Thursday, April 27, 2017
New supply in the manufactured housing industry is extremely low. In the last two decades, only 10 mobile home parks have been built in the US; that’s roughly one new community every two years! Ironically, demand for affordable housing is increasing daily. Not only are low-income families exploring the options of all-ages, tight-knit communities but with more than 10,000 Baby Boomers retiring every day to a slow, steady income of $14,400 per year, retirees are absolutely driving demand for communities with age restrictions.
Green Street Advisors analyst Ryan Burke states: “Nowhere else in real estate do we see this complete lack of new supply and the favorable demand dynamics. It’s a pretty good story.”
Manufactured housing Real Estate Investment Trusts (REITs) had a total return of 28.5% in 2016 compared to the 18.2% total return for apartment REITs and the 12.8% return for single-family homes. The FTSE/NAREIT All REITs Index was ranked at 9.3%. “As (manufactured housing) continues to outperform other sectors, particularly in the private market at the property level, there’s no way the outperformance will go unnoticed,” Burke says.
REITs in the mobile home park field generally own higher-quality communities. Although REITs only own ~1% of the 50,000 manufactured housing communities nationwide, they amount up to 15% of the institutional-quality stock. According to Drew Babin, an R.W. Baird analyst, existing park-owners and manufactured housing REITs currently have a “chokehold on the market”.
With little supply and a high drive to expand, REITs tend to enlarge their portfolios through acquiring, not only just manufactured home communities, but entire portfolios. The most recent example was in 2016 when Sun Communities, Inc. purchased a portfolio of more than 100 communities for $1.7 billion from Carefree Communities, Inc. However, even though a gold nugget like Carefree’s portfolio with several high-quality communities existed, most expect to see those deals as smaller transactions.
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Wednesday, April 19, 2017
Over the course of the last year, the manufactured housing industry has made immense leaps and bounds in comparison to the last decade. The rising prices of homes and falling prices of mobile homes combined with retiring rates, unemployment rates and the minimum wage continue to spell out the positives of affordable housing, especially in these times.
Last July, Congress passed the Housing Opportunity Through Modernization Act (HOTMA), which allowed Section 8 vouchers to be used for the purchase of a manufactured home (as opposed to only being able to pay rent with the vouchers, tenants may purchase a mobile home through a lease with section 8 vouchers). This, although one of the biggest, is only one notion to why one would choose a manufactured home as the way to go.
1. Manufactured Homes are Sold at a Great Value in Proportion to the Average House
The average cost of a new home sold in the U.S. is ~$325,000 today. Compared to the average cost of a new mobile home – $64,000 – that’s approximately 508% the cost! Now, more mobile homes are bought used than new (same with standard homes). Taking that into account, the median cost of a mobile home is $10,000 while the median sales price for homes in the U.S. is $200,000 – exactly 20 times the cost of a used mobile home.
Since 2007, more than 50% of jobs are minimum wage jobs. Because of this, and the fact that ~10,000 Baby Boomers are retiring each day into an average social security income of $14,400 per year, it could be predicted the manufactured housing industry could see a huge spike in the coming months/years.
A note to make: both new & used mobile homes are cheaper than an American automobile.
2. Mobile Home Parks are Comparable to Gated Communities and are Much Cheaper
Time magazine wrote an article last month titled The Home of the Future outlining some benefits to manufactured homes. One of the observations the writer made was the similarities between mobile home parks and expensive gated communities; generally, the quality of life is the same, but rent is immensely cheaper in a park than a complex. And although it’s not necessarily common to have actual gates out front, most do share some unique features. For instance, communities (both parks and complexes) can be thought of as a small city inside another city. There are typically a few rules that help raise standards for the community that the residents must live by. This delivers a high-quality life to the inhabitants that they cannot find anywhere else.
3. Mobile Homes are Geared Towards the Elderly
With approximately 10,000 people retiring every day, it’s starting to become a trend for Baby Boomers to sell their expensive home, buy and move-in to a mobile home and live off the difference as a retirement fund. Being only one-story, it’s very convenient for those aging who find difficulty with negotiating room with stairs. Additionally, the smaller size of the trailer results to lower utility costs, which can’t hurt when there is only $14,400 coming in every year. One last huge positive of manufactured housing communities is the tight-knit closeness of the residents; it feels and acts as a giant support network!
It’s no secret: affordable housing is a rising problem in America and mobile homes seem to offer a solution.
Wednesday, April 5, 2017
April 05, 2017 – Two days ago, Cavco Industries, Inc., a leading building of Manufactured Homes and Modular Homes, Park Model RVs, Commercial Buildings and Vacation Cabins in the U.S., closed on the purchase of another mobile home manufacturer: Lexington Homes, Inc. Headquartered in Phoenix, Arizona, Cavco Industries designs and produces factory-built products, which are distributed primarily through a network of both company-owned and independent retailers. Some of the brands owned by Cavco Industries, Inc. include Cavco Homes, Palm Harbor Homes, Chariot Eagle, Fairmont Homes and Fleetwood Homes.
Lexington Homes, Inc. operates only one manufacturing plant, located in Lexington, Mississippi, and distributes homes to independent retail business in the Southeastern United States. The company was founded in 2004 by four men whose combined experience in the manufactured housing industry totaled over 100 years! More info regarding Lexington Homes, Inc. can be found at www.lexington-homes.com.
The price at which Lexington was purchased has not been disclosed, however it was mentioned the deal was paid in cash at closing and was funded internally by Cavco. It was also noted that Lexington Homes’ products will continue to be marketed under the Lexington brand name and the current management team will remain with the company. Now including their newest acquisition, Lexington, Cavco employs approximately 4,200 people and operates 20 manufacturing plants across the United States. Visit www.cavco.com for more information about Cavco Industries.
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