Home appreciation. It sounds good, right? It’s a given, correct? Well, not so fast. The Associated Press tried to claim that mobile homes are a bad investment because they do not appreciate. Is that a fair assertion? In this week’s Mobile Home Park Mastery Podcast we’re going to discuss this single point that the Associated Press simply can’t come to grips with despite the fact that it’s economic nonsense.
Does anyone remember the year 2007? Single-family home prices in that year averaged $322,100. Then you fast forward to 2011 and home prices are $259,700, which is a $63,000 loss if you'd owned a home in 2007 and you went and sold it in 2011. Then in 2013, prices finally got back to where they began in 2007, but you would've had to hold your home for seven years just to get your money back. Now in 2019, single-family home prices average $378,700. Two observations. Number one, home prices in the United States do not always go up. Observation number two, what do you do if you don't have $378,700? What if you could only afford 10% of that? What if you can only afford 1% of that amount for housing? You see, investing in house is a luxury, yet living in a home is a necessity.
This is Frank Rolfe for the Mobile Home Park Mastery podcast series. We're talking about the Associated Press and the recent articles they've brought out regarding mobile homes, and more specifically, the fact they think mobile homes are a lousy investment and therefore must be a lousy place to call home. They've written a whole string of articles that all were unleashed on the earth over the last 30 to 45 days on this topic. So I thought it'd be interesting to really put a magnifying glass out there and see, are those reporters correct? Are mobile homes in fact a bad investment for the consumer? Well, let's first start off with an assumption. Let's assume you can afford to spend roughly $800 per month on a three bedroom dwelling. That's your budget. That's about $9,600 a year. According to the United States government, to afford 9,600 a year, you'd have to earn about $30,000 a year.
$30,000 a year is about $15 an hour. As we all know, there's a lot of Americans living roughly 20 to 25% between the price point of minimum wage, 725 an hour and $15 per hour. In fact, it's one of the fastest growing groups of employment. Virtually 50% of every job created since 2007 pays $15 an hour or less. So it's a big segment of our population. So that's your budget, $800 a month. Now on the one hand, you can buy a mobile home in a mobile home park. That home is going to cost you $800 per month, which includes lot rent for the first 10 years and then the home is yours. Or option B, you can rent an apartment if you can find one. You won't be able to find hardly anything in apartment world as three bedroom for 800 bucks a month. The US average is 1200 a month and that's for a two bedroom. Most of the markets we serve, the three bedrooms are around $1,500 a month.
But just for sake of argument with the Associated Press, I will pretend, which I know doesn't exist, that you can find a suitable three bedroom apartment for $800 a month. Of course it'll be a class C building in a terrible location, but nevertheless, let's just proceed to look at this strictly economically. Now, what will you spend over a 20-year horizon? On the mobile home, for the first 10 years, you'll spend $800 a month. That's $96,000 over a 10-year horizon. But for the second 10 years, you're only going to spend 400 a month, because now the home is yours and all you have to pay is a lot rent. So the second 10 years would cost you 48,000 bucks for a grand total of $144,000 spent in housing over 20-year period. But let's look at the apartment. You could rent that apartment for 20 years, but that will cost you $192,000. So what does it mean?
It means you save $48,000 over a 20-year horizon by buying the mobile home as opposed to renting the apartment. Now, does that parallel what happens if you spent $378,000 on a single-family home? Probably not, because again, the issue is not, can you invest? The question is, can you put a roof over your head within your budget? In fact, if you read a lot of the most recent articles right now on single-family homes, they lament the fact that people aren't investing more, investing less, and the interest rate is down to a smidgen. As a result, they assume there's a 2.39 greater advantage, in all, just endless malarkey. But that's great if you're rich enough to buy one of those houses. But for many Americans, probably a third of the entire US population, they simply can't even get into that game. So, what does it mean? It means you Associated Press is basically advancing a false narrative.
