News & Notes Archive - November 2006
In a surprise resignation, president of MH industry trade association offers departing comments that reveal ongoing problems that are keeping manufactured housing from realizing its potential. His insights are useful to home shoppers.
Last month, in a move that caught the industry completely off guard, the president of the Arlington, VA-based Manufactured Housing Institute (MHI), the national industry trade association, abruptly quit, moving on to a new job as president of another trade group, this one in the financial services sector. Chris Stinebert, who had held the post for eight years, was a well-regarded executive who had the unenviable job of trying to find common ground among interest groups that are often at odds with each other: manufacturers, retailers, suppliers, lenders and land-lease community owners (i.e., mobile home park owners). Talk about herding cats....
Not one to burn any bridges behind him, Stinebert didn’t reveal any reasons for his sudden departure other than career advancement, but I wouldn’t be surprised to learn that he had begun looking for new employment months ago following a private summit in Chicago hosted by a core group of major manufacturers and to which MHI was specifically not invited. At that meeting the builders grappled with the vexing challenge of reinvigorating an industry that lately has been limping along at an annual production rate of around 120,000 to 130,000 homes. Among the options discussed (word of which leaked out following the meeting) was disbanding MHI and adopting some other strategy to better advance their interests.
Following his departure, Stinebert, now unfettered by the constraints of his previous employers, wrote a column for this month’s issue of an industry trade magazine in which spoke his mind. In it he provided a list of actions the industry absolutely must undertake if it is ever to be anything other than a niche provider in the housing marketplace.
I want to share with you a few of the items from his list, along with my comments. Together they may help home shoppers have a better idea of how this rather odd, but promising, sector of the housing industry operates:
Stinebert: “Manufacturers must step up and take control of the marketplace. This means setting strict requirement for their retailers, including the appearances of the sales centers, acceptable business practices and ethics. Then, manufacturers need to enforce these requirements. For far too long, manufacturers have served as ‘enablers,’ permitting retailers to continue their faulty practices, lowering the bar for all competing retailers, and perpetuating a negative image.... Retailer excellence, not volume, needs to be rewarded, and questionable business practices should bring severe consequences.”
My comment: Amen to that! I recommend precisely this strategy in the closing pages of the Grissim Buyer’s Guide. The MH industry for decades has been loathe to crack down on their dealers who are ripping off their customers and screwing homebuyers on warranty service, all because they need those orders to keep their factory production lines running. That’s why, unless and until the industry cleans up its act, finding a reputable dealer is essential.
Stinebert: “Manufacturers should assume the responsibility for customer satisfaction....This means that each manufacturer should be responsible for the placement of the home and anything that needs to be repaired during the warranty period.”
My comment: I totally agree. So many manufacturers, especially those selling low end homes, just want to build the boxes, ship them to the retailers, pick up the checks and go home. And so many dealers just want to sell the box, drop it on the site and go. If GM or Ford were to do that with their cars and trucks, they’d be out of business in no time. There are many manufacturers of higher end homes who do a good job here, but the shoddy record of so many builders continues to drag the industry down.
Stinebert: Manufacturers and retailers should be more open about making pricing information more available to potential customers....It is time to stagger out of the dark ages and discard the long held philosophy that ‘an educated consumer is manufactured housing’s worst customer.’ ....The National association of Realtors and Yahoo recently reported that three out of four homebuyers started their home search on the Internet....If this industry wants to continue ignoring three-out-of-four homebuyers, we deserve the consequences.
My comment: Can you believe the majority of retailers still refuse to put sticker prices on their home models? They BS you with so many excuses why they can’t do that, and it’s insulting. And it’s true, many retailers pay lip service by saying informed consumers are better customers, but the reality is, they hate customers who know what they’re talking about because they can’t get away with their usual bag of tricks. I’ve heard stories from so many of my readers.
I wish Chris Stinebert every success in his new job. Now, if the MH industry will only take his timely advice.
