Not too long ago, mobile home park owners could order new homes to fill vacant lots. Now they find that delivery times are far into the future, prices are up $10,000, and some manufacturers even have caps on the number of homes you can order. In this Mobile Home Park Mastery podcast we’re going to discuss the U.S. home manufacturing crisis and how to overcome this hurdle to fill your vacant lot.
Episode 210: Overcoming The Home Manufacturing Crisis Transcript
The mobile home park… since the start of COVID-19, back in March of 2020. One, the eviction moratorium, the other the advent of new higher home prices for new manufactured homes, and much longer delivery times. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. we're going to be talking about the home manufacturing crisis in America today. It's a topic very few people talk about but it's very, very much an important and relevant subject for those who are in mobile home parks.
So why do we care? Why do we care about manufacturing at all? Well, it is true that park owners really don't have their fortunes tied to those manufacturers or street retailers. We dream of the day when we're 100% full and don't need homes at all. So the best day ever for mobile home park owners will be where nationwide there's not a single vacant lot. That would also be the worst day ever for mobile home manufacturers because then community owners would no longer need new homes. So our fortunes are no way related except for the fact we have to fill our vacant lots with homes in order to get our lot rent. And the problem is that ever since COVID came on the horizon, the price of new mobile homes is going up roughly about $10,000. And the delivery time is now extended often into six months or more into the future. It's getting so desperate now that some manufacturers are even having limits on how many homes that different park owners can even buy.
So why is this occurring? That'd be the first good question. How has COVID caused homes to go up about $10,000 in value and delivery times to extend about six months into the future? Well, the first thing you have to know about home manufacturing is it's not nearly at capacity. So it's not like toilet paper. We all know that toilet paper during the COVID crisis was in such hot demand, they just couldn't manufacture enough of it. We were all hoarding rolls and rolls. I'm sure everyone listening to this probably has at least two or three giant eight packs hidden away in a closet somewhere. No, this is different. You see the factories are not anywhere near at capacity. A typical mobile home manufacturer could literally do three eight hour shifts, and I'm not aware of any of them in the United States do in one single eight-hour shift. So really, you could triple capacity. And there was a time in which that happened. If you take the clock and you dial it back to about 1998 or 1999, the industry was producing about 400,000 new homes a year. Today it produces somewhere between 60,000 and 100,000 homes on a regular basis. So it's not that we can't manufacture enough homes. That's not the problem. The problem is nobody really wants to staff up to produce more homes at a time when people want homes, because they don't believe in the fact we can ever break the 100,000 home barrier. We've been stuck at that level for about 20 straight years.
Now who's really at fault? Why do they not have three eight-hour shifts going on in every plant across America? Why are they not manufacturing 400,000 homes a year? Well, that's a simple answer. That's because the US government has failed to take any interest at all in mobile homes or mobile home manufacturing. You see they support every other kind of mortgage. You want to buy a house? No problem, they'll do anything to get you to buy that house. Want to buy a condo? Again, that's no, no problem. Sure, we'll get that mortgage on that condo. You want to get our mobile home purchased? Well good luck to you. Because our mortgage programs in the US loaned nothing but lip service to this idea. All the time we hear that they're going to go ahead and help securitize mortgages on mobile homes, they're going to try and make mobile home purchasers have the same exact equal share of concern is they give single family but they never do. We hear it all the time. And it's never happened.
So if you're wondering why we can't manufacture more homes in the US, well, you need to ask your governmental representatives because they really are what's the bottleneck there. If they would support the mortgages, and the dealers could therefore sell more homes, then they could manufacture more homes and in manufacturing more homes, probably the price would actually come down. There's a lot of efficiencies when you manufacture in three eight-hour shifts as opposed to one eight-hour shift. But I don't think we're ever going to see that. I don't really think the government is ever going to support the mission of making more mobile homes. Why is that? Why do they not support affordable housing when they talk so much about it? That is a mystery that I really can't unlock. I think it ties somewhere back to the fact there's just too large of some kind of industrial complex tie between the government and apartments. They like having that niche of affordable housing, where through Section 8 the government picks up most of the tab, and they provide us housing with a very safe clientele of a government that's always given them that regular monthly dole. And they don't want mobile homes to step in and take any of that away from them. So I'm not really sure what is the root cause. I just know that I myself after 25 years have, at this point given up hope the government will ever work on mortgages and really ever help the manufacturers out in any possible way.
So I'm just a park owner. All I care about is filling my lots, right? So how can I fill lots? How can I circumvent the new home manufacturing crisis? It wasn't that long ago, before COVID, that most every Park owner was filling their lots with new mobile homes. The homes were very inexpensive, best looking they'd ever been. People loved them. We'd go in there and in some parks, we'd fill 100 homes and lots a year. But today, you can't. Because when you add $10,000 to the price of the new home, you can't find enough customers to qualify like you did in the old days. And when you have to wait six months in order to get the home, well, that's really not going to work for you very much either if you have a regular desire to fill your vacant lot. So what can you do? How can you fight back? What can you do today? Well, here's some ideas for you.
