The 2018 Home Buyer’s Outlook
Note: Annually at the beginning of the year I offer here my assessment of the manufactured housing landscape (along with a few suggestions) to help home shoppers—especially first-time buyers— better understand the market conditions they will likely face in the next 12 months. — John Grissim
The manufactured home industry in 2018
This year arrives at an interesting moment in the history of the manufactured housing industry. Here, ten years after the Great Recession of 2008, the industry has finally emerged from an unprecedented—and painful—shake-out following the financial crisis and the crash of the entire US housing sector. To give you some idea, in 2007 there were 79 manufactured home builders running 183 production lines. Today that number is 61companies (down 23%) and 130 production lines (down 33%).
These figures suggest the industry today is significantly smaller and less robust, but this impression is misleading. Prior to the recession, the manufactured home industry (MH, for short) was already facing a growing problem. Many companies found themselves burdened with way more production lines and factories than the market demanded, putting them on a shaky financial footing. Adding to this bloat of overcapacity was an overcrowded marketplace. When the recession hit, most of these overextended companies went under, or, in several instances, were bought out by stronger companies. Altogether, by the time the dust settled, 18 builders, some of them venerable names with reputations for high quality homes, were gone.
The upside is, by 2018, the MH industry is generally in much better shape, having corrected its over-capacity problem and re-sized to reflect market demand. It can fairly be characterized as run by companies that are on the whole financially stable, better-managed, market savvy, and much more customer-centric than at any time in its previous history. This bodes well for today's manufactured home buyer.
There is one development that informed home shoppers will find useful to know. Over the past decade mergers and acquisitions led to significant consolidation. The MH industry is now dominated by the three Big Cs—Clayton Homes, Inc., Cavco Industries, Inc., and Champion Home Builders, Inc.. Together the total market share of these three is about 70%. Clayton, with a share somewhere around 45% is by far the larger of the three, with Cavco in the 13%-15% range, and Champion slightly below at 12%-13%. In fact, if you count its numerous subsidiary companies building modular-code homes and multi-family dwellings, Clayton, itself a subsidiary of Warren Buffet's holding company Berkshire Hathaway, is now the largest home builder in the U.S.
Worth noting is that Clayton Homes, Inc. also owns two major banks—Vanderbilt Mortgage and 21st. Century—that specialize in retail MH loans sold through dealerships and which together account for 35% of all MH home loans. In fact, annual combined profit from the two banks significantly exceeds that from the total of homes sold from Clayton and its many subsidiary builders.
Nationally, housing (including manufactured homes, or MH in this report) is poised for continued growth in 2018. The National Association of Home Builders (NAHB) predicts that new home starts will be up by at least 5% in 2018. Economists predict an acceleration of that growth over the next two years.
Unlike the site-built housing industry which crashed with the Great Recession of 2008, manufactured housing had already experienced the collapse of its own housing bubble. Starting in 2000 when just over 250,000 manufactured homes were produced, the number declined by nearly 80 percent, and continued after the recession hit. The period 2005 to 2011was especially brutal, with total home sales dropping 65 percent, from about 147,000 to just over 50,000.
In 2011, the MH production numbers finally turned around and have continued their upward trend. In the year just ended, the number of manufactured homes produced in 2017 totaled 92,102, up from 2016's total of 81,136. These are healthy numbers, and by year's end the total could reach the benchmark number of 100,000.
MH industry's revival—key 2018 take-aways for home shoppers
With the national economy showing continued strong recovery and very low unemployment, the MH industry is once again doing very well, but the increased consumer demand means many, if not most, production lines are operating at capacity. This means longer build times for customer orders. The typical four-to-six week lead time has in many cases grown to seven-to-ten weeks or longer. In addition, many builders are experiencing labor shortages due to competition from better-paying jobs. In sum, home-buyers should be prepared for longer build times. Be sure to ask sales people about the build lead times for their homes.
Retail price ranges of new manufactured homes sold
According to figures provided by the Housing and Urban Development agency (HUD), as of December 2017 for the U.S. as a whole, the average sale price (not including land) for a manufactured home (which includes both single-section and multi-section homes) was $72,900. Single-section homes alone averaged $53,400, while multi-section dwellings averaged $91,800.
