It is with a heavy heart that the Florida Manufactured Housing Association (FMHA) announces the passing of Ronnie Bledsoe. Ronnie was a visionary land developer, a well-regarded businessman, and more importantly a revered family man and a friend to many.
Ronnie Bledsoe
In hearing of Ronnie’s death, FMHA President Mark Kelly said: “Those of us in the industry that had the pleasure of working with Ronnie know what a class individual he was. He was a giant in our industry and a man that was all about vision, drive, a strong work ethic, and integrity. The FMHA recently recognized Ronnie and his partner, Parker Mynchenberg, as our 2019 Members of The Year for their work at their Plantation Oaks of Ormond Beach community. We will miss him greatly and our thoughts and prayers go out to his family.”
Bledsoe’s experience as an underground utility contractor and developer, and Parker Mynchenberg’s background in civil engineering, landscape architecture, and pool design turned out to be a winning combination. Bledsoe and Mynchenberg teamed up to develop the 377-site Plantation Oaks of Flagler between 1998 and 2004. Plantation Oaks of Flagler is one of northeast Florida’s premiere 55+ manufactured home communities.
After selling Plantation Oaks of Flagler, Bledsoe and Mynchenberg took on one of their most ambitious projects, Plantation Oaks of Ormond Beach, an upscale 55+ manufactured home community. This 1,577-home, 55+ manufactured home community is located along the Ormond Scenic Loop and Trail, close to exit 273 on I-95.
Ronnie will be long remembered for his friendly nature, kindness, and generosity as a community and industry leader. Our thoughts and prayers go out to Ronnie’s family, friends, and business associates.
1. It’s early yet in the programs, but what if any type of market change have you seen with the emerging presences of CrossMod/MH Advantage/CHOICEHome?
The CrossMod product is an excellent opportunity for our industry to initiate dialogue and educate the public as well as regulators and policymakers on the quality and affordability of manufactured housing. Within the industry, we know and understand that manufactured housing is the most viable solution to the affordable housing crisis in America. However, to continually change and improve the image of manufactured housing is a difficult and slow process. CrossMod is an excellent and new segue into the dialogue that needs to be had. Undoubtedly the positive effect of this education will impact all manufactured housing products, not just CrossMods.
Outside of this education, we, as an industry, need to find a way to solve the zoning issues that prevent these and all HUD homes from going into most municipalities. This dialogue was a significant portion of our most recent MHI Financial Services Division board meeting in Nashville. It’s a real issue that MHI and their membership will be taking on.
2. What type of advantage do you feel these new programs offer lenders/retailers in the manufactured housing industry that is unattainable by originators and servicers of conventional home finance packages?
I think the biggest benefit is affordability followed by speed to build. To be able to have a home built in a factory that rivals site-built housing for significantly less cost per square foot and a much quicker build time is a significant advantage that our industry must take full advantage of.
3. If we assume these new homes and finance programs that can co-exist with standard R1 site-built homes will pare away at the exclusionary zoning practices our industry has experienced, how long do you feel it might take for a notable change to occur? From a consumer lending perspective, how do you forecast and measure this type of change?
This is a big discussion. We need to push on this, presenting to our industry and gathering a task force to explore ways to appropriately approach zoning change. The state associations do a good job of that, they’re the boots on the ground and have relationships with planners and zoning boards of appeal. And MHI really should look to them on this front.
We have the federated states division of MHI, made up of state association directors who would be a primary resource for this area of industry activity… there’s an opportunity to create a set of best practices that will go into a playbook or a tool kit of some kind,
It has been suggested that we urge the federal government to halt Community Development Block Grant (CDBG) funds for local governments that fail to meet a certain threshold of manufactured housing implementation in affordable housing initiatives. But there’s no one approach that’s going to be the ultimate solution. It will be a combination of approaches that will be a solution that works over time. The sticking point is that we’ve been at this type of effort for some time, and we don’t want to look back in another few years and say ‘Man, we should have done more or we should have done this differently.’ The important time to make that positive change is now.
