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Will Higher Interest rates boost MH sales ?

Posted: Fri Sep 12, 2003 8:06 pm
by David Oxhandler
Industry Participants: What do you think about the statements below? Please respond with your thoughts below

I have been involved in different phases of the manufactured housing
industry for over 25 years. Over that time we have seen the finance
opportunities and operators come and go. As long as interest rates are
unusually low the sales and financing of MH will continue to diminish. BUT
as soon as interest rates start to go up you will see a revival in our
industry. The basics of supply and demand will hold true . As long as rates are low
the price advantage (20 to 25% today in most markets) of MH over stick built
is not enough to make a significant difference in monthly payment
comparisons. As such there is little economic reason for most buyers to select
manufactured housing over site built. We currently have a monthly payment advantage of 20% on a current mortgage
rate of 4 to 7% . In the not too distant future, when we are looking at a
spread of of 9 to 12% interest on that same 20% price advantage,
manufactured homes will yield considerably lower payments than their site
built competition and become much more attractive to many buyers.Due to the sudden run up of the national debt, there is little doubt that
Uncle Sam will have to start borrowing money very soon. Historically,
government borrowing has always triggers interest rate hikes.At this time the mortgage industry is overwhelmingly occupied with the
hugest wave of refinancing in our nations history. As rates rise, the refi
boom will come to a screeching halt. Then individuals and companies who
invest in mortgages will be more willing to look into areas of home finance
that they have absolutely no need to consider today. I'm confident that as
the demand for the product increases that the financial market place will
respond to the increased demand. Respond with your thoughts, below.

Re: Will Higher Interest rates boost MH sales ?

Posted: Sat Sep 13, 2003 4:14 am
by rmurray
I could not have said it better.....I just hope rates rise a little quicker or many will not be around to enjoy the recovery...

I am afraid...no matter what the industry has done with image advertising consumer preceptions are still not what they should be...I know much of the product we sell today...far outshines the mass produced stick homes being built today...but...consumers do not seem to get the point...To them..we still sell mobile homes..trailers...and if they can..they want to buy a "real" house..

Foremost insurance has an interesting study...One of the eye openers is what the consumers call thier own homes...The term "mobile home"..has been gone for over 25 years..and yet 79% of all owners call their home a mobile home or trailer...

I do not know what the industry could have done different...if anything at all...

When someone asks you what type of residence it is, what do you call it? 1st percentage in1999 ..2nd percentage in 2002
Mobile Home
63% 62%
Trailer
19% 17%
Manufactured Home
10% 12%
House
4% 4%
Modular Home
2% 3%
Travel Trailer
1% 0%
Other
1% 1%
Total Percentage
100% 99%
Number Responding
22,139 21,391

Re: Will Higher Interest rates boost MH sales ?

Posted: Mon Sep 15, 2003 6:23 am
by JimK
You present some interesting thoughts. Banks are less apt to lend to lower credit score people when the interest rates are low because they don't make enough to cover the 'risk'. Add to that the new Fannie Mae 10% down requirements and there goes the entry level market.

The only people we are successfully selling to now are buying the large decked out homes. They are older, perhaps empty nesters, and have the cash for the downpayment requirements, plus a good credit score.

The best thing that could happen to spark the industry is for Fannie Mae to lift the recently place 10% down requirement.

Just my thoughts.

Re: Will Higher Interest rates boost MH sales ?

Posted: Mon Sep 15, 2003 11:07 am
by Toby Hise
Sometimes I think we seem to remember the good old days when interest rates were much higher, home only financing was the only game in town. Today we are in the real estate business. Will higher interest rates bring out more quality credit buyers? Or, has the manufactures priced the homes at level that forces $100,000 land/home packages? Is it truely the interest rates that will save the day? Perhaps. When interest rates climb, we will see how it affects todays way of doing business compared to the past.

Fannie Mae. Ten percent down on manufactured homes. I wonder why! Could it be that the retail end of this business absolutely hammered the finance compaines. Fannie mae is going to ensure that does not happen to the mortgage lenders, because manufactured homes are not the main staple of mortgage lenders. Never have been and never will be.

