Residential Magazine

Factory Savings

Manufactured housing can be an answer to the affordability crisis

By Bill Packer

Home prices continue to skyrocket across the country, putting the American dream out of reach for many people. One solution to this price crunch is manufactured housing. This type of housing can be an appealing option for many consumers. Originators who understand loan programs for these homes can grow their businesses.

Surging home prices are preventing many families from buying a home, despite historically low mortgage rates. Median home prices during the fourth quarter of last year were less affordable than historical averages in 55% of the U.S. counties analyzed, up from 43% a year earlier, according to an Attom Data Solutions report. This data suggests that more than half of American workers are currently unable to meet the traditional 28% front-end debt-to-income ratio, reversing what had been a recent positive trend.

Primary homeownership expenses (mortgage payments, insurance and property taxes) exceeded the 28% threshold in nearly 60% of the counties analyzed by Attom Data. This included several of the country’s major cities such as Los Angeles, Phoenix, San Diego and Miami. Adding insult to injury, the decrease in affordability was coupled with a median home-price increase of at least 10% in much of the country, while price appreciation outpaced wage growth in more than 90% of the counties studied. That’s the bad news.

Affordable solution

The good news is that manufactured housing continues to provide an affordable solution for families nationwide. More than 22 million people in the U.S. already live in manufactured homes, according to the Manufactured Housing Institute. With 129 plants across the country, the industry produced almost 95,000 new homes in 2019, which represented approximately 10% of all single-family home starts. Definitive 2020 data was not available earlier this year, but anecdotally, manufactured-home builders are continuing to increase production.

During the past two years, there has been a year-over-year increase of more than 10% in loan volume specifically tied to manufactured homes, according to internal data from American Financial Resources. From an affordability standpoint, there was a nearly 8% increase in the costs of traditional stick-built homes from 2019 to 2020, this data shows. During the same time, there was a 2.7% increase in manufactured-home costs, a clear illustration of how affordable this housing option remains.

Manufactured homes also frequently cost less than renting. Oftentimes, manufactured homes provide superior finishes and more square footage than a comparably priced, stick-built single-family home. They also tend to have new appliances and other premium features, along with some welcome distance from neighbors versus apartment or condominium living.

Quality construction

Companies are able to capitalize on the inherent efficiencies in the factory-building process while constructing manufactured homes with standard building materials. The controlled environment and assembly-line techniques remove many of the problems encountered during traditional home construction — such as weather, theft, vandalism, damage to building products and materials, and unskilled labor. Factory employees can be trained and managed more consistently than contracted labor needed for the site-built home-construction industry.

Also, much like other assembly-line operations, manufactured homes benefit from economies of scale that result from purchasing large quantities of materials and appliances. Manufactured-home builders can negotiate substantial savings on many components used in building a home and pass these savings directly to homebuyers.

All aspects of construction are quality controlled and inspected per the rigorous standards of the federal Manufactured Home Construction and Safety Standards. Many homes can be upgraded to Energy Star or similar energy-efficient packages. Increased energy efficiency helps increase value — not only by saving up to 30% on monthly utility bills but because some utility companies and power cooperatives offer rebates for homebuyers.

Providing an environmentally responsible and affordable alternative to aid U.S. households, today’s manufactured homes offer amenities that rival and often surpass more traditionally constructed homes. Most are made in America and crafted with precision by highly skilled workers using the latest manufacturing techniques. Homebuyers select the size and layout, and customize it with up-grades to fit their needs — including modern kitchens with new appliances, luxury bathrooms and wood-burning fireplaces.

Nearly two-thirds of new manufactured homes are placed on private property, according to the Manufactured Housing Institute. Many stand beautifully side by side with stick-built homes.

Fortunately, there are a number of unique loan programs especially suited for the purchase of a manufactured home and titled property, each with their own eligibility requirements and guidelines.

Favorable trends

A number of factors make manufactured homes attractive for both homebuyers and the originators who work with them. These include regulatory changes, moving patterns and loan programs that cater to this market.

This past November, the Federal Housing Finance Agency (FHFA) announced its 2021 requirements for Fannie Mae and Freddie Mac, including several changes relevant to manufactured housing. FHFA set a goal that at least 50% of the agencies’ 2021 multifamily lending activities must be tied to affordable housing. The revised FHFA standard reflects a substantial increase from the previous affordable-housing mandate of 37.5%.

As for moving patterns, United Van Lines released its annual National Migration Study this past January, confirming that Americans continue to move westbound and southbound. The COVID-19 pandemic accelerated many of these decisions to relocate. Migration to western and southern states have been prevalent patterns for the past several years, and they persisted in 2020. Although the available data is still preliminary, it also appears that people are leaving more densely populated areas for the space offered in more rural areas.

Organizations like the National Association of Realtors and American Enterprise Institute (AEI) Housing Center reported that nonurban areas are attracting an increasing number of homebuyers. Last year, the nation’s least-dense ZIP codes grew at nearly twice the rate of the most-dense ones, including major metros such as New York, Los Angeles and San Francisco, AEI reported.

Fortunately, there are a number of unique loan programs especially suited for the purchase of a manufactured home and titled property, each with their own eligibility requirements and guidelines. Available programs include options from the Federal Housing Administration, U.S. Department of Veterans Affairs, U.S. Department of Agriculture, Fannie Mae and Freddie Mac. These programs cover purchases, refinances and single-close construction.

Many of these programs can be coupled with downpayment-assistance programs. Using the right combination of tools opens the opportunity for homeownership to a broader range of borrowers, including those who may have been years away from saving up a traditional downpayment.

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Introducing manufactured housing as an attractive option to consumers is key, as is providing information about loan options. Considering the innate complexity of this specialized financing — including chattel lending, another specialized loan type in the manufactured-home space — it’s vital to work with a lender that has significant experience in manufactured housing.

Knowledgeable lenders can guide the borrower, real estate agent, mortgage originator and other related parties through the process. As more families choose this path for their affordable American dream, learning the options to fund their manufactured-home purchase will become increasingly vital to building your business. ●


  • Bill Packer

    Bill Packer is executive vice president and chief operations officer at American Financial Resources (AFR) Inc. With 30 years of experience in financial services, Packer joined AFR in 2015 and currently oversees operations, technology, new-product development and marketing. AFR is the nation’s leading FHA 203(k) lender for sponsored originations, and is an innovator in the construction and renovation lending space.

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