The interior of a new Fleetwood home.
4. Tell us how your chattel lending programs have fared in the last year or so? Are you seeing an uptick in activity?
Although Cascade has provided land/home financing in the manufactured housing industry for over 20 years, we have only been lending on chattel for about three years. So, with our chattel programs, we really had nowhere to go but up. We have expanded and developed our loan products to assist retailers and communities in expanding their sales. On top of our wide range of loan products, Cascade has invested significant time and resources into developing technology to streamline the lending process for consumers and retailers alike. With the development of our digital loan application, we are getting a full prequalification with income, credit, and other applicable qualification guidelines considered back to the borrowers and retailers in less than two minutes. This type of technology gives retailers and communities the ability to sign and execute contracts before the borrower leaves the sales center. Site-built lenders have had this technology for years, our industry has lagged slightly behind. But at Cascade, we have addressed this and are excited about continuing to develop and streamline the lending process for our clients. We believe that our continued advancements in technology and lending programs will positively impact a boost in unit sales for the retailers and communities with whom we work.
5. Does the industry in this chattel category continue to be hampered more by the slow-to-grow secondary market or is the lean chattel market more of a reflection of so few new manufactured home communities with reliance on growth coming from existing community expansion?
As you know, the macro backdrop should be highly supportive of demand for chattel as one of the most attractive solutions to the affordable housing crisis. However, there are several forces at play that are impeding growth. There are many that point to a lack of a secondary market in the financing of chattel loans.
In 2019 Cascade executed the first securitization of newly originated manufactured housing loans since 2007. We sold a pool of $174 million of loans to institutional investors. This was a tremendous accomplishment for Cascade, but also for the entire manufactured housing industry. The lack of a secondary market for non-agency and non-government manufactured housing loans has limited lending in our industry. Creating additional liquidity by the closing of our securitization is a huge first step in creating a secondary market.
We will likely issue another larger securitization in the third quarter of this year. While our first one was unrated, we are working with rating agencies now to get this next one rated.
These initiatives should pave the way for more availability of credit for chattel buyers. That will certainly enable Cascade to assist more buyers in achieving the dream of home ownership.
That said, simply improving the financing markets is not enough. The lean chattel market is really a reflection of zoning constraints and a misplaced stigma around the sector. We need a sea change in buyer demand to move the amount of shipments into a place that is consistent with solving the country’s lack of affordable housing.
6. What does the future hold for you? What do you feel is the key to being a successful consumer lender for affordable homes?
We think affordable housing and the work MHI and its membership are doing will continue to help this industry grow, and as shipments go up we’re going to be prepared to create and offer better, more efficient programs to help finance those homes. The industry is about to finally break through the 100,000 shipments level and ideally with the right economic factors, push far beyond it. The industry has some very strong tailwinds right now and Cascade takes very seriously our role to create and provide loan products that will support sustainable industry growth.
7. What are your impressions on the overall climate for the manufactured housing industry?
Clearly this is an unprecedented moment in history. 2020 started with such strong tailwinds but the current situation with COVID-19 has altered every aspect of growth worldwide, not just in our industry. That being said, manufactured housing was the best solution to the affordable housing crisis in the United States prior to the current situation, it is the best solution during the crisis, and manufactured housing will be the best solution after the crisis. Cascade is dedicated to creating better systems for our borrowers, to aid retailers and communities in fulfilling the demand, and we take very seriously our role to create and provide loan products that will support and promote sustainable growth.
Additionally, our message is being well-articulated, and it’s being heard. A few years back it would have been absolutely unfathomable to think that the Secretary of HUD would be advocating for manufactured housing and that we would have homes displayed on the national mall in D.C. It was something we just wouldn’t have thought would happen. And to have Fannie, Freddie, and FHFA coming out to our home shows and conferences to educate themselves and the public as they work toward their Duty to Serve requirements has given the industry visibility that we have not previously enjoyed. It’s a testament to the grit of our industry. We are an industry who rolls up the sleeves, works hard for change, and doesn’t take no for an answer.
