News & Notes Archive - April 2005
Good news trend: more MH builders offering extended home warranties
California-based Karsten Homes has just announced a ten-year limited warranty plan for its homes, adding an additional five years to its existing warranty, and making its protection the industry’s longest. This is good news not only for buyers of Karsten homes, but is another indicator the MH industry is finally getting serious about customer satisfaction. Palm Harbor Homes now offers a five year warranty, while Oak Creek Homes, a subsidiary of American HomeStar, provides a seven year limited warranty.
All HUD-codes (i.e., manufactured homes) are required by law to have a one year warranty against structural defects, including coverage for problems with plumbing, electrical, heating/cooling systems, roof and floor coverings. Beyond that, many builders offer nothing. But those who do are winning customers. Warranty coverage is a big deal, so if you’re home shopping, be sure to ask about your builder’s protection.
Karsten’s plan covers everything (including cosmetic fixes) during the first year, then for the remaining nine years covers the home for any structural defects. Palm Harbor’s guarantee is for five years. Oak Creek Homes utilizes its own service teams to cover a new home’s first year, then contracts out to a third party service company for years two through seven.
With Karsten Homes’ raising the bar, you can bet the industry’s big players won’t be far behind in offering similar protections. That’s good news for home buyers.
Going after the mainstream homebuyer with — whoa! — an MH indistinguishable from a site-built home?
I don’t know why, but the Northwest is noteworthy in the MH industry for producing manufactured homes that look more like, well, homes, than “mobile homes.” Two HUD-code builders in particular, Fuqua Homes and Discovery Homes, both of Oregon, have deliberately set out to capture a share of the 1-1/2 million mainstream home buyers (those who can afford the $200,000-or-more cost). Both companies are worthy of attention here. This month it’s Discovery:
A subsidiary of Palm Harbor Homes, who purchased the company in 2000, Discovery builds modular homes for a national market, except in the NW where it builds HUD-code homes that amazingly look just like site-built: eves all around, articulated exterior walls, 9’ walls, flat ceilings, 6/12 roof pitch, the works. During the past year, the company has shown its Buckeye model at three consumer shows and has blown away visitors. The home costs about $145,000 delivered onto your prepared site, but compared with a competing modular show model, at $440,000, the Buckeye was a show stand-out.
Discovery’s Buckeye 44’ x 60’ showstopper: 1809 sq. ft., 3 BR 2BA, wrapped porch, island cook-top kitchen, huge walk-in pantry -- $144k delivered to your foundation. Wow!
No, it’s not affordable housing. This home targets the $250,000-to-$350,000 price range for new site-built home buyers, and there is a 6-9 months gestation period, but it has a lot going for it: being factory-built its completion is far less susceptible to costly delays and at $55-to-$75 a square foot, offers a significant savings over comparable site-built homes. These folks are on to something.
I predict a terrific future for Discovery’s manufactured homes.
Where MH is hot - and where it’s not
I regularly call around the US as part of my ongoing research and to check the pulse of MH in various regions. Here’s a brief update: In general, the long-awaited recovery of the MH industry, following its near collapse in the late 1990s (please see Chap. 1 of my book) is finally here. Nationally, production is up about 15% over last year, but not across the board. The current hot spots where business is booming are: California, Nevada, Florida, and parts of New England and the mid-Atlantic states. But the Carolinas, Texas and many pockets in the Southeast-all traditional strongholds of low end, entry level MH, continue to struggle.
The Midwest region, particularly Indiana, home to Patriot and Four Seasons, are reporting strong rebounds. Four Seasons’ CEO Austin Baidas emailed me late last month to report that 2004 saw a 40% increase in production over 2003 and that “2005 is off to a great start.”
In the southern California market, where winter storms have seriously hampered site preparation activity, builders like Silvercrest nonetheless have a 30 day backlog. Expect that to double by summer. The Florida market, quite simply, is nuts following an epic hurricane season that triggered an avalanche of new MH orders. General Manufacturing of Waycross, GA, which serves that market, reports a seven week delay.
In markets where MH is hot, home buyers looking for the best price should take time to price homes from dealers outside their area (150-200 miles is not too far to drive) to make sure they’re not being sold homes at artificially jacked up prices. In weak markets, the buyer can drive a harder bargain, but again, shop carefully and compare out of area prices.
Industry watch: Slumping Fleetwood cans its CEO, second ouster in three years
Industry giant Fleetwood Enterprises, which includes a huge RV division, ousted CEO Ed Caudill on March 10th. on the heels of a dismal quarterly report that showed its MH retail sales were off a whopping 20%, largely because Fleetwood sales centers are mostly in regions where the MH market continues in a steep decline (the Carolinas and Texas being two). Since 2000, Fleetwood’s retail sales have fallen off 66%. Brought back aboard (and out of retirement) was Elden Smith the 64-year old (and very savvy) former head of Fleetwood’s RV division. Fleetwood’s MH side will slowly recover (this is a good company that makes a good MH product), but this latest development is part of the aftermath of Fleetwood’s disastrous decision in the 1990s to buy scores of independent dealerships (at way over market prices) and take on over $200,000 in debt. Interesting isn’t it, how big companies can make stupid business decisions just like the little guys (Chapter 1 in my book has the juicy details).
Zoning wars - Episode IV. Colorado rumblings, N. Carolina flap
In many state the biggest hurdle MH buyers face is zoning laws written decades ago that prohibit “trailer homes” and/or “mobile homes,” because, historically, they ruined the neighborhood. Historically, this reasoning was probably true. Today’s MH may look perfectly respectable next to its site-built brethren but that hasn’t made placing it there much easier. Examples:
In Colorado, a State government committee on March 30th, approved a bill preventing local governments from limiting where an MH can be placed in a community. Currently, local municipalities have the power to limit MH to less desirable locales. Both sides expect a fight when the bill hits the floor for debate.
In River Bend, North Carolina, on March 16th, a judge backed the city’s right to revoke a permit, mistakenly issued, that allowed an MH to be placed in the subdivision of Norbury Estates, where “mobile homes” are not allowed. The town had first issued the permit for the 2,065-square-foot, four-bedroom home because the home had a state insurance designation as “modular.” But when neighbors looked under the “skirt” and saw wheels, they complained. The city ordered the home wheeled out of the subdivision. The owner may appeal, but technically (and I’ll bet, legally), if a home arrives on its own wheels, it’s a manufactured home, not a modular home. Stay tuned...