The Manufactured-Housing Industry Sees an Opening
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The Manufactured-Housing Industry Sees an Opening

Some lenders and advocates think factory-built homes are a solution to the housing crunch.

By Ben Eisen
Mon, Nov 22, 2021 10:41amGrey Clock 4 min

Elvira and Bobby Guerra spent three years searching for a home to buy in southern Texas, but their real-estate agent repeatedly showed them houses that were too expensive and still in need of work.

Late last year, they went to see a house they found on Zillow and were surprised to learn it had been built in a factory. They liked the large backyard and that it was in a new 21-home subdivision in the San Antonio outskirts of Seguin. The first-time home buyers closed in February.

“We were very impressed with it being a manufactured home,” said Mrs. Guerra, a homemaker. She lives in the three-bedroom house with her 18-month-old daughter. Mr. Guerra, a welder, died from Covid-19 in August.

Housing lenders, developers and advocates think they have found a winning formula by building homes in factories that look like site-built homes but cost less. More developments like the one in Seguin could help alleviate America’s housing-affordability crisis, they say.

“We have a lot of teachers, first-time home buyers and folks downsizing after retirement,” said Dustin Arp, managing partner of Spark Homes LLC. It developed Cordell Oaks, where the Guerras bought their home. “Maybe they used to qualify for site-built housing but no longer do.”

A new single-family home built on-site sold for an average of about US$392,000 in 2020, or about $309,000 excluding the cost of the underlying land, according to government data. New manufactured homes cost US$87,000, not including land.

The industry is on pace to deliver more than 100,000 new manufactured homes this year for the first time since 2006, according to the Census Bureau. The Biden administration has pointed to manufactured housing as one solution to the shortage of affordable homes.

Still, manufactured-home makers face a battle convincing prospective buyers that their homes have solid construction and safe financing choices. The industry boomed in the 1990s, when dealers pumped up sales by offering unrealistic loan terms to people who couldn’t afford them. Home shipments spiked to nearly 400,000 a year. Many borrowers defaulted and lost their homes, and many lenders shut down.

During the pandemic, households living in manufactured homes of all types have been about twice as likely to fall behind on rent or mortgage payments as the broader population, according to an analysis of census data by Alexander Hermann, senior research analyst at Harvard University’s Joint Center for Housing Studies. About 19% were behind in the third quarter of this year.

Those occupying manufactured homes were also more likely to report losing incomes during the pandemic than other households, Mr. Hermann said.

In many ways, manufactured housing remains a world apart from the site-built housing market. The homes are constructed in factories and shipped to their destinations. They are traditionally sold in dealerships that might offer limited financing options. In those cases, a person might buy a manufactured house as a piece of personal property, like a car, rather than getting a mortgage that tethers the house to underlying land.

Some 42% of manufactured homes are purchased with loans secured by the home but not the plot of land, according to the Consumer Financial Protection Bureau. Those loans typically have far higher interest rates. Owners can also be at greater risk of losing their homes if they don’t own the land.

In recent years, Fannie Mae and Freddie Mac have made it easier for lenders to extend conventional mortgages on certain manufactured homes that have features like porches or garages built on-site. Buyers in Cordell Oaks get mortgages like these, secured by both the house and the land.

Missy and Mike Campbell moved in down the street from Mrs. Guerra this spring. They had camped out in their recreational vehicle for months while searching for a new home. They obtained a Fannie Mae-backed loan through Guild Mortgage Co., where Mr. Arp is also the local branch manager.

The Campbells paid about $238,000 for their house, and the mortgage has an interest rate under 3%, Mrs. Campbell said. The two families have a friendly competition going for best holiday decorations.

Skyline Champion Corp., the builder supplying the houses at Cordell Oaks, is also working on subdivision projects in California and Colorado for these higher-end manufactured homes that are eligible for conventional mortgages, according to Dave Busche, a business development director at the company. Spark Homes, the Cordell Oaks developer, is starting on another 51-unit subdivision nearby called Clara Ridge Ranch. Clayton Homes Inc., a unit of Warren Buffett’s Berkshire Hathaway Inc. and the country’s biggest manufactured-home maker, said it is working with seven developers on similar subdivision projects.

These higher-end houses still account for a tiny fraction of new manufactured homes. And manufactured homes have long accounted for about 9% of new single-family construction, according to the National Association of Home Builders. Manufacturers say that many local zoning codes don’t allow manufactured houses, and that local officials can misconstrue them as trailer parks. Supply-chain bottlenecks and labor shortages have also slowed production across the industry.

Builders and developers say they are helping people who might otherwise be locked out of homeownership. New starter homes are scarce. Only about 21% of new site-built homes sold in September were priced under $300,000, according to the Census Bureau, down from 35% of sales a year earlier.

Guild Mortgage, a large manufactured-housing lender, recently purchased four plots of land in Paradise, Calif., which is in the process of rebuilding from wildfires.

The company plans to install manufactured houses built by Clayton. Then it will open them up to residents and policy makers to tour. Eventually, Guild will sell them to Paradise residents.