Consumer activity dipped in the earliest days of the coronovirus economic shutdown but the latest data from MHVillage.com, the industry’s largest consumer website for manufactured housing, shows significant recovery with interest pushing higher than 2019 levels.
Demand for affordable housing remains strong and has shown significant growth in recent weeks.
Overview of MHVillage User Activity
The domestic housing market has shown tremendous resiliency through sustained and unprecedented economic uncertainty. As markets reopen and a greater number of consumers reactivate, having a strong, steady presence in the marketplace is essential to seizing the evident opportunity at hand.
Mortgages Bankers Report Shows Highest Volume in 11 Years
The Mortgage Bankers Association in its weekly report of mortgage application volume stated the number of applications nationally has continued to increase since mid-March when economic restrictions due to the coronavirus began.
Moreover, mortgage applications are at their highest level in 11 years, and for the second week of June 2020 were 21% higher than the same week last year.
Rising numbers in mortgage applications amid greater than usual economic concerns shows that consumer confidence has remained high. Buyers remain buyers, and new consumers are entering the market.
The Market Composite Index increased by 8% week-to-week. Refinance applications rose 10% week-to-week and were up 106% year-over-year.
“Purchase applications increased to the highest level in over 11 years and for the ninth consecutive week. The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence,” MBA’s Associate Vice President of Economic and Industry Forecasting Joel Kan said. “Mortgage rates dropped to another record low in MBA’s survey, leading to a 10% surge in refinance applications. Refinancing continues to support households’ finances, as homeowners who refinance are able to gain savings on their monthly mortgage payments in a still-uncertain period of the economic recovery.”
The survey has been conducted since 1990 and includes more than 75% of the nation’s retail residential mortgage applications.
Clayton Home Building Group and the University of Tennessee’s Department of Industrial Systems and Engineering are implementing workforce changes developed from more than two years of research.
The research project began in early 2018.
Clayton’s university partnership broadens the corporate and industry commitment to making homes more attainable by incorporating advanced automation and robotics into the off-site construction process that improves efficiencies and reduces cost.
“Our country is experiencing a widespread need for quality, affordable housing solutions,” President of Clayton Manufacturing Rick Boyd said. “At the same time, we are continuously researching ways to reduce labor stress for our valued team members.”
Clayton’s university partnership brought in (from left) Abhay Bajpai, Cory Chumley, Marty Mansfield, Dr. Rupy Sawhney, Carla Arbogast, Hari Arawind, Kshitij Sharma, Prashanth Balasubramanian, and Vaikrant Pandav to study work habits, find efficiencies, and create a healthier and more productive work environment. Photos courtesy of Clayton Homes.
Automation Assists Employees, Benefits Homebuyers
Boyd said automating processes and integrating robotics into the existing production reduces physical burden, but also enhances safety and improves efficiency.
“By testing and incorporating the latest available technology into our construction processes, we hope to deliver innovative and attainable solutions to more home buyers,” he said.
UT engineering faculty and students conducted research during multiple three-week periods at Clayton Rutledge in East Tennessee, one of the company’s 40 off-site home building facilities in the U.S. By using wearable activity trackers and analyzing hours of video, the students compared value-added to non-value-added tasks for each team member throughout the day. They then considered potential time-saving solutions and offered them to the workforce.
“My experience with Clayton had a positive impact on two aspects of my life— problem-solving and relationship management,” UT graduate research assistant Abhay Bajpai said. “Through our research and collaboration, we were able to understand the production process, as well as provide solutions to problems and constraints they were experiencing. The relationships we built with the team members were crucial in our methods for an overall sustainable process improvement.”
UT engineering students mount a camera to map Clayton team member activities during the workday.