Number one, remodel your old homes. When I got in the business, there was this urban legend that lenders hated old homes. So back in the early days back when I had Glen Haven and my other early holdings, I was told by other mobile home park people, "Oh yeah, well, you've got to tear down all that old 60s and 70s, 80s junk and bring in the new homes because you see lenders don't like that. Well, that was the biggest lie of all time. Lenders love the older homes, why wouldn't they? Older homes are safe, they're secure, they won't be moved. They're paid in full, they won't be repossessed. So a lot of times when park owners consider tearing down their older inventory, even if it's in good condition, that's about the worst move you could possibly make. Particularly now that the homes are more expensive, why do you want to punish your customers like that? Why deprive them of that $5,000 home and make them instead get a $50,000 home? And when you settle that mortgage with them, it makes it harder for them to pay higher lot rents because we all know that's where the industry is heading.
So number one, just remodel what you have. I have yet to see an older home, properly painted, the roof sealed, vital skirting, nice deck, and shutters that doesn't look just about as good as a new home. Certainly good enough unless it's a very, very visible lot. Those kinds of you see head on as you're doing the curve in the road or right or your entrance. No one's going to care. They have no problems with those older homes that look nice. It's very inexpensive to fix an older home up. $500 to paint it, $250 to do the roof, maybe $1000 to skirt it, let's throw another $1000 on the deck, shutters are only $20 a set. Bottom line is I can rehab an older home often for the same price as simply moving a new mobile home in.
Number two, expand beyond new homes. Look at used homes. There's a lot of used home alternatives. You can buy used homes from repo lists. Most of your lenders have repo lists. You can also buy used homes often from home wholesalers, or you can find them yourself on social media, places like Craigslist and Facebook. Is there anything wrong with a used home? Yeah, well, you'll have to remodel it. That's not as much fun as the new home right? The new home comes in, it's ready to go plug and play. Used homes, you got to go ahead and redo them. However, that used to home you don't have to wait six months. That used to cost you a fraction sometimes of the new home.
Another thing you can do is to do kind of a joint venture with your mobile home dealers. If you go to almost any dealer, you drive along the highway, you're going to see these older mobile homes typically tucked away in the back corner of the sales lot the farthest from view. These are trade ins. So a guy came to them and said, "Hey, I want to buy a new mobile home." And they said, "Great, we'll give you a $3,000 credit on your old mobile home." And they didn't really care because they had that home so overpriced, that $3,000 thing was just a scam. So they take the home and they just stick in the back of the lot, and it's gathering dust, and no one ever wants the things. Go to those people and say, "Hey, what about moving those old homes into my park? And I'll let you put it there, rehab it. Get it all ready to go. I won't charge you any lot rent until you sell it." It's entirely different when you go around selling a home on a lot than a home sitting in an asphalt field. It also it's really kind of a win/win. Customers come into the dealer wanting to buy homes, they can't really afford the new ones. They can afford the used one and here's a complete plug and play, ready to go situation for them. And they're not hard to sell.
Another option would be Lonnie dealer. Why do they call them Lonnie dealers? Well it's after a book called Deals on Wheels by Lonnie Scruggs. It was a big seller back in the day. Of course, Lonnie is with us no longer, the book doesn't really work often based on the SAFE Act and Dodd Frank, but nevertheless there are people out there who like to invest in mobile homes, put them on lots, rent them out, sometimes sell them. Again, that's someone bringing in a home. It's a home you don't have to deal with. They often buy them use. Same situations you can buy used, but they're using their own capital and you don't have to. So nothing wrong with Lonnie dealers to fill vacant lots. That's good too.
Finally there's RVs. We love RVs. Why? Because RVs traditionally are much, much more expensive than mobile homes. And the customers who tend to bring the RV in and live in it in their retirement, they really spruce up the park. They often have the nicest cars, the nicest yards, just the nicest people. How do you get RVs? Well check your permit, make sure your park is allowable to have RVs. Most of them are, and then all you have to do is let it be known that you're there. Put a sign out in front that says, "RVs Welcome," and make sure that you have a very strong presence on the internet, because that's where most of those people find places to put their RV. So in any simple Google search of your market, you should pop up when they put an RV lot in that market. And then you should have a very nice web page telling all the great things about your property. But RVs are terrific. RVs are also great.
So the bottom line to it all is that you know we get paid the same rent no matter how we fill the lot. Whether the home is brand new, used, even an RV, it doesn't matter. It all counts as one more occupied space, one more amount of lot rent coming in the door. One more income stream that's valued with that cap rate to give the overall value of that mobile home park. The bottom line is don't let the manufacturing crisis get you down. Our industry again is not tied to manufacturing. People don't realize that; we are in the land business. We are not in the manufacturing business. We are not in the retail business. We are only dealers long enough to fill our vacant lots and then we quit. This manufacturing crisis only even applies to you if you have vacant lots and you're trying to fill them. So much like the evictions moratorium which will hopefully be ending soon, the manufacturing crisis for all park owners ultimately ends when you finally get full. This is Frank Rolfe with the Mobile Home Park Mastery podcast. Hope you enjoyed this. Talk to you again soon.