Kanebridge News
Share Button

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, 2021Grey 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.

MOST POPULAR

Interior designer Thomas Hamel on where it goes wrong in so many homes.

Following the devastation of recent flooding, experts are urging government intervention to drive the cessation of building in areas at risk.

Related Stories

The waterfront residence is one of Port Stephens’ finest homes.

By Kanebridge News
Fri, Aug 12, 2022 2 min

In the coastal township of Salamander Bay — nearby to Port Stephens — comes a unique home crafted to take full advantage of unbroken ocean vistas across three levels.

With one-of-a-kind flair, the stunning 5-bedroom, 3-bathroom, 3-car garage home of 52 Randall Drive Salamander Bay is nestled on a private 577sqm plot, optimised through intelligent design to take advantage of the Port Stephens landscape and lifestyle.

Within the home sees the typically coastal textures of natural oak floor and timber feature walls take hold while stone and tiled adornments add layers of luxury.

The open plan living, kitchen and dining areas incorporate a fireplace and near floor-to-ceiling glass that opens to create a seamless indoor-to-outdoor dining and entertaining space on the home’s top floor.

The heart of this area is the kitchen, centred around a marble-topped island, state-of-the-art European appliances and an attached bar area, with built-in refrigeration, accompanied by a butler’s pantry.

Also here comes a grand outdoor spa, central to the balcony, while another outdoor entertaining area with a pizza oven is found on the middle floor.

Downstairs once again comes a second living space replete with the perfect wine cellar — cooled by the natural rock foundation of the home — offering an array of entertaining options

Of the home’s accommodation comes a private and luxurious master retreat with expansive ocean views, a walk-in wardrobe and an ensuite, here, speckled with grey terrazzo tiling and timber joinery vanities.  A further four bedrooms are found throughout the home along with two family bathrooms rounding out the offering.

Less than a five-minute walk from nearby amenities of shops, restaurants, cafes and beaches the home offers the best of the Port Stephens area.

The listing is with PRD Port Stephens’ Dane Queenan (+61 412 351 819) and Erin Sharp (+61 499 912 311) and is heading to auction; prd.com.au