Midway through the decade of manufactured housing (1995 - 2005), more factory-built homes are being shipped and manufactured home communities being built than since the industry's heyday in the early 1970s. The statistical port and starboard data base (i.e. housing production and distribution, vs. income-producing property type), for this industry reads like a small off-Broadway play becoming a major hit everywhere it opens.
During 1996, manufactured homes accounted for one out of three new single-family homes sold throughout the U.S.! That's 363,411 new homes, up 9% from 339,601 the year before -- but still well below the 575,940 mobile homes (i.e. proper term for pre-HUD code homes produced before 1976) shipped during 1972.
Surge in Popularity
Why the significant surge in popularity for this housing product? The answers: Affordability, building material quality and larger size. Manufactured homes average only $26.79/sq.ft. compared to $56.28/sq.ft. for a site-built home. The manufactured home figure increases to near $40.00/sq.ft. when sited on a permanent foundation. None of these sq.ft. figures include cost of land. Average price of a manufactured home during 1995, (all sizes) was $36,600 vs. $120,500 for site-built homes. Average single-section home size is 1,115 sq.ft. and multi-section home is 1,585 sq.ft. Finally, flexibility of design, variety of available features and options, and high quality building materials all contribute to manufactured housing product popularity.
Real Estate Asset
What about the real estate asset(i.e., manufactured home land lease community side) of the equation? According to the 1997 Allen Report(a survey of 500 largest multi-property operators in the U.S. and Canada), major owners now own and/or fee-manage 15%+ of all manufactured home communities in the U.S. This is significant because it is estimated that only 15% of all existing manufactured home communities are more than 100 sites in size, the minimum size that interests major multi-property investors. Among the 172 owners who responded to this year's survey, the average manufactured home community portfolio numbers 15 properties apiece, with each community averaging 225 rental home sites. Average physical occupancy during 1996 was an impressive 98.2% (up 4.6% from the year before); average operating expense ratio 38.2%; annual turnover among homes proper, only 5%, and 10% for homeowner/renters who, when they do relocate, generally sell and leave their home in place.
The inaugural Allen Survey (1996) raised more than a few eyebrows. Researchers polled the same 500 major operators relative to key investment real estate criteria for manufactured home communities nationwide. Results were as follows(all national industry averages):
All these statistics compared very favorably with those for apartments, strip shopping centers, suburban office buildings, industrial market and economy hotels. Finally, 1996 was capped by the still crystallizing merger of two of the industry's five REITs. ROC Communities, Inc. and Chateau Communities, Inc. merged into Chateau Communities, Inc. based in Englewood, Colorado, the industry's largest real estate investment trust.
What About the Future?
What's ahead for 1997 and beyond? On the production and distribution side, look for 375,000-400,000 new manufactured homes this year, translating into an increasing market share of the housing industry nationwide. A key point to keep in mind, however, is that manufactured housing generally sells well only when enjoying a clear 25-33% price advantage over comparably sized housing product in the same local market. Some merchant builders are finally getting wise to this reality and are competing more aggressively with manufactured housing and, in some cases, using the product in their projects. Finally, expect housing unit size(i.e. 12'-16' wide x 44'88' long for single section, and 24'42' wide x 36'-80' long for multi-section) and mix (e.g., 48% are single-section and 52% are multi-section) to stay fairly constant for the time being. There's even more excitement brewing on the real estate asset side of the industry! The REITs(and other large non-public investors) buying frenzy of manufactured home communities during 1994 through 1996 is over. For a time the acquisition pace and pricing was reminiscent of the limited partner syndication days of 1984-1986. Most of the available and desirable "200+-site manufactured home communities have been gobbled up. But there are several new players on the acquisition scene: a dozen or so REIT "wanna-bes" (for lack of a better descriptive term, though few, if any, will ever "go public")with lots of capital behind them, and a veritable wave of individual and partnership investors who have recently discovered the asset type, courtesy of Wall Street analyst reports and much positive publicity. So what are those recent, but almost too late, arrivers on the scene to do? There are at least three reasonable alternatives:
Learning the Basics
How does a real estate investor learn the basics of the manufactured housing product and real estate asset? Would-be developers have made Development, Marketing and Operation of Manufactured Home Communities a best-selling text since its debut in 1994. Novice and experienced real estate investors have pushed How to Find, Buy, Manage and Sell a Manufactured Home Community into its third printing after less than a year on the market. Plus, for the first time in 20 years, there are at least four manufactured home community land development seminars being held each year, usually to sold-out audiences, by the Manufactured Housing Institute, (703) 558-0400 and PMN Publishing, distributor of the two aforementioned texts, (317) 888-7156.