However, I am sure that there will continue to be dealers who will play the "old short down payment game", if possible. However, there is going to be a Huge difference in the way mortgage lenders handle the ones who are caught. Mortgage lenders, Not mortgage brokers, are not used to losing Hard Money. They are only used to losing Soft Money when it comes to foreclosures on site built homes. The Consecos and GreenPoints understood going in their foreclosures would result in Hard Money Losses. They tried to offset the losses by volume. Of course it didn't work with all the fraud that went on in the 90's. These lenders, are licking their wounds, and only slapped dealers on the hand.

No so with mortgage lenders. Once they experience some of the same antics from retailers, and they find themselves losing hard money, someone will go directly to jail. They will not play. That is a good thing.

As you set in your offices wondering who moved the cheese, thank the dealers that you know that moved it for you.

Re: Will Higher Interest rates boost MH sales ?

Posted: Mon Sep 15, 2003 1:57 pm
by Mark
No. You can speculate all you want, I sell more houses for more money and make more profits with low rates. Thats a fact.

Re: Will Higher Interest rates boost MH sales ?

Posted: Wed Sep 17, 2003 8:40 am
by Jay
When intrest rates for site built housing go up it will allow some room for the manufactured homes to compete. If the New Greentree tries to do "business as usual" the result will be the same as in the past. They have gone under twice maybe the 3rd time will be a charm and teach the industry a real lesson.

This industry cannot label itself with one sticker and expect that to apply all over the country. Out west and up north the big multisection homes may be able to compete with the regular site built housing. They will have to play on a level field and the Fannie Mae rules will see to that. Hopefully those who try to get around those rules will be caught and put out of business.

The south and southwest will need entry level, lower cost homes in order to satisfiy the growing population that moves in and wants to have someplace besides an apartment to live in. Placing homes in communiites and being able to fianance them is going to be a big part of the park/community business. Big companies are doing this and figuring out how to get fianancing and it is working.

The smaller guys will need help but it will come and the industry will prosper. At least the good guys will.

Re: Will Higher Interest rates boost MH sales ?

Posted: Sat Oct 25, 2003 9:44 am
by Mike
Higher mortgage rates have usualy brought higher credit scores to the sales centers. I agree with Mark, lower rates can have a positive inpact on sales if you have the right product, land availability, etc. In my market there are two types of sales happening. First is the big, pretty and cheap. (The 2000sq ft for $49,900 crowd) and then the site build high quility modular folks. Well built HUD homes seem to be struggling. Not enough WOW for the consumer and not enough appraisil for the dealer. With new financing guidlines this division only seems to be getting wider.Beware! The when the new higher credit scores return, they will be beter ed-ju-Kat-ed and informed than in the past. Good luck.

Re: Will Higher Interest rates boost MH sales ?

Posted: Tue Dec 02, 2003 12:19 pm
by Kenneth Rishel
First, there is no question that the industry is in a recession. The question that many people seem to dodge is "why". The manufactured housing industry has undergone a number of these recessions before and they are almost always preceeded by periods of "easy credit" followed by periods of almost no financing sources.

I have heard the arguements for years that high interest rates on site built equal more manufactured home sales. I believe this comes from a pre 1975 time when the industry was selling 10'-12' wide "slicks" on 25% down, 10 year paper. The homes were retailing for prices that rivaled the price of a new car. Those days are dead and gone. The public won't buy that type of house, the government won't allow it to be built, and local zoning won't allow its placement.

As an industry, we should take advantage of the few lenders left who have low rates and promote manufactured homes as a smart alternative to site built housing. This has to start with the advertising and marketing, followed by attractive dealer facilities and fully set up homes on display. The mfrs have to build a product people want, and lose the flash that only appeals to people who have real difficulties getting financed in the first place.

Re: Will Higher Interest rates boost MH sales ?

Posted: Tue Dec 02, 2003 1:57 pm
by Kenneth Rishel
This industry cannot label itself with one sticker and expect that to apply all over the country. Out west and up north the big multisection homes may be able to compete with the regular site built housing. They will have to play on a level field and the Fannie Mae rules will see to that. Hopefully those who try to get around those rules will be caught and put out of business.The south and southwest will need entry level, lower cost homes in order to satisfiy the growing population that moves in and wants to have someplace besides an apartment to live in. Placing homes in communiites and being able to fianance them is going to be a big part of the park/community business. Big companies are doing this and figuring out how to get fianancing and it is working.

Very @!#$!

Posted: Wed May 24, 2006 3:26 am
by John4087