There's an old Spanish proverb that says, "With the high and mighty, always a little patience." Which means when you have plenty of food on the table, roof over your head, gas in your car, you could withstand a lot of the things that life may throw at you. But that's not true for many mobile home park customers. They simply don't have that luxury. Apparently, the Associated Press doesn't understand that. It would be no different than if the Associated Press wrote an article on people and their savings and their investments. They could say that many people are really lacking in investing because they're not putting in $100 a month or $1,000 a month into their retirement plan. They're not taking advantage of all these IRA laws and oh gosh, you could make so much money in the stock over the last five years and bond yields or X and CD yields or Y.
But that doesn't matter to you when you have no money to invest. A lot of people are simply scraping by. They don't have the ability to go out there and make logical investment choices because they don't have the capital to invest. The same parallel could be drawn between regular investing, which the Associated Press authorized plenty of articles on, and investing in single-family homes. Let's look at a similar false narrative that's advanced almost every day in the media. That's this whole discussion of what it takes to retire comfortably in America. I just read an article a few moments ago and it tells me that the average US individual needs to have saved by the time they reach retirement between one and one and a half million dollars.
If you haven't done that, I guess you've apparently failed yourself and your friends and your family because that's how much you need to live comfortably. Well, how many people have between one and one and a half million dollars saved in the United States today? The answer is hardly anyone. Certainly not 90% of the US population, possibly even higher than that. But by far the majority don't. By far, the majority of Americans will be going into retirement on a social security check of roughly $1,200 a month, because that's what the average social security check is. You might say, "What about the pensions?" Well, they don't have one. What about the savings? Well, the average American household at retirement has somewhere around $70,000 in total assets. That's the average. That means half have less. So the bottom line is the Associated Press needs to stop being snobs and wake up to what's going on out there in the real world.
When we talk about affordability on mobile homes, we're talking about right now you need affordable housing. It's not viewed as an investment tool. On top of that, perhaps we as a nation are viewing housing completely inappropriately by thinking it's an investment tool. If you look at the price of housing going back many, many decades, not just from the period beginning in 1960, if you go all the way back to the period beginning at the turn of the century, what you'll see is that homes are lousy investments decade upon decade upon decade. Talk to somebody that owned a home back in the 1930s. How did they fare with it? Not good. By the 1940s, it was worth probably maybe what they paid if not a little less. Because it wasn't until about the 1970s that people started thinking of homes not as shelter, not as a dwelling, but as a way to make money, a way to save value, and a whole investment program built around a house.
It seems ludicrous, does it not? How in the world did the nation get here? Perhaps, there were so many people with a vested interest in this narrative that homes are an investment. Think of all the home builders, the mortgage companies, all these different groups, they all profit from convincing you that a home is an amazing place to park your money whatever money you have. With that false narrative, they were able to garner greater customers, greater revenue. So maybe the whole thing is just basically a scam. I don't know. Perhaps we'll all know years from now when we look back on how the home market fairs at the end of the movie. I don't know about you, but the fact that the millennials are now the largest population group in the United States, what it then suggest is that maybe home prices are not supportable in the years ahead.
Maybe what we're seeing right now is the very top of a bubble which will have a glog decline. Same thing that happened to people who made silent movies back in the '20s when they brought out the talkie. I don't know, but going back to the original topic, you certainly cannot, not for one minute, ever say that a mobile home is a bad investment because you should not view it as an investment. Need to view it as what it is, affordable housing, something that people can afford, something that has no rival, something that nobody else can possibly provide as nicer product as... Apartments can't do it, single-single family homes can't do it, can't even meet the price point. So hey, Associated Press, why don't you give mobile home park residents and mobile home park owners a break here and stop trying to produce a narrative that we all know is false.
Clearly, the best thing you can do if you're trying to provide a roof over your head in a nice, clean, safe place to live, with your own yard, no one knocking on your walls and ceilings, ability to park by your front door, and a sense of community as a mobile home park, then let's forget this ridiculous narrative of how it fares as an investment vehicle, because that's not truly fair to anyone and it's not really the correct thing to say about what is truly the only option for affordable housing in the United States. This is the Frank Rolfe for the Mobile Home Park Mastery podcast series. We'll be back again next week.