Following the Science of Homebuilding
The National Institute of Building Sciences states that 57% of activities in construction are wasteful and non-value-adding, while 62% add value in manufacturing. As a result of the partnership, changes to improve productivity and team member experience were implemented at several Clayton home building facilities. One of the recommended practices, kitting, involves bundling all materials for a specific space in the home and delivering them at the most accurate time during the building process.
Kitting improves efficiency. Additionally, it encourages physical distancing between team members, which is helpful in reducing the likelihood of virus transmission.
Clayton’s university partnership has delivered meaningful results for manufactured housing, and the research continues, UT Industrial and Systems Engineering Professor at Rupy Sawhney said.
“Not only were we able to create an algorithm and methodology unique to Clayton and the manufacturing industry… that research is now expanding,” Sawhney said. “Several of our staff and students have subsequently developed and published major reports and studies.”
The reason they did this is to help find a better balance for the American workforce between productivity and health and wellness. Sawhney said American workers are very productive, but highly stressed.
Zone-based manufacturing, Sawhney said, is the novel breakthrough his group made during the partnership.
“This basically came from what we saw at Clayton, which was a recommendation toward creating zones within a home where there will be a more strategic work effort on this part of the floor plan. And that’s what led to kitting, where all the materials can be delivered all together and at the right time for a particular zone. We believe through this we can transform productivity and improve the health and wellness of the workforce.”
Kevan Enger, a seller-focused broker for manufactured housing communities.
Over the last several years, the mobile home category has boomed. The convergence of multiple supply- and demand-side market conditions coincided with a historic generational shift to create an unprecedented sellers’ market. This seller’s market had extended beyond expectations and was long-believed to be in its eleventh inning.
Will coronavirus prompt a game-over call?
The Pre-Coronavirus Landscape
By supplementing available market intelligence with our own national data and empirical analysis we have created a moving picture of the community segment. Over the 2018-2019 period, our data shows strong demand for mobile home park communities. That demand continued to drive prices up and push cap rates down.
The market was hot
For the most part, larger parks in large MSAs were in the highest demand. Hot markets such as California, Arizona, and Florida had the greatest price gains. Cap rates in these markets approached 3% for group buys of larger parks in February of this year, while we were still seeing smaller deals in the 9% range. Our sales data shows an average cap rate reduction of approximately 38 basis points.
Occupancy good and improving
Our reports show an approximate 4.8% increase in occupancy over the last two years for the properties we were marketing. A broader view of the category at the market level revealed a slightly lower increase in occupancy but confirmed the upward trend.
All-ages communities came in at 91% while 55+ communities reported an average 96% occupancy rate. The data revealed an uptick of approximately 1% for the national metric over the same period. Breaking it down, all-ages communities registered an increase of 1.2%, while the 55+ communities gained of 0.5% in occupancy.
The occupancy metric is interesting because mobile home parks have historically been a multi-generational hold with limited change over the years.
As larger and more sophisticated groups have entered the market, we’ve seen a lot more streamlining and efficiency in the space both on the back and front end of the business. This increase in efficiency contributed to a reduction in vacancy rates particularly in the sunbelt.
Increasing curb appeal within the go-to-market trend helps push occupancy rates up. In addition, the national lack of affordable housing combined with more appealing models of manufactured homes has contributed to a boost.
Sales Volume at Historical Highs
The big driver in the category has been the significant sales volume increase.
According to a recent Fannie Mae report, 2018 mobile home community sales volumes reached approximately $9.3 billion, highest since the end of the Great Recession in June 2009 — an important point we’ll revisit in the post-pandemic section.
The report notes much of the volume was driven by large transactions and private investors, including privately-owned companies with about 70% of the purchase volume.
In addition, institutional buyers accounted for 10% of the volume, but the top spot in acquisition share belonged to Fort Worth-based institutional fund TPG Capital with acquisitions of $387 million.
