Mobile Home Park Mastery: Episode 140

Where Have All The Mobile Home Dealers Gone?

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Back in 1999 there were 400,000+ mobile homes sold in the U.S. with dealers making fortunes. Today, there are less than 100,000 being sold (it’s been that way since around 2000) and most of those same dealers have disappeared. In fact, you never even hear about mobile home dealers these days. Why is that and where did they go? In this episode of Mobile Home Park Mastery we’re going to discuss the rise and fall of mobile home dealers and what the future might hold for them.

Episode 140: Where Have All The Mobile Home Dealers Gone? Transcript

Eight years before the United States' great recession began in 2007, the mobile home industry had already had its great recession. It was called The Great Chattel Collapse, it started in about 1999, by the year 2000 all was lost. This is Frank Rolfe for The Mobile Home Park Mastery Podcast series. We're talking about mobile home dealers. What happened to them? Where did they go? Are they ever coming back? Back in the late '90s the production of mobile homes got as high as about 400,000 units being sold per year in the U.S., almost all strictly coming from those dealers. And you saw them along the highways throughout America, all the different brands, all the different dealers, they were selling homes like there was no tomorrow, mobile homes that is. And they were selling them strong for one key reason, there were mortgages at that time allowing for a zero down, no income documentation, 30 year mortgage on a mobile home.

Now you may say, wait, I saw that movie, it was called the 2007 Housing Collapse of stick-built homes, but, and that's true, but not quite a decade earlier it happened in the mobile home industry. And when it happened, it happened with a vengeance, just like the 2007 collapse with stick-built. What happened was you had a huge number of these poorly thought out mortgages collapse, and then in the onslaught, many of the lenders were completely wiped off the earth. Many of those who'd been making mobile home loans for decades just stopped doing it. They couldn't handle the risk anymore. They couldn't handle the losses. They were literally wiped out. So what happened then? Well, we went from about 450,000 mobile homes sold in the United States, all the way down to about 60,000, it plunged that far almost immediately. And now, in almost two decades, it's never gone up by much. It's back to around 100,000 units now, almost 20 years later.

So, what happened? Well, the same thing that happened with the 2007 Great Recession and the collapse of homes. You cannot, nor have you ever in the history of the world, been able to make zero down, no income doc loans, on any asset and done well with it. It's a crazy idea, and we all know it's crazy. Why do people do it? They do it because they want to bolster their sales. They want to have Herculean amounts of production not thinking about the aftermath of what happens after you put that production on the books. So I think even back in the late 1990's everyone knew it was stupid and everyone knew it would not work. But there was one group out there that really pushed it hard and that were the dealers. I think probably the manufacturers knew the whole time it was a bad idea, I'm pretty sure the banks knew it was a bad idea. I know the Mobile Home Park owners thought it was a bad idea because I was one of them and I didn't like the way it was looking at all.

I recall a period in which I had one Palm Harbor dealer bringing me in five homes a month, just that one dealership and I was just one Mobile Home Park in a sea of Mobile Home Parks. I thought to myself, "How can they be selling this many homes suddenly?" Then I knew it was too good to be true and too good to last, and man was I correct. Let me give you an example of how stupid it got, I once had a customer who could not pay their lot rent on their brand new mobile home that they had moved in, so I filed for eviction. I went to court with them, against them, and in court there was a woman who said that her boyfriend had run off and left her in the mobile home with four kids, and she had no job and no way to pay the bill. I walked out of the courtroom and called the dealership on my cell phone and told them what had happened, to which they said, "Oh, yeah, well actually that woman's our customer, not the boyfriend."

I assumed the boyfriend had gotten the mortgage and then run off and abandoned the family, only to find that basically this woman who said under oath that she was unemployed, they had written up a loan request to the lenders saying that in fact she was the one who was the breadwinner. That's how bad it was. So people were falsifying loan applications, at least I guess they were, it looked falsified to me, and all in the sake of bolstering revenues to the highest level ever seen. And so, it made complete sense to me as a park owner when the whole thing blew up and those homes all started to get repossessed. I don't really miss that time at all because I much didn't like being involved knowing that the other shoe would drop at any moment, and curious each year how many customers would in fact leave, having their homes repossessed.

I prefer the more stable moments that we see now in the industry, but it begs the question, what will happen to all those dealers? When your sales fall, for many of them as much as 90% and only in the matter of one year or two years, clearly the first step they had was laying off staff, and you saw that. So you saw many of those same sales men that were driving Ferrari's and Corvettes during the heyday were suddenly unemployed and moved on to greener pastures. But then you started seeing many of the dealerships themselves go out of business. There was a bit of a lag, there was probably about five years where they kept thinking they could turn it around. But it never happened, the cavalry never came in, and many of those long time family dealerships ended and are in fact are no more today. Today what you have is just a minor, minor sampling of how many dealerships there were back when I got the business in the mid '90s.

And so the question to me is, "Will those survive? What's going to happen to those few remaining dealers?" When I say few, I mean relative to what there used to be in the olden days, there's still quite a few retailers out there. Well what's going to happen with them? I'm insulated, I'm a Mobile Home Park owner so I don't much care if they sell manufactured homes at dealers or not, doesn't matter to me. Well the first thing you have to know about the dealers is that about half of all the mobile homes made in America today we think are sold directly to Mobile Home Park owners who buy the factory direct, so that's where a lot of the homes being sold in America go. So out of those 60,000 to a 100,000 being manufactured today, probably half of those are going straight into parks being purchased by park owners. So that leaves a very small number really that are spread out and shared over all those remaining dealers.

