louisville and Tunica, rather than Community Series Homes or CSH models, with durability – enhancing features, designed for in – LLLCommunity infill, on functionally obsolete and full size rental homesites. At the very least, understand and agree – industry wide – what it means for housing to be ‘affordable’ in the first place; then, if and when possible, get our federal regulator, HUD, to finally begin promoting manufactured housing as the affordable housing option it is!*3

• Then there’re the ever present ‘elephant in the room’ concerns. *4 Whether a) ‘not talking’ about rental homesite rates being way out of sync with other forms of multifamily rental housing in the same local housing market; b) chattel lenders’ practice of including PITI only, within the commonly accepted 30% Housing Expense Factor – omitting routine household expenses; c) how after 60 years in business, there’s still no ‘secondary market’ for the valuation, listing, and sale of manufactured housing, particularly those sited within LLLCommunities; and of late, d) an emerging, unfortunate repeat of manufactured housing history, circa 1985, where larger firms – first, the mega home manufacturers, and today apparently, a few of the largest property portfolio owners/operators, who’re members of a national advocacy body, publicly and privately bullying smaller firm businessmen and women. *5

With that said, understand there’re two major matters to address here and going forward:

1. How to reverse the growing ‘nadir view’ of HUD – Code manufactured housing; where 50,000+/- new homes shipped per year is now viewed as the New Normal? It won’t be an easy process.

As preview, it’ll take a) leadership capable, industry experienced, highly motivated individuals, willing to listen to and understand their peers, via one or more national strategic brainstorming sessions – open to everyone willing to ‘pay the price to attend’; b) charting a realistic return to greater productivity and profitability via better and creative financing, with a marketing and sales perspective, under – girded by new respect for housing affordability, and,

2. How to effectively address most or all ‘elephant in the room ‘ concerns? Here too, this will not be an easy process.

In fact, with the exception of the final ‘elephant’ of the four – being a relatively recent arrival on the national manufactured housing scene, the other three matters are perennial bugaboos to everyone in the factory – built housing business. Three examples: 1) Are specific land lease lifestyle community owners/operators, charging rental homesite rents out of sync with other forms of multifamily rental housing, in their local housing markets, prepared to roll back their rates? I seriously doubt it. 2) Are independent, third party and on – site, self – finance chattel lenders prepared to make homeowner loans more affordable (i.e. ‘less risky’), by adding routine housing expenses to the PITI $ already within the 30% Housing Expense Factor? I think not. And, 3) after 60+/- years are we, as a housing alternative industry, prepared to create, grow and support a secondary market for the valuation, marketing, and sale of used manufactured homes – so that we can sell more new homes? Nope. And as far as that ‘fourth elephant’ is concerned, let’s hope saner minds prevail in the near future, so we don’t wind up with an even more diverse and divisive national representation relative to political and regulatory Advocacy, statistical Research, and comprehensive Resource servicing – especially where land lease lifestyle community owners/operators are concerned!

But given the circumstances and challenges just described, is there willingness and commitment to ‘change and improve’, to and for the greater good of all involved in manufactured housing and the land lease lifestyle community realty asset class? Again, I think not.

Not mentioning any names here, but today there are no fewer than five national, not for profit entities vying for the dues money and loyalty of individuals and firms associated with HUD – Code manufactured housing and or its’ real estate component, the land lease lifestyle community asset class. Print off this blog posting and send it to the elected and salaried leaders of the trade group or groups with whom you affiliate, and ASK: 1) Do they agree or disagree with the concerns set forth in the previous paragraphs, then ask, ‘WHY?’ Then, 2) What are, or will they be doing about these and related matters, from their perspective, during the remaining months of year 2013? Anything you’re told, short of a specific and timed Action Plan, is their clear vote to continue this status quo; being,

’50,000 new HUD – Code homes per year as the New Normal for the entire manufactured housing industry’!

Is that what YOU want to hear, and where you want to lend your support? I hope not!

In either event, I’d like to know your thoughts on some or all these identified concerns playing important parts in keeping HUD – Code manufactured housing at its’ five year new home shipment nadir! Either our elected and salaried leaders should be taking steps to get us out of this malaise, or we need to reorganize and do it ourselves, with the help of new business associates!

Write to me: GFA c/o Box # 47024, Indianapolis, IN. 46247 or phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

II.

‘REAL HOMES, REAL VAUE’. How Outsiders Look at Us!