Here's a breakdown of several regions , again, using figures for December 2017). Prices are in dollars:
| Region | Total | Single | Double |
| Northeast | 76,900 | 49,200 | 100,300 |
| Midwest | 64,900 | 48,700 | 84,500 |
| South | 70,000 | 54,000 | 89,000 |
| West | 96,400 | 58,600 | 103,900 |
As these numbers indicate, prices can vary considerably by region and state. In Texas, where by far the most MH dwellings are sold, the average total for an MH home is in the $68,000 range. In California, ranked seventh in the top ten (for MH homes sold), the corresponding price is close to $112,000, a $44,000 difference.
This disparity is largely due to consumer demographics. Texas consumers, like MH buyers in much of the Sunbelt states, are lower-income, entry-level home-buyers for whom low-cost affordability is the primary concern, whereas California MH homebuyers tend to be from a higher income bracket and able to afford both upscale options and the higher quality construction features of the most popular models.
Higher retail prices in 2018?
The short answer: yes, but largely incremental. Inevitably, high consumer demand and maxed out production capacity, coupled with increased costs of building materials means a higher price tag. The regional market is also a factor, especially in Texas and Florida, given the major demand for home replacements in the aftermath of last August's hurricanes Harvey and Irma. How much of a price increase you'll encounter depends on the model and build quality. On average, figure on at least a 4%-6%.
Some recommendations on specific buying scenarios
The Grissim Buyer’s Guide to Manufactured Homes & Land contains detailed information and advice on every aspect of selecting and purchasing a home, but here are several suggestions to keep in mind:
First, I should state here a core opinion I hold about manufactured housing: while a manufactured home (or MH in this article) can be an excellent high-quality dwelling comparable to a site-built residence (and at a lower price), at least 60% of all manufactured homes built are cheaply constructed, plain looking (i.e. looks like a mobile home), show significant deterioration after five years, and if not legally tied to the land as improved real estate, will not appreciate in value and will be very difficult to sell because banks are loathe to write loans on these types of “used mobile homes.”
Having said this, I would add that I am no elitist. I will never disparage low-end manufactured homes per se, because they answer a huge need. One of the great things about manufactured housing is that it can provide basic shelter for those who otherwise would have no home at all. If properly sited and well-cared for, even the most humble single-section home can be decent affordable housing.
As for where I got the 60% number, it derives from an unscientific calculation involving my estimate of the number of homes built annually with a Grissim Ratings Guide construction rating of less than 5 (on a scale of 1-to-10, ten being the highest quality), together with my more than 15 years of researching and evaluating manufactured homes, and regularly talking to industry insiders I trust whose perspective I respect. Who knows, the percentage may be closer to 65%.
Thus, these recommendation:
1. If at all possible, restrict your home search to the remaining 40% of manufactured homes that are well-built and feature-rich.
2. Shoot for a Grissim construction rating of at least 7. Bear in mind you can start with a home model that has a 5 or a 6 rating and add options as necessary (e.g., thicker exterior walls, steeper roof pitch, higher rated insulation, double-pane windows, residential sheet rock walls, higher quality carpets, superior brand name appliances, wood cabinetry and Energy Star packages) to upgrade the construction rating to an 8 or a 9. Both my guides contain a table that breaks down construction features that can help you with your choices.
3. If the manufacturer of the home model you desire can build it to the modular code, not the HUD code (and a great many do), and you can afford the 15%-20% extra that doing so will cost, have your home built to the modular code. Here's why:
Modular code homes are built to local site-built building codes and are considered by mortgage lenders as identical to site-built homes. You'll have an easier time getting financing, and very likely at a lower interest rate, the savings from which will go a long way to paying for your higher purchase cost.
When the time comes to sell, your home will not be regarded as "a used mobile home," with the negative perception that comes with it (including a low resale price). Rather, your home will be regarded as "an existing residential home," just another real estate listing. You'll get a higher price and the buyer will have an easier time getting financing. Note: for more on what a modular home is, go to http://grissimguides.com/glossary.htm
And there you have it. If you wonder why I am so enthusiastic about manufactured housing, and why I firmly believe it is the best-kept secret in American housing, it’s because I and my wife are very satisfied manufactured home buyers who saved a bundle on our new home and have enjoyed watching our home appreciate right along with all the site-built dwellings around us.
Wishing you the best of luck with your home search.
—John Grissim