The Trends
At this point we've looked at what's happened in this dual-sector industry over the past two years, and what market watchers can expect in the year or so ahead. Other questions remain: Are there notable trends that warrant closer attention, and what unique challenges and opportunities lie ahead for manufactured housing?
LAYOUT
While related to new development, contemporary manufactured home communities, both the subdivision and land lease variety, bear little resemblance to trailer parks and mobile home communities of yesteryear. Today's community features a curvilinear street layout with spacious home sites (density closer to four or five per acre vs. the eight to 10 of the past); wide streets (to handle multi-section homes); and often a full array of features and amenities keyed to the targeted home buyer/renter, e.g. cable TV, natural gas, city water and city sewer, recreation facilities -- even 18-hole golf courses. Image and curb appeal are of vital importance to all operators! Gated entrances featuring attractive landscaping and at least two flags(U.S. and state or corporate colors) are all but de rigueur. And it's increasingly common to find information centers smoke-free, and staff, if not in uniforms bearing the corporate logo, tastefully dressed and universally polite and helpful.
PROFESSIONAL PROPERTY MANAGEMENT
The preceding trend is related to the marked emphasis on professional property management at all levels, thanks in part to Wall Street pressure and just good common operating sense. Certified Property Managers can now be found at most middle and executive property management levels among the major operators. In addition, the Manufactured Housing Educational Institute regularly trains on-site managers in its Accredited Community Manager programs. And before year-end there will be an inexpensive correspondence course alternative marketed to the same property managers. The new program is based on the soon-to-be released 10th anniversary edition paperback of Mobile Home Park Management, retitled Manufactured Home Community Management.
NATIONAL POLITICAL PRESENCE
Manufactured home community owners now have a viable national political presence in the successor to the Industry Steering Committee of 1993-1995, in the MHI-based National Communities Council. A major current project for this trade group is the launching of their First in Excellence, Seal of Approval recognition program for superior manufactured home communities.
INDUSTRY-WIDE COMMUNICATION
Intra-industry communication continues to improve. While the production and distribution segment of the industry has had the Manufactured Home Merchandiser and The Journal for decades, the seven-year-old Allen Letter remains the sole source of news for manufactured home community real estate development and management. Many of the same manufactured home community subscribers attend the annual International Networking Roundtable to learn from and with their peers, and keep abreast of what is happening nationwide.
NEW IDEAS
New concepts and ideas are being tried in the manufactured home community environment. These include: senior housing with varying degrees of assisted living services; two-story manufactured homes as a possible answer to functionally obsolete rental and subdivision home sites; and the continuing acquisition of some rental properties by municipalities and homeowner association groups (i.e., ROCs or resident-owned communities).
INDUSTRY TERMINOLOGY
A final trend that has become reality is the widespread adoption of contemporary industry terminology, especially on the real estate side of the house. For example: Manufactured housing home-buyers are often residents of manufactured home communities, some living in single-section, and others in multi-section homes, all sited on land lease or subdivision home sites." No more "trailers, parks, tenants, or singlewide and doublewide coaches behind toters." The industry has certainly come a long, long way.
Industry Challenges
With all this good -- even great -- news, for the manufactured housing industry and manufactured home communities, there has to be a reality check relative to "challenges." In very abbreviated fashion these situations include:
Summary
Manufactured housing today is as close to being a glamour industry as it's ever been. Investment returns soar to almost unprecedented highs in most every sector. The U.S. consumer is being served with the best factory-built product ever produced, and professionally managed manufactured home communities are enjoying a renaissance two decades in coming. Is it little wonder then, that practitioners within the industry, and, observers on the perimeter, have widely hailed the years 1995-2005 as the Decade of Manufactured Housing and the Manufactured Home Community?
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