Here’s a common sight in much of America – becoming more common every day. It’s the transport of a new mobile home from the factory to its new geography inside a mobile home park or on raw land. The sales of new mobile homes are increasing virtually every month, and have grown nearly 100% from their all-time lows about a decade ago. But what is fueling this trend?
More than 50% of all new home orders are from park owners
One interesting fact is that the majority of new mobile home sales in the U.S. are not coming from the end consumer, but from mobile home park owners who are striving to fill vacant lots. With the average occupancy running at around 80% in mobile home parks throughout America, the net result is that there are tens of thousands of lots yet to be filled, and that gives manufacturers a steady stream of new orders.
Better quality product and pricing
Another reason that mobile home sales are increasing is that the manufacturers have dramatically improved their product and price points. Much of this progress is due to the efforts of Warren Buffett’s Clayton Homes, which has created floorplans and finishes that rival the best of stick-built and Class A apartment offerings, but at a fraction of the price. The efficiency of mobile home factories is legendary, with the Clayton Wakarusa plant, for example, producing 11 homes per day with only one barrel of trash (carpet remnants, wood pieces, etc.) per home.
Recent natural disasters
The advent of Hurricane Harvey – and similar weather events – have increased home ordering by FEMA and related governmental groups. For example, post-Harvey the government ordered practically all industry productions for several weeks. The number reflected in mobile home manufacturing include these purchases.
Baby Boomer effect
There are 10,000 Baby Boomers retiring in the U.S. each day – and a huge number of them are focusing on down-sizing. This has materially impacted mobile home sales for years now, although it seems to be picking up momentum and more Boomers are hitting retirement age. This phenomenon will last for at least another decade (the last year Baby Boomers to be born was 1964, which won’t turn 62 until 2026).
Potential loan assistance from Fannie Mae in 2019
One item that has huge potential to increase new mobile home sales – but has not taken effect yet – is the loan assistance program from Fannie Mae that is to be launched in 2019 under the Duty to Serve law. This rule requires the government to aid those of lesser income, and that will result in Fannie Mae mortgage assistance to the capital markets for mobile home mortgages beginning next year.
Mobile home manufacturing and sales have been building momentum each month for several years. The reasons are not speculative, but simply the byproduct of several megatrends, coupled with the huge advancements in product design and pricing. We anticipate to see these gains continue for years to come.