You only have to go back to January 2021 to get a 30-year home mortgage of 2.74%. But with the advent of some of the dumbest governmental policies since Jimmy Carter the 30-year home mortgage has now broken the 6% barrier and is on the way to approaching 7%. While that’s historically about the norm (the 1972 mortgage rate was 7.28%) it’s going to be a huge shock to an America that has been enjoying quantitative easing and low rates since 2008. What will be the impact on this doubling of home mortgage rates for the mobile home park industry?
Loss of the pricing advantage that single-family home mortgages have held over mobile homes
When you bought a mobile home in 2021, the interest rate on the mortgage was typically between 8% and 10% while single-family mortgage rates were 2.74% -- no comparison, right? However, now the mortgage rates are between 6% and 7% on single-family and 8% to 10% on mobile homes, so that pricing advantage has pretty much evaporated. And the monthly payments on the single-family home with the “double” mortgage interest rate dwarf any mobile home in any market in the U.S.
So much for all those articles on what great investments single-family homes are vs. mobile homes
In interview after interview over the past few years, woke journalists have tried to argue that mobile homes are for “chumps” as they do not have the same price appreciation as single-family homes. Well, now that single-family home mortgages have doubled you can say goodbye to U.S. home appreciation. Of course, the truth was always that mobile homes did not have to appreciate to be a good purchase for the consumer as the savings far exceeded any needed price appreciation to be a terrific value. At the same time, the new “chumps” are those who depended on the appreciation of single-family homes which will not be going up any more now that mortgages have doubled.
Higher demographic customers who would not look at “trailer parks” before
The mortgage on a $250,000 single-family home is now around $1,700 per month at a 6% interest rate. That’s going to force many people who wanted to buy those type of houses needing to find a lower-cost detached alternative. Mobile homes are the only option to these consumers. As a result, there will be a new breed of mobile home park customer that has higher credit scores and higher down-payment funds. And that will allow for the new, higher cost of single-wide homes that have suffered from inflation since the pandemic.
Higher rental rates for all forms of housing
Higher mortgage rates for single-family homes will usher in higher rental rates for single-family homes. It’s just a fact of life that businesses will charge rents that are roughly equivalent to or higher than the cost of home ownership. And higher single-family homes prices and rents will fuel higher apartment rents – which recently topped $2,000 per month on average nationwide. And higher apartment rents result in higher mobile home park lot rents. That’s just the cycle of life when it comes to housing and rents. Mobile home park owners will profit from higher rents, just as apartment owners will.
Single-family mortgage rates have more than doubled. The single-family home industry is screwed. The mobile home park industry, on the other hand, is a big beneficiary from this reality. Higher single-family home mortgage rates will result in reduced competition for park owners, who will enjoy higher rents and better-quality customers as a result.