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They Were About to Move In When the Ocean Almost Washed Away Their New Home

Gail and Ron Fink’s property in Jupiter Inlet Colony sustained major damage during an unusually windy day. ‘The whole backyard is shot. All the landscaping is gone.’

By E.B. SOLOMONT
Fri, Feb 23, 2024 8 min

Gail and Ron Fink weren’t home the day the ocean swallowed their backyard.

The Florida couple, who are in their 70s, were a few miles away on Feb. 6—an unusually blustery day in the Sunshine State—as waves pounded their beachfront property in Jupiter Inlet Colony, sweeping sand, dirt and trees out to sea. When it was all over, the Finks’ newly-built, roughly 10,000-square-foot home was intact; so too was their free-form swimming pool, improbably balanced on exposed concrete-and-steel pilings.

“That’s what saved the whole thing,” said Ron, founder of an air- and-water purification company. “The pilings are holding up the house and pool.”

Gail and Ron Fink recently finished building a roughly 10,000-square-foot home. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Drone footage and pictures from local photographers and the Finks’ builder show the severity of the destruction, which left their pool suspended in the air, with pipes protruding from the earth. Town officials said erosion claimed 7 to 10 feet of sand and created steep drop-offs in front of about half-dozen homes, including one belonging to Kid Rock , the rapper-turned-country rocker, who paid $3.2 million for the property in 2012. Conair heiress Babe Rizzuto also sustained damage to her property down the street, which she bought for $6.3 million in 2015 and currently has listed for $22.5 million, according to Zillow.  Neither responded to requests for comment.

But the Finks house, located just past the end of a granite revetment wall—a kind of sea wall—bore the brunt of the heavy wind and waves.

 

“The whole backyard is shot. All the landscaping is gone,” said Ron. Also gone are fully matured Palm trees and an ipe-wood deck. “It’s out floating in the ocean someplace.” Ron is self-insured and the repair work will be quite expensive. undefined

A New Jersey native, Ron is an engineer by training who worked at nuclear-testing sites in California and Nevada before moving to Florida in the 1980s. He is the founder of RGF Environmental Group, which makes air- water-and food-purification systems.

For almost 40 years, the Finks—who have three adult children and eight grandchildren—have lived in Admirals Cove, a gated community in Jupiter about 5 miles from their new house. They paid $180,000 for the Admirals Cove lot in 1987 and built a roughly 6,000-square-foot house, Ron said. The Finks also own homes in the Cayman Islands and Bahamas.

Until now, the Finks have lived in Admirals Cove, about 5 miles from their new house. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Ron said they began looking for property in Jupiter Inlet Cove years ago. “It’s a neat place, just a closed little colony right on the ocean, low key and quiet,” he said.

About 20 miles north of Palm Beach, Jupiter Inlet Colony is at the southern tip of Jupiter Island. The town, founded around 1959, has approximately 240 homes and is surrounded on three sides by water—the Atlantic Ocean, Jupiter Inlet and the Intracoastal Waterway. Long a destination for wealthy homeowners, homes in Jupiter Inlet Colony tend to trade for between $2 million and $5 million, although one sold for $18.6 million in January, according to real-estate brokerage Redfin. Last year, a home on the Intracoastal sold for $21.4 million, a record for the town.

In 2020, the Finks paid $4.9 million for a vacant beachfront lot and subsequently built a coastal-style house with a copper-and shake-style roof, covered loggia, pool and outdoor fire pit. “You know, it’s kind of a dream home,” Ron said. “We have built quite a few homes, but this is the end of the line for us, hopefully the last one.”

He said the property originally belonged to the singer Perry Como, one of the town’s first residents. A prior owner demolished Como’s house, and when the Finks bought it, there were concrete-and-steel pilings sticking out of the ground.

Ron Fink said he never removed about 60 pilings, he simply added roughly 30 more. “Now I’m glad I did,” he said. (Pilings are based on the design of a house, so Ron retained some pilings that he didn’t necessarily need.)

John Melhorn of design-build firm Thomas Melhorn, which built the house, said the Finks were a final review away from obtaining a certificate of occupancy when the backyard was destroyed. “They were right there at the goal line,” he said.

The Finks’ house and pool are standing on about 90 concrete-and-steel pilings. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Melhorn said the erosion began in late October amid unusually high winds and ocean swell. During the first week of February, sand beneath a row of sea grapes that stabilized the dunes between the house and ocean began to wash away. By the evening of Feb. 6, the plantings disappeared. The yard was gone by the next morning.

Melhorn said a pre-existing, low wall between the ocean and house—described as a cinder-block retaining wall on land surveys—also washed away, as did a walkway and steps to the beach. But he said the 2-foot-high wall was less of a retaining wall and more like a curb between the street and sidewalk. In this case, a prior owner used it to hold sea grapes back from encroaching on the property. The Finks replaced the wall with decorative stone, now lost to the ocean. An outdoor fire pit is still there, cantilevered over the ocean. “We tried to pull as many things out as we saw the erosion coming, but we lost a lot,” Melhorn said.

