Manufactured-home dealerships here have been hammered in recent years by an industry slump that has decimated sales, gutted staffing levels, and caused many stores and some plants to close.
A frenzied surge in competition and reckless lending that caused the market to be flooded with repossessed manufactured homesformerly referred to as mobile homestriggered the downturn, those in the industry say.
It put people into homes who really shouldnt have been there, says Dave Boyce, owner of Thrifty Homes, a longtime dealership at 4805 E. Sprague.
Historically low interest rates that have enabled more buyers to qualify for conventional site-built homes also have been a factor in the slump, which the Wall Street Journal recently described as the worst in the cyclical industrys 60-year history.
Nationally, shipments of new manufactured homes plummeted to 130,900 last year from 373,100 in 1998, industry figures show. Manufacturers shipped just under 2,900 homes to retailers or end users in Washington state last year, down from a peak of around 7,500 in 1995, according to U.S. Department of Housing and Urban Development statistics.
In unincorporated Spokane County, figures also show a steep downward trend, with the number of permits issued for the siting of new or replacement manufactured homes falling to 447 in 2002 from 625 in 1998. One industry source here estimates the industry crash caused half or more of the dealerships in the Spokane-Coeur dAlene-Sandpoint area to close their doors.
Theres optimism in some quarters here, though, that the industry not only has bottomed out, but might be starting to pull out of the skid.
Jim Markley, co-owner of Greenfield Homes, a 5-year-old dealership at 6817 N. Division, says he thinks the surviving dealerships here are beginning to see an upswing in buyer interest.
For us it has already turned, he claims. Our traffic has increased probably 200 percent this year.
He attributes that rise to a combination of fewer competitors in the marketplace, reduced inventories of repossessed home, and a move earlier this year by Fannie Mae, the nations biggest provider of mortgage financing, to boost its involvement in the manufactured-housing market.
Fannie Mae announced in February that it was joining with Seattle-based Washington Mutual Bank and eight other big lenders to work toward transforming that market, which Congress believes provides an important affordable housing option for many Americans, particularly low-income and elderly citizens. Though forced earlier to make more than $200 million in write-downs on securities backed by mobile homes, Fannie Mae said it would seek to provide prospective buyers access to affordable 30-year mortgage financing with down payments as low as 5 percent.
It also said it will work with its lender partners to learn more about best practice measures theyve developed, including measures designed to help ensure that consumers dont pay more for manufactured homes than theyre worth, and to eliminate predatory and anti-consumer practices.
Big ground to make up
We started out just as the market started down. For us right now, were doing really well, Markley says, adding that the Fannie Mae support should provide a further boost. He adds, though, that Greenfield Homes should be selling 36 to 48 homes a year, and, We were down to less than 20, so the company has a ways to go way before it gets back to a desirable volume.
Greenfield Homes sells Silvercrest manufactured homes made by Champion Enterprises Inc., of Auburn, Mich., and Skyline homes made in McMinnville, Ore., by Skyline Corp., of Elkhart, Ind. Both manufacturers are publicly traded.
Markley and other dealers interviewed for this story say a typical manufactured home sold here is a double- or triple-wide unit ranging in size from around 960 to 2,800 square feet of floor space and in price from around $38 to $44 a square foot, excluding land and site work. That would put the cost of a typical 1,200-square-foot manufactured home at roughly $48,000. An additional cost of $15,000 for site work is considered typical. Single-wide manufactured homes, as one dealer put it, are largely a thing of the past.
The industry estimates that construction costs per square foot for a new manufactured home average from 10 percent to 35 percent less than a comparable site-built home, not including land costs.
The manufactured homes being built now, dealers here assert, are far superior to those constructed before 1976, when the federal government established stringent construction and safety standards. Like site-built homes, they also now are available in a broad range of floor plans and designs, even including handsome two-story units, and with an equally broad range of amenities,the dealers say. They still suffer, though, from a stigma among some prospective home buyers.
Boyce, of Thrifty Homes, says, Were a heck of a lot different than we were back thenby generations, Id saybut we still have the image issue. People who dont know what a manufactured home is or havent been in one, even for five or seven years, are just amazed at what they can buy for the dollar, but we still have that issue to overcome.
Thrifty Homes started out here as a manufacturer 32 years ago, and now is an exclusive dealer of homes made by Fleetwood Industries Inc., of Riverside, Calif., Boyce says. Thrifty Homes sales have fallen over the last several years by 35 percent to 45 percentless severe than the national slump, but still a pretty dramatic reduction, he says. Like other dealers here, he says, the company was forced by the shrinking sales to trim its work force and other expenses.