(How the Corporation for Enterprise Development, or CFED, views the value appraisal of manufactured housing sited on parcels of real estate owned fee simple; and, why land lease lifestyle community – sited homes should be appraised similarly….)

If you’re on LinkedIn, and have been following the lively discussion leading up to the CFED – hosted Webinar on 28 March, you know there’s a ‘recent report’ cited as seminal to the upcoming presentation. It’s titled, ‘REAL HOMES, REAL VALUE’. I’ve read it cover to cover, but there’s no way I can do the 50 page report justice in a few paragraphs. But I will point out some of the highlights that caught my attention.

• Among 31 individuals acknowledged as resources for this report, eight are affiliated with manufactured housing; but NONE are owners/operators of land lease lifestyle communities: Joan Brown, Steve Hullibarger, Don Miner, Dan Rinzema, Betty Whittaker, Paul Bradley, Emanuel levy, and George Porter.

• Early on, author Robin LeBaron acknowledges report’s focus being “…the practices of appraising manufactured homes as real estate….” P.5. But by default, he hints at interest in valuation issues pertaining to manufactured homes sited in land lease lifestyle communities. “In 2008, approximately two – thirds of manufactured homes placed in the US were titled as personal property, and one – third as real property.” P.13. Leading to a recommendation, later in the report: “Encourage states to adopt the Uniform Manufactured Housing Act as a means of standardizing the process of recording the conversion of title from personal to real property (Within land lease lifestyle communities and elsewhere. GFA), and vice versa.” P.39. *6

• In the Executive Summary, the author calls for ‘terminological clarity’ relative to differentiation among factory – built housing types. That work has already been done. All he had to do was cite Don Carlson’s decades long demarcations, based on national housing market share, per production (site) builders @ 45% (Who routinely use pre – hung window and door components, as well as roof trusses and floor/ceiling joists); panelizers @ 45%; modular housing @ 5%; and HUD – Code manufactured housing @ 5%. Courtesy, ‘Automated Builder’ magazine.

• “Only one state, New Hampshire, automatically titles all manufactured homes as real property.”

• “Six differences between manufactured and site – built homes…relative mobility or immobility, design and structural quality, external appearance, finishes, perception and tenure.” P.22 Actually, the final ‘difference’ would have been better cited as ‘tenancy’ (‘holding property by lease or rent’) rather than tenure (‘the holding of something, as property or office….’), since the author points out, on page 27, “…one – third of manufactured homes are located on land that is not owned by the homeowner (“fee simple” ownership of the land and home), but leased from a third – party, typically in a manufactured home community.”

• “A perimeter foundation, for example, must be perfectly sized to accommodate a manufactured home without generating future problems.” P.24. No question, but what dimension and integrity of the perimeter wall are important; but it is not weight bearing, as the mass and weight of a manufactured home is borne by the steel carriage or frame under the home, onto piers located under said home and not the perimeter wall!

• Another recommendation in the report, calls for “…standardization of the definitions and terminology related to manufactured housing….” An example of outsiders being unaware of resources already widely available to them. The Official Glossary or Lexicon of the manufactured housing industry and land lease lifestyle community asset class has been around now for more than three years, with latest edition published as Appendix III in the 2012 ‘Book of Formulae, Rules of Thumb & Helpful Measures’. See end note # 3.

Interested in obtaining a copy of this report to read for yourself, and maybe prepare to participate in the free Webinar, on this subject, at 2:30PM on 28 March 2013? Do what I did. Google CFED and make a direct inquiry for ‘REAL HOMES, REAL VALUE’; and while you’re at it, ask for Webinar ‘sign up’ instructions.

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End Notes.

1. nadir: ‘the lowest point’ Webster

2. Year 2011 = 51,055 homes; 2010 = 50,046 homes; & 2009 = 49,789 homes

3. Read chapter # 5 in Book of Formulae, Rules of Thumb, & Helpful Measures, available for $19.95 from PMN Publishing. MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764

4. ‘elephant in the room’ = English metaphorical idiom for an obvious truth that is either being ignored or going unaddressed.’ Wikipedia

5. PITI = loan principal & interest; pro rata personal property or real estate taxes & homeowners’ insurance premium

6. The Uniform Manufactured Housing Act adopted in July 2013 by the Uniform Law Commission

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George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry,
The Land Lease Lifestyle Community Asset Class &
Affordable Housing Purists & Enthusiasts Nationwide
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156