In Florida, erosion is increasing because of more frequent, more severe storms and sea-level rise, said Cheryl Hapke, a research professor at the University of South Florida and the chair of the Florida Coastal Mapping Program. But she said it isn’t just hurricane-level storms that cause major damage. “One thing I have found about barrier islands [like Jupiter Inlet Colony] is that sometimes a series of smaller events can have as big an impact as a major hurricane,” she said. “But people get caught off guard. It’s something they don’t think of.”

In Jupiter Inlet Colony, longtime residents said this month’s erosion is the worst the area has seen in years, possibly ever.

Mayor Ed Hocevar, who has lived there for 17 years, said it has been a particularly cool and challenging winter with an abnormal number of Nor’easters. On Feb. 6, local news channels warned of high winds, with gusts between 40 and 50 miles an hour. (There were also reports of an earthquake off the coast that week, causing high waves.)

Since the 1980s, Jupiter Inlet Colony has had a granite rock revetment wall that extends from the northern end of the community past 11 oceanfront homes. “But we’ve got 28 homes along the beachfront, so it isn’t complete,” Hocevar said. “Where the wall ended is where the significant damage occurred.” Hocevar said he doesn’t know why the wall wasn’t completed, although local lore is that homeowners building the wall ran out of money.

Last week, the town hired a local mining company to bring in 7,000 tons of sand to replace what washed away. Hocevar said it would cost about $500,000, which will come out of the town’s reserve fund. Long term, he said, extending the revetment wall isn’t a strong possibility.

Hapke, the coastal geology expert, said that in recent decades, sea walls and hardened structures have fallen out of favor as scientists discovered they are detrimental to the environment around them. “Storm water wants to flow, so it will redirect water to the area without a sea wall,” she said, adding that the most ideal long-term solution is to move homes away from the coastline.

 

Hocevar, 67, who has been mayor of Jupiter Inlet Colony for about a month, said the town is working closely with the Department of Environmental Protection on its response. He said the DEP’s recommendation, should erosion like this occur again, is to bring in more sand. Hocevar emphasised that the community is rallying together. “Think about it as a fortress and your wall has been breached,” he said. “You want to protect your neighbourhood and that’s what we’re trying to do here.”

Holly Meyer Lucas of Compass, who represented the seller when the Finks purchased their property, said Jupiter Inlet Colony is a “special little enclave” where sales exploded during Covid. “Listings sell after a day or sell off-market,” she said.

Lucas said the consensus among local real-estate agents is that property values will hold, despite the erosion. “I think this is a really rare, weird, fluky event,” she said. “I’ve sold everywhere up and down the coast and I’ve never heard of anything like this.”

The couple were close to getting their certificate of occupancy for the newly-built home. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Babe Rizzuto, whose house is two doors down from the Finks, listed her house for $24.5 million in December 2023 and cut the price to $22.5 million on Feb. 6, according to Zillow.

“She’s going to continue to sell,” said Milla Russo of Illustrated Properties, who is marketing the property with her husband, Andrew Russo. “Even though the timing isn’t great, it is what it is.”

Russo said there has been erosion in the past, and during hurricanes residents of Jupiter Inlet Colony are the first in the area to evacuate. But in general, people are not preoccupied with the weather. “Maybe because we live here, when the hurricanes come, we all have hurricane parties. We go to people’s homes and we barbecue and grill. Of course we’re careful and we lock up and all that, but weather is weather,” she said. “We’ve never been terribly scared.”

(The Russos were also involved in selling the Fink property. However, in 2020 the closing agent on the deal, Florida-based Eavenson, Fraser & Lunsford, PLLC, sued Milla Russo and Illustrated Properties as part of a commission dispute. The seller, Michael Cantor’s Range Road Developers, was named as a defendant and cross-plaintiff in the suit, in which a judge ruled in favor of Eavenson, court records show. Milla Russo declined to comment on the suit. Eavenson declined to comment beyond the judge’s findings and Cantor did not respond to requests for comment.)

Ron was also matter-of-fact about the state of beachfront living. Bring a life jacket, he jokingly told a photographer who inquired last week about taking his picture.

However, the Finks are facing weeks of costly repairs. Although the town is bringing in sand to replace the decimated beachfront, the couple is self-insured and will be on the hook for the cost of rebuilding. Several major home insurers have pulled out of Florida, and Ron said insurance on the house would have cost $100,000 a year. Now, he estimated they could face about $1 million worth of repair work. “We gotta eat it,” he said.

The couple, who was supposed to move into the house this month, has put those plans on hold—for now. An engineer recently inspected the property and deemed the house safe, Ron said. “We’re doing wallpaper today,” he said. “We can put it back together again.” The patio and pool area, meanwhile, are roped off while the area underneath is backfilled with sand.

Ron said being near the ocean makes it worthwhile. “I just love the ocean, we both do. It’s important to us,” he said. “It isn’t easy to look at, but I’ve been through a lot worse.”

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