What is the Manufactured Housing Market?

By June 18, 2019Mortgage

Traditionally seen as undesirable, could manufactured housing be making a comeback?

Different from the pre-fab homes that dotted the landscape post-WW2, manufactured home assembly now predominantly takes place on factory lines rather than on-site. 
However, the notion that manufactured homes, or mobile homes, remain undesirable may be shifting in the new market. 
Here’s why:

As young people struggle to afford new construction houses or secondary market houses, the number of renters in the United States hits new records. An alternative to renting could be found in manufactured housing. 

Distribution of Renter in the U.S. by Age
By allowing new upgrades and the option of modular housing — manufactured housing has expanded to meet a new customer base. Beyond the ‘trailer park’ connotation, companies have begun producing models with upgrades such as french doors and granite countertops. 

In fact, the industry appears on track to produce more than 100,000 units in 2019, the highest in a decade. 

Manufactured Home Shipments Per Year

The industry could continue to improve for manufactured housing makers due to the Department of Housing and Urban Development’s announcement of plans to review regulations on manufactured houses. While no official changes have been made, the Trump administration’s previous records of removing regulations show promise that HUD will act the same. 

The advantage of regulation reform mainly presents itself in the ability to add new amenities to manufactured housing. The real test of manufactured housing lies in its ability to integrate itself into ‘acceptable’ housing for the majority of Americans. Mobile home parks are typically viewed negatively and zoning can often be difficult — which falls under state zoning laws. If zoning laws were more favorable, manufactured housing could reach beyond its traditional customer. 

What does this mean for banks and borrowers?

Another key area of development in relation to manufactured housing lies in Fannie Mae and Freddie Mac’s commitment to expand their loan purchases to include chattel loans. Chattel loans are key because many manufactured homes reside on leased land and classify as personal property rather than real estate. 

Chattel loans are typically more expensive to acquire than a traditional home mortgage due to higher rates and shorter terms. The industry-wide failure rate of non-mortgage mobile homes sits at around 28%, while the current delinquency rate of single-family mortgages sits at 3.4%. 

This suggests that borrowers financing manufactured homes are more likely to default than traditional single-family house borrowers. An additional concern that should be noted lies in the lack of secondary market value for manufactured homes. However, as credit boxes continue to expand, and the manufactured customer base changes, this may change as well; particularly for non-depositories. Within banks, manufactured housing loans help fulfill CRA requirements which makes them an asset. As banks prep for upcoming exams, they may begin to look at manufactured housing loans as potential areas to meet their mandatory CRA requirements. 

“Insufficient information and lack of access to manufactured home financing options are two negative factors that still affect the manufactured housing industry. To offset their impact, well-established industry participants, such as MHI, FHFA, CFPB and specialized lenders, will continue to develop buyer education programs and bring more financing solutions to the manufactured housing market. Considering that the secondary market for manufactured home loans is still limited, the success in meeting these objectives should have a notable positive effect on the entire industry”  – Triad

Pav(leen) Thukral serves as the Chief Executive Officer of Stackfolio. His experience stems from over 6 years of technical experience with the NSA, Bloomberg, and pattern recognition research with Thad Starner, the father of Wearables. Pav is a co-founder of Stackfolio and has steered it’s vision of transparency and market access since inception. He marries the deep technical talent at the company with the deep capital markets talent, and acts as the bridge that helps make that special magic work.
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Pav(leen) Thukral

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