Here is a live feed of the MHP Industry over last two recessions:
Link to the previous article on this topic:
You’ve probably seen the net operating income stability charts from the largest MHP owners. However, two under-appreciated components of that resilience are:
How well top-tier portfolios performed relative to inflationary periods.
How the largest park owners achieved above average NOI gains into two of the craziest recessions we’ve ever seen.
When the world is falling apart, well-located parks have gained strength.
In other words, they’ve been anti-fragile investments the last ~20 years.
There are a few rational reasons for this.
1. Record Housing Shortfall
We basically stopped building homes after the Great Financial Crisis of 2008/2009. This was a classic overcorrection and “fight the last war” response to the subprime crisis.
2. Banks Got Too Stingy
Banks made it a lot harder to qualify for a home. Tighter underwriting standards were needed, but they probably swung the pendulum too far.
3. The Affordability Gap Widened
Another important factor is the increasing spread between the cost to purchase a new stick built home vs. a new manufactured home.
4. We Don’t Have Enough Mobile Homes
The go-go years of mobile home construction and “just have a pulse” underwriting standards for mobile home loans peaked 20+ years ago. We just recently got back to 100K home shipped per year.
5. Apartment Rents Spiked
But more importantly, MH rents (up ~5% / year in 2021 & 2022) haven’t kept up with massive, double-digit apartment rent increases (see graph below) the last couple years. This was especially true in the Sunbelt, which saw unreal apartment rent increases post COVID.
The worriers among MH owners fear a hard landing would create another 2001-2002 downturn in the industry (which disproportionately hit the softest markets & turnaround parks).
But given the widening gaps in affordability, the 3-4 million housing shortfall, the tighter lending standards (and all the other supply / demand benefits), we’d expect most mobile home parks weather whatever comes next this cycle.
Happy Trails,
MHP Weekly