New manufactured home prices are finally falling. This is great news.
When stick built home prices fall, most owners cry. When mobile home prices fall, park owners rejoice!
While there are often sale specials from specific factories (when their inventories spike), the last few months have seen the first across the board, wholesale price decreases since 2010.
Why does this make us happy?
We mostly care about the lot rent, we tend not to mark up our home prices
It’s a great sign that orders are finally leveling off and that we’ll be able infill more pads in 2023 (and won’t have to contend with another crippling backlog season like 2020-2021). Budgeting infill last year was damn near impossible
More future and current tenants can afford to buy new homes, thus getting home values off our balance sheet and improving park appearances
We can supply more desperately needed affordable housing
National Mobile Home Pricing
The national data below is on a lag, but mobile home park prices starting decreasing over the summer. Keep in mind these are national average prices and are skewed by more expensive homes on the coasts. The median mobile home cost is a lot less than the average.
86 grand for a single wide!?!
Even adjusted for coastal pricing impact that feels high. It doesn’t seem that long ago that a wholesale price for lower-end 3 bed / 2 bath single wide, 16 ft X 70 ft ranged from $38,000 to $42,000 delivered. Add installation costs: lot prep, new piers, set home, AC, decks, skirting, electric and gas hook up, insurance and landscaping cost $10K-$15K for an all in cost of $49,000 to $56,000.
You can still get somewhat close to that price range in some markets, but those homes are basically made of cardboard.
Backlog Blues
Plenty of park owners paid 50%+ premiums for homes in 2021. You had to call in favors, give away your firstborn and pay nosebleed pricing or get in line (eight month backlogs on new home orders were common).
Post COVID saw two years of relentless price increases caused by a surge of demand + labor and supply chain failure (cheap foreign materials started sitting in shipping ports waiting to be processed).
Besides raw materials, mobile home movers, installers and even city building inspectors were in short supply. Every step of a new home install process was a hassle.
It was a perfect storm for mobile home price increases.
Thankfully, supply is normalizing and pricing is cooling due to the drop in commodity input costs, the increase in factory capacity and the Fed’s efforts to tank the economy to stave off inflation. This has led to a few consecutive months of 5-6% price declines in the manufacturers pricing bulletins.
We just wish this would have happened before out tenant base blew through all those generous government stimulus checks!
Pandemic Home Sales
There were over 100,000 manufactured homes produced in 2021. Mobile home sales went from 97k, 95k, & 94k in ‘18, ‘19, & ‘20 respectively. There was probably demand for another 20K+ that went unfulfilled.
2023 Mobile Home Outlook
Our conversations with mobile home builder reps (they are biased, but probably right) suggest that mobile home deliveries will see stable to slight growth next year.
Q1-Q2 2023 will still see deliveries fulfilled from 2022 orders, which were sizable. As of now Q3 orders aren’t likely to see double digit percentage gains, but orders still look strong. Of course, Q4 orders are anyone’s guess now that interest rates have gone parabolic!
In recessions, mobile homes are positioned as a ‘catch all’ asset class - some tenants can’t afford single family or more expensive multifamily alternatives. Others lose their job and downsize to a manufactured home. Affordable housing supply nationwide is still very tight & this won’t change if times get difficult.
Industry consolidation from private equity hasn’t stalled. Big players are still putting in large mobile home orders. RHP’s recent 50 park acquisition has them ordering 500+ homes and Sun Communities Q2 acquisitions netted them over 2,000 new development sites to infill.
Who knows, but given the above, we’d suspect home orders and pricing to stabilize in 2023 vs. dramatic moves in either direction. Thankfully, steady as she goes is all we need in the affordable housing industry.
Happy Trails,
MHP Weekly