Recent email: Q&A about high wind dangers
Dear John,
I am looking into buying a Palm Harbor home. I have land in Lake City Fla. I am confused and concerned about the construction. Coming from a hurricane area (Miami Fla), this is a big issue for me. I was told by the sales person that Palm Harbor homes are constructed to 150 mph wind. He gave me so much info in a short time that it only added to the confusion. Please start me in the right direction. Any help will be greatly appreciated. I am impressed with the Palm Harbor homes.
Elaine D.
Miami, Florida
Hi, Elaine,
Thanks for writing. There's good news for you: manufactured homes now being built have very high wind resistance, and are fully the equal of most all site built homes in withstanding tornados. For example, the MH homes in Florida built since 1991 (after Hurricane Andrew) have done better than site built homes, sustaining very little damage in hurricanes. This fact has not been widely reported in the media.
Here is an excerpt from the Manufactured Housing Association of Oklahoma’s informative web site. Their concern is more tornados than hurricanes, of course:
Hurricane Andrew struck the southern tip of Florida and the Gulf Coast regions of Louisiana in late August 1992 with devastating winds in excess of 150 miles-per-hour. The third strongest hurricane ever to strike the United States, Andrew was designated a Category 4. Thousands of homes, both site built and manufactured, suffered extensive damage and destruction from the force of the storm.
Within weeks of the storm, the manufactured housing industry endorsed appropriate improvements in the wind resistance/safety of manufactured homes. After many months of effort by the industry to negotiate proper improvements, the Department of Housing and Urban Development (HUD) issued revisions to the wind safety provisions of the HUD Code, which became effective July 13, 1994.
In areas prone to hurricane-force winds (known as Wind Zones II and III, according to HUD's new Basic Wind Zone Map) the wind safety standards require that manufactured homes be resistant to winds up to 100 miles-per-hour in Wind Zone II and 110 miles-per-hour in Wind Zone III. In both of these zones, the standard for manufactured homes is now more stringent than the current regional and national building codes for site-built homes located in these wind zones.
An important element in the adequate wind safety of a manufactured home is the proper installation and anchoring of the home according to the manufacturer's instructions. Installation standards are regulated on a state-by-state basis. When properly installed and anchored, the manufactured home's wind resistance is significantly improved. For each new manufactured home sold, the manufacturer must include installation instructions to properly support and anchor the home. This requirement is part of the wind storm protection provisions of the HUD Code. End of excerpt.
Elaine, your Palm Harbor sales person is mis-informed (or maybe BS-ing you). Your Florida home will very likely be built for Zone 3 conditions, that is, able to withstand winds up to 110 MPH. Not 150 MPH. At 150 MPH, no home will remain standing. Feel free to tell your Palm Harbor sales associate that if he or she doesn’t don't give you the true facts, they can't expect to earn your trust.
Regards,
John
Interview: 15 minutes with...Rob Loomis
Note: In my role as an industry observer and consumer advocate I speak with people at all levels of the manufactured home industry (MH) to gain insights I share with my readers to help them be better informed. Some I have interviewed for a one-page column that runs in an industry trade publication. In return the magazine runs an ad for the Grissim Guides. No money changes hands. I insist on this. Aside from book sales, I neither solicit nor accept a dime from the industry, and my readers have my assurance I intend to keep it that way. Here’s this month’s interview:
Rob Loomis, factory sales manager of Golden West Homes’ southern California plant (Perris, CA)
Background: Age 44, born in nearby Hemet, CA, at one time home to seven Skyline factories (three RV, four MH), several of which (on the RV side) his father managed. A self-described industry brat, “grew up running up and down factory corridors with my father.” Graduated from Hemet High School, then to an area junior college, then in ’81 went to work at a Skyline MH plant, “swinging a hammer on the line.” Two years later promoted to purchasing (“Either they saw my potential or concluded I was injury prone–I can tear a motor apart and reassemble it but when it came to nailing a wall together, blood is certain to flow”). In the mid-80s tried wholesale sales for Skyline’s Ramada MH factory and loved it. From ’86-’91 held various positions in Skyline RV and MH plants before accepting an offer from local investors to start from scratch an RV dealership, a successful four year stint (“a great opportunity, the most rewarding of my career from an educational point of view”). Then back to Skyline’s tow-ables division, selling wholesale in CA and the southwest territory until 2000 when a chance phone call from Jesse Carrasco, g.m. of Golden West and a former Skyline MH associate, recruited him to help revitalize GW’s slumping sales. Loomis is married, the father of four (two boys, two girls). In his leisure time he satisfies his “need for speed” driving a high performance dune buggy (a sandrail) on local desert dunes.
