How Will War Effect Our Business?

[David Oxhandler]

The impending war has many of our citizens concerned about the future of the economy. Across the globe there has been a reaction, like none since the Vietnam Era, both for and against President Bush's desire "change the regime in Baghdad". The debate over whether the impending war, under today's circumstances, is the right or wrong thing for the US is a topic for a different venue. The question we are concerned with here is how will this war effect our industry? I spend a good part of my day on the phone with industry participants across our great country and have heard opinions, this past week, that fill the entire range of responses.Some who foresee positive results point to the war deepening the national deficit which they feel will inevitably lead to higher interest rates. The conviction that higher interest rates lead to more manufactured home sales, is not uncommon among many folks in all segments of our industry. On this side of the issue is also the belief that the war will rally and unite the country behind our leadership thereby boosting consumer confidence along with sales.On the other hand I have heard from those who feel that an uncertainty in the future, spawned by war along with an escalation of the cycle of terror and anti-terror, will cause consumer confidence to decline, leaving sales volume to suffer. Interestingly, many in this group also feel that interest rates will inevitably rise, but hold the conviction that higher monthly payments for all types of housing purchases will cut into their sales.Current events are leaving a high percentage of us feeling some insecurity (unless you own stock in a duct tape factory). When I'm worried it helps me to talk about it to those around me who are concerned about the same things.What do you think ?

[rmurray]

I am in an area with a large military presence.....Most stationed here have put housing on hold...but those not yet deployed are out looking in large numbers....mostly saying they will be activily in the market once they find out what will happen to them...There should be a small up tick from them when something happens and they know for sure they will not be deployed....or....it ends quick..

By the way...Korea seems to worry them much more than Iraq..

Much more of an effect on our market would be higher rates....I have contended in the last couple of years that these unusually low rates have contributed a lot to the current situation....Many of our consumers have been raised in manufactured homes...Their lifelong dream has been to have better than mom and dad...a "real" house...These folks would rather have a 20 year old stick home than a "trailor"...The real facts of our product are sinking in with a few...but many just do not want to know their life long dream was not necessarily right..These low rates have allowed many to do just that...also..low rates have held rent costs down as well...
Our best customers seem to be coming the other way..They have learned the myth of the "real" house...by paying high utility and repair costs...living in small lot subdivisions with changing demographics with these now lower rates...This group is growing in number and a small uptick in rates will probably urge them into action...increasing our sales a lot......
Our biggest worry is that we are still new at mortgage finance..only 3 years in volumn and always with declining rates...If rates start to escalate quickly (like they have many times in the past)..our worry is that the process takes too long...With rate locks only at about 2 weeks and the fastest mortgages at about 4 weeks (many as long as 8 weeks)...we are currently cultivating relationships with the few lenders that will do much longer rate locks....of course...they might change those policies as soon as rates look like they are going to rise...There are few if any dealers out there that can stand any homes delivered and not funded right now...How will the customer react if the payment is $ 200 high than they had thought it would be???..
Life is a bowl of cherries....unfortunately there are a few pits in the bowl too..

[Mac]

From the customer side...

We're very glad we closed when we did. I'm a deficit hawk, and I think the Iraq thing is an ill-timed expenditure. Hopefully we will not see stagflation (I still have my WIN button!). Rising interest rates could be reflected in lower existing-home prices - not good for the industry- or they could push folks into manufactured homes who were not before. I always lived in site-built houses, but when we moved onto land, our mortgage was such that it did not leave a lot of room for a new home. We looked at log shells, custom builders, prefab... finally went with a well-constructed - we believe - manufactured home. It had what I insist on: Hardi-Plank siding, good roofing materials, good insulation - at a reasonable price.

I think the industry is in for better times ahead, particularly if the value equation is stressed, and the use of quality materials - same as site-built- is stressed.