TGP was followed closely by Yes! Communities, a private REIT based in Denver with $376 million in acquisition volume. Internally, our empirical analysis reflects a similar pattern with approximately 75% of our sales going to private investors and groups that include privately-owned companies and/or developers.
Deal Velocity Acceleration
Other trends were in transaction velocity and market players. We see a marked decrease of approximately 26.6% in days on market. Much of this was due to the large number of buyers entering the market and the heightened interest in the category.
A higher number of buyers speeds up the process and increases the competition. For example, last year we averaged approximately 12 qualified offers a deal. This allowed us to find the right buyer, at the right price, much faster.
As a result, our internal velocity metric increased by approximately 100% year-over-year.
And then, coronavirus called a time-out.
The Post-Coronavirus Outlook
As we looked ahead to 2020, we saw a few trends developing and were on alert for other factors that could play a role.
What no one foresaw was a global pandemic.
Before the COVID-19 crisis, one of the biggest swaths of uncertainty was around the impact the election, politics, and fiscal policy could have on interest rates. Buyers had been on the favored side of rates.
Perhaps in anticipation of potential changes on the horizon or even the awareness of the seller market’s 11th inning feel, our information was showing an increase in sales volume.
Six weeks into the year, we had already produced 40% of our 2019 volume and we fully expected this rate of increase to continue with the potential that it would begin to level off toward the end of the year.
The New Challenges
Approximately a month into the crisis in the United States, the fundamental yet short-term challenges were:
Lack of financing options
The lack of financing options has already started and it is one of the biggest challenges we will encounter. Acquisitions of manufactured home communities are primarily financed by agencies such as Fannie or Freddie, banks, and the CMBS market.
The CMBS market is at a standstill and will remain so well into summer. Banks also hover on pause with stricter parameters for future deals and backing off ones in process.
The apparent outliers are Fannie and Freddie and their favorite child — affordable housing. Recent quotes from the agency are more favorable when compared to those given to multi-family. While agency financing typically calls for less flexible parameters, parks that qualify could jump ahead of the pack in deal velocity.
Bottlenecks across the board
With the country on pause, bottlenecks have formed across the transaction chain. This includes everything from financing and physical inspections to environmental studies and surveys.
As we move forward bottlenecks will ease but continue to create delays if more sporadically through the second quarter.
Collections, an area that was expected to be a bottleneck, has so far materialized smoother than anticipated. Owners we’ve spoken with reported better than expected collections for the months of April and May.
Uncertainty
In the face of uncertainty, people tend to wait. We sit squarely in the middle of this phase. We will see uncertainty get factored into deals across the spectrum higher rates and revised resident agreements. This uncertainty is expected to begin to clear out as we move through the rest of this quarter and into Q3 and Q4.
Perhaps our MVP and pinch hitter in this and any crisis is our affordable housing status. As affordable housing, we are recession-resistant and become a more attractive option during challenging economic periods.
Manufactured Housing Event To Be Held Aug. 12 in Nashville
The Networking Roundtable for manufactured housing professionals that has operated for nearly 30 years in varying locales will be postponed.
Organizers Susan McCarty and Erin Smith of EducateMHC said the decision to postpone was difficult, but best for the health and safety of everyone involved.
“As one of the longest-running manufactured housing Industry events, the Networking Roundtable unites land-lease community owners and operators from around the country to gather for hands-on, timely education on key manufactured housing industry issues,” Smith stated.
The 2020 dates for the 29th Annual Networking Roundtable in Nashville were to be Sept. 2-4. Nearly every manufactured housing tradeshow, conference, and meeting since March has been canceled or made a virtual meeting out of concern regarding the spread of the coronavirus.
There are over 50,000 land lease communities, representing an impact of over $1 trillion dollars to the U.S. economy, Roundtable founder George Allen said.
“This gathering represents a level of enthusiasm, deal-making and progressive-thinking found nowhere else,” Allen said.
