News & Notes Archive - November 2009
Latest Ratings Guide Updates reflect continued industry turmoil, but amid bankruptcies and consolidations, 2009 continues to be very much a buyer’s market.
This month marks the posting here of the latest Updates & Revisions to The Grissim Ratings Guide to Manufactured Homes. The addendum amounts to over a dozen pages of new and revised manufacturers’ listings, available as a PDF file (requiring the free program, Adobe Acrobat Reader, to open) and is exclusively available only to purchasers of the Guide.
You can obtain access by simply clicking on the Ratings Guide Updates tile in the left column of the home page, then keying in the answer to a question, the response to which can be found in your copy of The Grissim Ratings Guide. This will take you to a link where you can quickly download the document to your desktop. The file has been created in the same two-column format as the book. I recommend you print out the file and keep it in your copy of the Ratings Guide for easy reference.
I’m pleased to say that the guide and its updates together comprise the most comprehensive, up-to-date and authoritative listings of the manufactured home marketplace found anywhere. This also explains why the guide, in addition to its usefulness to home buyers, has become an essential resource book for professionals throughout the North American factory-built industry (end of commercial).
This year has been quite brutal for the manufactured home industry. Five of the nine companies listed as having gone out of business, some of them long-established and highly regarded, did so in 2009. The number of factories nationally producing HUD-code homes has steadily declined. From a total of 175 this time last fall, the number has declined to 143.
At this writing, I don’t foresee a major industry rebound in 2010, but current indications are manufactured housing has finally reached bottom and is bouncing along. To borrow a recession buzz phrase, Flat is the new up.
You’ve read a lot about the forces that are working against a housing rebound, but less reported are other forces quietly adding to a pent-up demand for housing. For example, each year the growing U.S. population generates a need to create about 1.1 million new households. That’s a lot of housing demand that’s been backing up for the past year or two, so look for a steady solid improvement next year.
For homebuyers, the upside is the retailers who have survived this very challenging downturn have done so because they are well managed, experienced, and have a lot of satisfied former customers who recommend them as reputable, reliable and committed to customer satisfaction.
These retailers also understand that money is tight and they must offer their homes at very competitive prices. Yes, a lot of weaker dealers have gone out of business, but there is still plenty of competition remaining for your business. Interestingly, the retail price of manufactured homes, averaging around $64,000 nationally, has remained fairly stable in recent years. There hasn’t been a significant amount of pressure on the prices of building materials such as lumber and fixtures. Good luck!
Champion Enterprises, Inc. declares bankruptcy, vows to complete restructuring in four-to-five months, then sell the company at a court-supervised auction. Meantime, business as usual.
On November 15, 2009 Champion Enterprises declared voluntary Chapter 11 bankruptcy. This venerable, well-known company, founded in 1953, has long had a major presence in manufactured housing. It owns a dozen subsidiary brands/companies in the US, with 22 plants in 13 states, plus three plants in Canada and a U.K. modular company. Champion is an excellent company that makes fine products, but its principal problem is, it has too much debt, $317 million, in fact. With the housing industry still in the tank, the company couldn’t keep up with its interest payments, and it literally ran out of cash.
The morning after the bankruptcy was filed, I interviewed Champion’s CEO Bill Griffiths for my newsletter, The Grissim Report. Mr. Griffiths was upbeat, telling me Champion intended to get through bankruptcy quickly, emerge no longer burdened by its heavy debt, then, next February or March (2010), sell itself in an auction.
I wish him and Champion every success, but after browsing the court records filed the first day, I don’t share the CEO’s optimism. It appears the banks are insisting that Champion sell substantially all its assets sooner rather than later. This may entail selling off parts of the company fairly soon, not waiting to sell Champion in its entirety at auction. One promising note: Champion’s current lenders have ponyed up $41 million to ensure going forward that the company can operate normally and pay its workers and suppliers.
Until things sort themselves out, the reality for home shoppers is that this is a major manufactured home builder in bankruptcy, and I must in good conscience advise home shoppers not to purchase a home from Champion or any of its subsidiaries (in the US. there are twelve subsidiary HUD companies) until the situation has clarified. For starters, homebuyers who buy one of the company’s homes now will have no assurance that warranty service will be available.
Note: The Grissim Ratings Guide has the full listings of all Champion subsidiaries.
First–Time Home Buyer Tax Credit extended until April 30, 2010 with expanded income limits and more opportunities to use the tax credit towards a down payment
Early this month President Obama signed into law an extension of the Worker, Homeownership, and Business Assistance Act of 2009 that extended the First –Time Home Buyer Tax Credit (FBTC) of up to $8,000 for qualified first time home buyers purchasing a principal residence. And, yes, that residence can be a manufactured home. It can also be a houseboat if it’s your principal residence.
This is great news, and you’ve likely already read about the program’s principal details. But many people haven’t become aware of provisions that are really helpful to people who would like to use some or all of their tax credit towards a down payment (called monetizing). Being able to do so is not a slam dunk, but there are programs out there to assist lower income homebuyers looking for affordable housing, and you may fit into one.
The best Internet site I’ve found about the FBTC is one created by the National Association of Home Builders, the big industry trade group. The site– federalhousingtaxcredit.com –has an excellent page of frequently asked questions. Here are a few excerpts to get you started:
- I read that the tax credit is “refundable” What does that mean?
- The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
- Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
- Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties. In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a down payment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs.
- HUD is now allowing "monetization" of the tax credit. What does that mean?
- It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain down payment and closing cost expenses. under HUD’s guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.?? Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent down payment requirement. In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and down payment costs above the 3.5 percent down payment that is required for FHA-insured homes.
Note: To access the full FAQs page, go to:
http://www.federalhousingtaxcredit.com/faq1.php