- Q: In 2000, Golden West Sales were hurting partly from some strategic decisions by Oakwood Homes which had purchased GW in 1994 and subsequently lowered the brand’s construction quality. How did you turn it around?
- A: By that time, Oakwood had realized their mistake and reversed course, allowing us a free hand. Our task was get back into the market place with a product and service deserving of the Golden West name. In late 2000 we had a plant show and introduced three new product series with designs and quality construction that were truly in the original spirit of the old Golden West. We signed up approximately 20 new retailers shortly thereafter. I was tasked with going out and establishing new relationships, improving our existing ones and re-establishing some of the older relationships once damaged. I’ve always been a relationship oriented sales person and the challenge really suited me. At the time about the only way we could supply sufficient numbers to our production line was to create new clientele. In terms of orders, we were literally day to day at the plant for nearly two years before things started to pick up. But, still, you could count on the fingers of one hand the number of days that the plant was actually idle. And by the end of 2002 we were our market situation improved significantly. For the most part we operated at maximum production capacity for close to three straight years, generating in excess of fifty million in annual sales.
- Q: Golden West has a second plant, in Oregon, that focuses more on homes on scattered private parcels whereas two thirds of your homes go into communities in central and southern California as part of park renewals. But California has a quirky twist to that. Can you elaborate?
- A: It’s quirky because so many southern California parks built in the fifties, sixties and seventies were sited on prime real estate, virtually right on the coastline, and each park space has great value. Retailer’s will pay a great deal to acquire the exclusive right to put a new home on those park spaces. That’s why an old 1970s vinyl-on-vinyl can easily sell in the tens of thousands. Typically, the park owner or manager will refer the old home that’s for sale to a retailer. The old home owner will sell it to the retailer who will pay a premium. This is sometimes referred to as a space acquisition transaction or fee, to buy the home and control the space. Those costs in turn are passed on to the new home buyer’s purchase price. That’s why a turn-key park home package, including improvements such as sidewalks, driveway, porch and awnings can easily sell for $200,000 to $300,000. But the flip side is that price is still less than half the median price of a site built home in California, which is what makes it all work.
- Q: The California housing market appears to be entering a correction. Will this affect you and how will you meet the challenge?
- A: As my boss, Jesse Carrasco likes to remind me, my job is the keep the parking lot full (laughs). Yes, in the short run a flat market will affect us because we’ll be competing with medium to lower-end site-built homes in high-density subdivisions. So we’re exploring other areas where we can grow, and one of them is big three- and four-section homes sited on private property, capitalizing on our very competitive cost-per-square-foot advantage over custom site built. This is where our close relationships with our retailers pay off. We can go to them and say, we need this, or let’s turn the wick up there with this product idea to help keep our production going and they react. So our loyalty to them pays us back. But over the long term, I’m very optimistic. As our product continues to improve and the marketplace fuels innovation, I see our industry in California merging into housing in general, with HUD code homes potentially becoming a popular option for developers of high density subdivisions, placing them on permanent foundations.
- Q: Interestingly, California requires HUD-code homes to be set on a permanent foundation to be eligible for a conventional home loan. Lenders seem to like this. Your thoughts?
- A: I feel it’s a terrific policy. I firmly believe that that is why the UBC code (Universal Building Code, for modular homes) hasn’t had a huge impact in the California market and helps with the over-all image of manufactured housing in general. A lot of lenders who have previously shied away from manufactured housing will continue to enter our market and compete with other lenders. True, permanent foundations about double the set-up costs of the home but the over-all value and advantages gained are more than worth it.