Manufactured Housing Reader

Listening to a conference call from UMH Properties (formerly United Mobile Homes) in Sept. 2007 is uncanny. “Next year at this time, affordable housing is going to be the number one political issue in this country,” says UMH founder and President Eugene Landy. “People are not going to be able to get mortgages, they are not going to be able to buy homes. They are going to have to buy housing that they can afford.

Landy believes that manufactured housing stands to gain from these changes.  People still need housing, due to the expanding population.

“It is going to be a trend for our industry,” he says. “The Federal Reserve numbers are that people are going to need 1.9 million more homes every year for the next ten years.”

UMH is positioned in expensive markets. Most of their parks are in places where median household income is above $55,000. Many markets have a good portion of housing about $500,000 and few entry points for stick built below $200,000.

Listening to Landy is refreshing and informative. Moreover, he speaks as an advocate of affordable housing. He laments the frequent mobilizations against other affordable sectors. He points out that many communities make zoning difficult for the placement of 3 bedroom apartments, out of a desire to keep down the number of children. It is the same for manufactured housing.

The political voice for manufactured housing already has some tremors. Governor Corzine promised 100,000 affordable units in New Jersey, but he cannot deliver, says Landy.

Landy counters that the manufactured housing industry can easily produce homes for $100,000 in these kind of expensive markets.

UMH Properties runs 6,700 lots with 5,000 tenants in 28 manufactured housing communities. Most of their parks are in the Midwest, Mid Atlantic, and Northeast. They put a ten percent cap on the amount of lots in any park that have mobile home renters. They prefer to only rent land, because it is more stable. Interestingly, this philosophy has allowed to achieve the status of Dividend Achiever. They have not lowered dividends since 1991.

The other interesting things:

• expectation is that annual shipments will return to 250,000 units per year.
• they are buying more park space through an investment in Monmouth Reit
• occupancy rates increased in 2007.

The founder still describes the recent history of manufactured history as “decimation.” He is critical of underwriting, where down payments ceased to be a requirement and affordability didn’t matter. “This period of inflation and rising home values made them winners, but now a lot of people are under-water,” says Landy. “I see nothing on the horizon for the longest period that people are going to find houses unless they have a down payment, they can document, and their income level is sufficient to make payments.”

“I hate to tell you that there are a lot of Americans that do not have ten or fifteen thousand in cash,” says Landy. “The change is coming. This time next year, we’ll see an incredible movement toward affordable housing.”

Landy hopes that the Congress will pass the FHA Bill. It would lower interest rates by adding agency guarantees to financing on manufactured housing. Landy suggests that this would allow manufactured housing lenders to lower interest rates by about 300 basis points.