Why the decline in manufactured housing?

The Cleveland, Ohio-based Freedonia Group released a report that expects manufactured housing shipments to reach 85,000 units in 2020.

That would mark a decline in share of total single-family housing starts and manufactured housing placements.

The research group explained that manufactured housing’s share of all single-family housing units was elevated in the 1990s due to very accessible credit, but declined through 2005 as the industry became more wary of its former easy credit policies, while lower interest rates and new financial instruments for subprime borrowers made conventional housing a more attractive option for many home buyers. However, faced with higher mortgage interest rates when their adjustable-rate loans were reset, amplified when the Federal Reserve tightened its monetary policy in 2005, many borrowers defaulted on their mortgages. This created tremendous volatility in financial markets and forced many lenders to change their practices. Furthermore, this led to a glut of repossessed houses in the market and limited any demand gains in manufactured housing.

According to Freedonia’s analysis, manufactured homes appeal to a wide range of individuals, particularly due to their affordability relative to site-built housing. In 2015, the median household income of manufactured home owners was approximately $28,400, with over three-fourths having annual incomes below $50,000. As prices for comparable site-built homes rise, manufactured housing will attract more first time home buyers and other consumers seeking an affordable alternative. However, new trends in design, additional value-added features, and increasing availability of multisection units will attract higher-income customers.

For more information on the report — “Prefabricated Housing in the U.S.” — visit freedoniagroup.com.