Issue link: https://read.dmtmag.com/i/205269
COMMUNITY CONSULTANT How Manufacturers and Community Owners Forged An Alliance That is Fueling The Re-Birth of the Industry BY FRANK ROLFE One of the biggest news stories in recent years – and the one least talked about – is how the manufacturers and community owners got together to start reconstructing the manufactured home industry. The efforts of these pioneer programs will, in my opinion, be looked upon one day as the start of a new industry focused on mutual benefits and the public welfare. It was the final piece of the puzzle needed for the manufactured home community model to flex the muscles that it has long kept hidden under baggy T-shirts – as the solution to the affordable housing shortage in this country. Where things went bad back in 2000 In 2000, there were roughly 400,000 units built and sold in the U.S. But then came the chattel collapse, as a result of some suspected abuses in underwriting credit for customers, and sales plummeted endlessly, landing at around 60,000 units per year in recent times. In 1999, I had one Palm Harbor dealer alone that would bring me seven units per month just to my park in Howe, Texas – that's how hot sales were. Every community owner, dealer and manufacturer looked like a genius back then. Little did we all know that what was fueling those levels of sales were faulty underwriting. There is no difference between this event and the single-family home crisis of 2008. What we have all learned over the past decade Since the collapse, we have all learned a lot of things about what works and does not work in the world of manufactured home sales and underwriting. One item that every community knows is the enormous demand for affordable housing. We have some properties that receive over 100 calls per week looking for homes. So demand is strong and consistent. At the same time, the manufacturers have continually improved the product, so that it has never been more attractive or at a lower price point. But NOVEMBER 2013 14 THE JOURNAL equally important over these years has been the continual testing of credit models to find one that works well for this industry. The missing ingredient Back in the chattel crisis of 2000, many people assumed that what was being identified was that people did not really want or need manufactured homes, and that there is no way to construct a successful manufactured home loan. Many blamed the collapse on our business model, instead of the clearly shaky underwriting methods of that time. Of course, all community owners have learned that this is untrue, as we have all had to use our own purchase and sale or rental of homes to fill vacant lots. And, in the process, we have learned that manufactured homes are just like anything else: they necessitate the buyer having a job, a reasonable track record of being credit-worthy, and putting down a sensible deposit. But the problem has been that community owners do not normally have the resources to be the intermediary in home sales and rentals in the scale required to make a huge difference. Sure, the typical community owner can purchase a handful of homes, but what about properties that require 50+ units to hit occupancy targets? The missing ingredient has been large-scale financing programs to fill the void left from Greentree, CIT and others that withdrew during the chattel crisis. The new attack plan Manufacturers have now stepped up to the plate on providing credit for the community owners, and both parties are hitting home runs with this association. CAVCO, Clayton and Legacy now offer programs that range from re-financing existing home inventory, to providing floor planning and lines of credit for home purchases by community owners, to extending financing on homes that community owners buy. These programs are going to be the frontrunners to the industry regaining its dominance that was lost in 2000. They employ a win/win alliance between the manufacturer and the community owner to ensure that all parties get the support – and protection – they need to generate a profit. The potential benefits With the return of credit, community owners can buy homes and fill lots on a larger scale. This will allow manufacturers to go back to building more homes. It will allow for greater community occupancy. It will provide housing for those thousands of people that call us each week. And it will make communities more attractive and better neighbors with newer homes that improve aesthetics. Best of all, it will finally bring an end to this false theory that our customers are not worthy of credit and can't be trusted to repay their debts. Community owners have already known the truth for years through experimentation, but now even larger lenders are learning the reality that our loans perform fine with tempered with the sensibility that was missing in 2000. Conclusion I remember going to a New Year's Eve party in 1999, when people worried about the impact of the new millennium. They were right to worry in the manufactured home industry, because it ushered in not computer failures (as was projected) but the chattel mortgage crisis. However, some pioneering manufacturers are finally putting an end to that lousy decade, and taking the industry to the next level. We salute them! T J Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 18th largest community owner in the United States, with almost 9,000 lots in 17 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. To learn more about Frank's views on the manufactured home community industry visit www.MobileHomeUniversity.com.