Information on registration for the 2021 Networking Roundtable is available through the EducateMHC website.
The Manufactured Housing Institute will provide industry professionals with a new interactive webinar series that kicks off with the topic “Developing with Manufactured Housing”.
MHI will hold the first webinar on June 17 from 2:30 to 4:30 eastern standard time. The manufactured housing webinar is open to anyone who would like to participate at the cost of $35. However, the webinar is free for MHI members who enter the registration code “MHIMEMBER” when signing up.
MHI developed the webinar from its annual full-day development seminar that coincides with the Congress & Expo. Scheduled for April in Las Vegas, Congress & Expo was canceled due to concerns about the spread of the coronavirus. The event will return April 6-8 2021 at the MGM Grand in Las Vegas.
Agenda for Developing with Manufactured Housing Webinar
Industry planning and development professionals Roderick Knoll, Emeka Nnadi, and Donald Westphal will join MHI staff to lead webinar participants through the program.
“Our faculty will provide industry knowledge for builders and developers who are considering factory-built housing to save time and money on their projects,” MHI President Mark Bowersox said. “The two-hour webinar will deliver a virtual opportunity to explore a wide spectrum of topics.”
An overview of the agenda includes discussions on:
Manufactured housing industry overview
The development process and site selection
Pro forma cash flow for manufactured housing developments
Communicating something you’re passionate about can be a difficult task. This is particularly true when your topic spans multiple industries and is based on places that tens of millions of Americans call home.
Epperson and Eason began having a conversation and conceptualized what the white paper might be in 2018.
“It’s not a secret that off-site built housing is a great solution for affordable housing,” Eason said. “The real opportunity was to create a document that aggregates information about the important role off-site built housing plays in the industry. It’s about making something that’s accessible and easy to use when talking with the public or even a developer who’s not considered off-site housing.”
What the White Paper Covers
The white paper on off-site built homes includes information on manufactured homes and modular homes. It focuses on the current prevalence of factory-built dwellings, how they fit the changing marketplace demands, and the sustainability of new homes.
“We wanted to touch on everything, but something that really spiked our interest when talking with Next Step was about the opportunity for appreciation. Manufactured housing appreciates over time in a way that mimics site-built homes,” Eason said. “That’s why we wanted to highlight that particular point.”
“Each time I speak, particularly outside of the industry, I am asked about appreciation,” Epperson said. “We have information now that’s so solid and recent, that we really can capture people’s attention.”
Clayton and Next Step, which are long-time collaborators on a series of initiatives, are working together to organize a schedule of presentations at event within and outside the manufactured and modular industries.
Eason and Epperson said they felt with the development of CrossMod™ homes that can be placed seamlessly in many urban areas alongside all variety of site-built homes that the timing was particularly good to reframe the conversation.
“I really see the opportunity with CrossMod because it aligns so well with what Next Step has been preaching for a long time, specifically about the benefits of a permanent foundation, energy-efficient features, and consumer-friendly financing,” Eason said.
“We believe and have proven that you can go into suburban areas with this product, build a great product and help improve the neighborhood,” Eason added. “It takes some time because there initially is a little bit of ‘not in my back yard’ sentiment for affordable housing specifically surrounding manufactured housing. But it’s great to go through the process and watch how people’s impressions can change.”
Where is The White Paper Going?
U.S. Department of Housing and Urban Development Secretary Ben Carson and his staff received a copy of the “Off-Site Built Homes: An Evolving Industry that Meets Today’s Affordable Housing Needs” white paper during a tour of a home building facility in Alabama earlier this year.
“We’ll take it on the road with our different stakeholders across the country,” Epperson said. “We participated with the Aspen Institute this year and played a role in an affordable housing research project they are working on.
“The change I’m seeing nationally right now with funders, think tanks, thought leaders, the conversation has shifted,” she said. “The door has opened to really engage deeply on making manufactured housing more available.”
The big driver in the category has been the significant sales volume increase.