Looking ahead, Boyce says, I would guess when the year is done, well start to see it coming back, perhaps by 10 percent to 20 percent over 2003. The market, though, still will take a long time to recover the ground it has lost, he predicts.
Art Berger, owner of Yakima-based Valley Quality Homes, which operates a dealership here at 17123 E. Sprague and four others across the state, says a couple of his dealerships have been hurt by the market downturn, but that his companys overall sales have increased over the last several years.
Theres no question of the fact that the industry in general has been down, but I attribute it to certain sales techniques being used that should not and need not be used. It results in heavy repossession rates, he says. We have had some swings, but nothing dramatic.
Valley Quality Homes, founded 25 years ago, sells manufactured homes made in Sunnyside, Wash., by affiliate Valley Manufactured Housing and claims to be the states largest seller of double- and triple-wide homes for 11 years running.
We do have the credibility, and that has carried us through tough times. We have never suffered and went into the red at any time. That is almost newsworthy, Berger contends.
Statewide, though, he adds, There certainly has been a lot of casualtiesa bunch of them down the I-5 corridor (in Western Washington), and Eastern Washington has had its share.
Joan Brown, executive director of the Washington Manufactured Housing Association, says the industry in this region probably has been through the toughest period in its history.
She says, however, I think weve already seen the leveling out.
The Olympia-based trade organization that Brown heads represents retailers and lenders in the state, and manufacturers in Washington, Oregon, and Idaho.
She says the slump was caused by a huge influx of lenders into the manufactured-housing market and tremendous competition. Some of the lenders went for volume and chose not to use standard healthy underwriting criteria, after which repossessions soared, she says.
There was a lot of pressure to put people in homes, which time told us they shouldnt have been, Brown says.
There was just this huge bubble of entry into the market, and then an equally big bubble leaving, she says. Were back to our core group of long-term professionals, so I feel very optimistic in that sense. She adds that the associations members seem upbeat about a market turnaround as well.
Whats good for consumers to know also, Brown says, is that the Northwest manufactured-home market is unique compared with the rest of the country. We have always been a higher-priced market, with little consumer interest in single-wide units, and a larger percentage of homes sold here are placed on private property, rather than in land-lease mobile-home parks, she says.
Brown notes that Washingtons manufactured-housing industry, though struggling, had something to cheer about earlier this year when the state Legislature approved a bill that prohibits discrimination against consumers choices in housing. Basically, she says, the bill requires local governments to treat manufactured homes that are built to current standards the same as site-built homes in regulating where they can be placed.
While the legislation by itself probably wont spur a big increase in manufactured-home sales, it is tremendously symbolic, Brown says.
The industry, though, continues to be plaguedsometimes just peripherallyby allegations of consumer abuse. The most recent example here involves a company called JEM Industries that, for a $100 fee, was offering a loancosting, for example, $165 a month for 10 yearsthat purportedly would provide a new double-wide mobile home, a new car, and furniture. The Washington state Attorney Generals office has alleged that the business is a scam.
We are very concerned about the apparent lack of ability by them to fulfill any of the promises they are making, says Jack Zurlini, an assistant attorney general here.
An estimated 8 percent of the American population, or about 22 million people, lived in manufactured housing as of 2000, the industry says. In unincorporated Spokane County, the total number of mobile homes had climbed to 13,516, or 7.4 percent of the total housing stock, as of last year, from 2,488, or 2.5 percent of all homes, in 1970, according to the fall 2003 Real Estate Research Report for Spokane and Kootenai counties. Showing the tendency for them to be located in rural or semi-rural areas, just 1,523 of the 13,516 mobiles homes were in the city of Spokane, equal to 0.5 percent of the citys total housing stock.
The manufactured-housing industry dates back to the 1920s, when trailer coaches were introduced to serve travelers who wanted the ability, while vacationing, to sleep at a campsite. During World War II, those dwellings on wheels then were used at factories to house workers who came from miles away to aid in the war effort.
When the war ended, returning veterans found affordable housing in short supply. Manufacturers responded by producing trailers that were large enough to house a family, but that still could be moved from one location to another to provide the mobility that families desired back then. Mobile homes then evolved from consumer demand for something that was bigger and nicer looking.
The effect of federal regulations enacted in the 1970s was to define mobile homes more clearly as buildings, rather than vehicles. The Housing Act of 1980 adopted that change officially, mandating the use of manufactured housing to replace the term mobile homes in all federal law and literature for factory-built homes constructed since 1976.
Most such homes now are never moved after theyve been installed, the industry says. They differ from so-called modular homes, which are factory-built homes constructed to the state, local, or regional code where the house is to be located, rather than under a federally regulated building code.
They are built in sections, or modules, that are transported to the owners site and installed.
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