Regardless of price point, factory-built homes are the cost effective way to create quality housing. Based on factory built housing's indisputable cost advantage, factory built homes should increase market share compared to other forms of housing.
The increase in manufactured home shipments occurred every decade but the last one. The billions lost in conventional home mortgages the last ten years was a direct result of government policies that encouraged the purchase of houses without regard to affordability. As rational standards are again applied to obtaining housing, manufactured home shipments will likely increase.
Manufactured home community owners who have embraced rentals are having no problem finding customers for those rental units. The lack of barriers to entry into rental homes encourage increased occupancy of rentals.
Rental units solve the down payment issue that so many working families otherwise cannot overcome. Imagine how difficult it is for a young family of four to save $6,000 on a family income of $50,000 to $70,000 per year. This challenge prevents countless young families from purchasing homes.
Down payment is just one hurdle to home ownership. The second hurdle is credit score. Many people have scarred credit as the result of making bad housing choices in the past.
But a person with bad credit who moves from a $300,000 house to an $80,000 house should have no problems making the payment if their monthly income is unchanged.
Current rules and regulations may prevent financing that buyer. Renting provides that person with a manufactured home they can easily afford while they repair their credit.
Our cost advantage as an industry over conventional housing is substantial. Apartment construction averages $200 per square foot, depending on the market. We can buy communities for $40,000 per site and add a $40,000 house creating almost 1,000 sq. ft. of brand new housing for $80 per sq. ft.
If an apartment owner needs rent of $14 per sq. ft. we can operate with rent of only $7 per sq. ft. That means where they charge $1,400 per month, while we can charge $700 per month. Clearly we benefit the customer and society. UMH's 92 percent – and steadily increasing - rental occupancy demonstrates that when the regulatory barriers and down payment barriers are removed the consumer accepts our product.
The customer appreciates and accepts our appealing home product based on their cost benefit analysis, the enhanced privacy and other factors.
The issue becomes what will bring more buyers back to factory built homes? One answer is a stronger economy. When wage earners feel more secure in their jobs, more will buy homes. When wage earners earn more money they will have the down payment for our homes. When demand increases prices for pre-owned manufactured homes, repossessed homes and new homes will all rise.
As occupancy in properties increases and waiting lists for residency return, don't be surprised when people who bought during the last ten years make money on their homes. That's the law of supply and demand. People talk, so word will get out that manufactured homes are a good investment. As prices of all housing rises, it will become more and more obvious how cost competitive factory built housing is. Sales will increase.
The Other Big MH Issue...
In order for UMH to minimize the time required to fill our 2,000 vacant sites, we would like to see an industry-wide marketing and public relations campaign. UMH believes all legislative problems affecting our industry are due in part to our industry not marketing the benefits of our industry.
How can anyone be against increasing the quality of housing for families with children, the elderly, those with mobility issues, and all people who need housing?
We as industry professionals know the benefits of our product, just as Steve Jobs knew the benefits of personal computing. We need to sell America on the benefits of factory built housing. Steve Jobs sold America on the benefits of Apple products by employing a major national advertising firm.
One of the people at that firm was Ken Segall. I am looking forward to introducing Ken Segall, author of Insanely Simple, and the person who put the “i” in iMac, at the MHI national convention.
Great products do sell themselves. I know that because of our success with rental homes.
But we still need to sell regulators, bankers, zoning officers, and people who otherwise will never see our product on the beauty and benefits of manufactured homes.
Yes it’s as simple as getting people to visit our product. But we need to know how to do that. Our mission is complicated by the fact that most of us have never seen a picture that really does the factory-built home justice. Our house is a home.
When the potential customer brings their family into our home, it becomes easier for them to visual as their home, and we end up with more leases and sales.
But we need to bring that customer from their current residence into our sales center for that to happen. I’m looking forward to the MHI Congress and Expo in Las Vegas in April, and hearing from Ken how we can simply create the best marketing.
by Sam Landy