A Mixed Bag – ‘The Good News’ and ‘The Not So Good News’
Marcus & Millichap’s 1H 2024 “Manufactured Home Communities National Report offered a mixed bag of good and not-so-good news. Specifically, the US. Department of Housing and Urban Development (HUD) is funneling more money into manufactured housing through its PRICE program. This consists of $225 million in financial resources to “help preserve and revitalize existing manufactured housing and communities.”
Another piece of good news? Barriers to manufactured housing are falling. The Marcus and Millchap analyst explained that the Federal Housing Administration (FHA) and Ginnie Mae are “implementing plans to make manufactured homeownership more affordable.” This process consists of:
- New calculation methods for loan limits allowed under the Title 1 Manufactured Home Loan Program (FHA)
- Revising financial eligibility requirements for Title 1 issuers (Ginnie Mae).
The report indicated that long-term manufactured housing demand will likely increase due to these programs and re-evaluations.
Now for the not-so-good news.
- According to the report, limited land supply and stringent zoning laws keep conditions somewhat tight. Increasing single family home costs and a considerable shortfall of housing units have placed a national spotlight on manufactured housing as a viable ownership option.” This in turn, will increase demand for lot space, especially in areas with warmer clients and higher single-family and multi-family costs. “The repurposing of open land, combined with decreasing lot availability at existing communities, contribute to tight conditions,” Marcus and Millichap analyst pointed out.
Rezoning for new manufactured housing remains an issue, contributing to lower vacancy rates nationwide. Furthermore several manufactured home communities traded hands in 2023, with the buyers planning to repurpose the land. This could lead to additional limits on supply.
Other issues in the report include:
- Higher population growth has led to lower vacancies, especially in the Southern, and Atlantic and mountain states
- Overall lot vacancy was 5.4% at the beginning of 2024, while the Midwest vacancy rates stood at 10.1%, rates in the West were 2.1%
- While rent lot rates have been driven by demand, communities in California, Massachusetts and New Jersey are exacting rent-control policies.
- Manufactured home shipments fell in 2023, but over one-third of houses delivered were placed on rented lots, representing a year-over-year increase.
- Sales transaction velocity slowed in 2023, relative to 2021 and 2022 and similar to other real estate property types.