I think if you go to those dealers, what do you see? Well, I know when I drive by I see a whole lot of double wides and even some triple wides stocked on their lots. They've pretty much abandoned Mobile Home Park customers at this point and all they're looking at are pretty much farmers and ranchers looking to buy mobile homes to put on their land or maybe to house their children or grandchildren out on the farm. And there's definitely a niche there because there are a lot of people in America who are not park owners who still want to buy a mobile home and they've got the credit and the money to do it. And so, that is a good way for those dealerships to serve those customers who would not be able to be reached in any other fashion.

But is there a future at all? Is there a future with these dealers? Well, the jury is out on that because I think what you still have on the table is the potential for the U.S. government to stand behind mobile home loans and securitize those and make it possible perhaps for people to go back to buying mobile homes from dealers to go into mobile home parks. Now why would they even bother since so many mobile homes are being bought by Mobile Home Park owners and brought in factory direct? Well, because not all parks engage in that. If you want to go out and get in that business, that space of buying mobile homes or bringing them into your park, you traditionally have to have, not only a dealer's license, but you have to have roughly 10 vacant lots to make it worthwhile for the manufacturer to paper you as a potential dealer. So as a result, there's many parks out there that may only have one or two or three or four vacant lots and they're off the radar screen.

Number two, a lot of older mom and pop park owners, they don't really want to get involved in selling mobile homes, so they've stepped out of the game completely. So in those cases you may have really good lots and really well positioned parks that people really want to live in, but they can't because mom and pop doesn't want to buy the homes and bring them in then to resell. So when I talked about securitization, what am I talking about? Well under the Duty to Serve Law, Fannie Mae and Freddie Mac had been throwing out the idea which was supposed to begin this year, I thought, or actually last year, of them underwriting more mobile home loans directly to customers. And I don't mean those farmers wanting to double wides, but I mean Mobile Home Park residents, people with lower incomes who simply want to have a home of their own and move it into the park of their choice. I sure hope those programs work. We haven't heard a lot about them, but still there's a glimmer of hope out there that they're happening behind the scenes and we just don't know about it.

Because if you're a park owner, you don't really see people going into dealerships and buying mobile homes, and those stats really aren't much published or advertised so we probably wouldn't know initially. The only thing we would know is if we saw mobile homes coming into our parks from customers buying them at dealerships, and we are seeing a little bit of that in some states. Texas particularly, it's not uncommon to have, if you have a vacant lot, a customer call you to say, "I want to bring in a home on that lot," or a dealer to call you and say, "I've got a customer who wants that vacant lot." So that gives us some idea that possibly the wheels of progress are turning out there and maybe eventually dealers will go back into the business of selling mobile homes, not only to go on farmer's and rancher's land, but to go inside a Mobile Home Park, which is really what they began on in the first place.

But a lot of that will hinge on whether or not Fannie Mae and Freddie Mac, number one, we'll make those loans and in a large quantity. And number two and how those loans fair, because Fannie Mae and Freddie Mac don't want to lose money anymore than anybody else, so they're going to watch very tightly the default rate on those securitized pools that they do of mobile home loans. Now if they can succeed, if the default rates remain low and the losses remain low, it could be the start of ramping up something really, really big. Bear in mind, as you all know, we are in the middle of the largest demand for affordable housing in American history. And as you also know, Mobile Home Parks are the only way to fill that demand in an unsubsidized fashion. So clearly the demand is there, and there's lots and lots of vacant lots in Mobile Home Parks.

Let's face it, the nation wide vacancy rate of Mobile Home Parks is probably about 20%, but there's many other parks that don't make those lists because they're too small or mom and pop don't participate. And some of those, and I drive by them and you drive by, they may have 50%, 60% vacancy. So a great way to help solve the affordable housing crisis, but only if Fannie Mae and Freddie Mac will step in and get the job done. And number two, if those customers can get the job done and not default. And if they do default, not mess up the collateral too bad so the losses would be very small. So the bottom line is the jury is still very much out on the future of mobile home dealers. Now they do definitely serve a useful purpose, because people need to be able to go somewhere where they can go in and walk current mobile home offerings. And I'm always blown away when people see the new quality of the product out there because it's never been higher. Mobile homes have never looked better, both inside and out.

So I think the product is great and definitely the pricing is still extremely attractive, the only part we don't know is can the dealer stand on their own feet today and can the customers? Not those folks who buy the double wides for cash, but real affordable housing, mobile home customers, can they get the job done? Can they buy the home? Do they have the down payment? Can they make their payments every month? That is the key question we will all see unfolding in the months and years ahead. If they can pull it off, it would be a huge resurgence in manufacturing, and I know that we all certainly hope they can pull it off. But until then, the jury is kind of out on the future of the mobile home dealer, we definitely wish them well. Next time you're out driving around, note where those dealers are and hopefully one day maybe you'll see more homes on those lots and maybe they'll go back to selling like they did in the old days. This is Frank Rolfe, the Mobile Home Park Mastery Podcast series. Hope you enjoyed this, talk to you again next week.