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Home > Analysis and Commentary, Association, Business, Manufactured Housing Industry, News Item, People, regulation, research, Small Business, Trends > Manufactured Housing Industry, New HUD Code Home Retailing – More Exploring, Going Vertical

Manufactured Housing Industry, New HUD Code Home Retailing – More Exploring, Going Vertical

October 10th, 2017

ManufacturedHousingGoingVerticalReportDailyBusinessNewsMHProNewsFirst in the mobile home business days, and later, as the manufactured home industry evolved, the sale of new homes was dominated for decades by independently owned and operated retailers and communities. 

Some independent retailers – a.k.a ‘dealers’ – developed over time into multiple-locations that also produced, sold – and sometimes also financed – their own homes.

For much of the industry’s history, it was independent retailers that dominated in total numbers.

It should also be noted that those eras when independents dominated, had far higher total home sales. Coincidence?  The National Federation of Independent Business (NFIB) – which includes 325,000 companies, hundreds of which are in manufactured housing – has argued that small business is a backbone for America.

MobileManufacturedHomeAnnualShipments1959-2012CalculatedRisk-DailyBusinessNewsManufacturedHousingIndustryResearchReportsMHProNews

The popularity of mobile homes rose rapidly in the post World War II period. The first big drop came during the time that the HUD Code for manufactured housing was passed and went into effect. 

That trend of new home sales being dominated by independents stared changing in the mid-to-late 1990s. 

Fleetwood Homes and Champion Homes – then the two top producers of HUD Code manufactured housing – went on a buying spree of retail locations.  The big two builders of HUD Code manufactured homes were looking for more market share, and their plan was simple.

Establish new retail centers, or buy out existing ones that were already performing.

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To understand the proper industry terminology, click the graphic above.

Tony, I have absolutely no idea,” how many other HUD Code manufactured home producers are exploring or going vertical.  But, “In the case of [our company],” the “off-the-record for now” email read, “I give it consideration every single day!

Another independent producer said they were hearing some about this vertical integration trend, but not hearing a lot of this [yet,] but understand many attempt to find different ways to solidify and/or increase their market share and CSI.”

 Among the MH Industry’s Vertical Operations

·        Clayton Homes,
·        Cavco,
·        Nobility Homes,
·        Solitaire, and
·        American HomeStar,

are among those companies that produce and retail homes – these are brand that to various degrees are already vertically integrated.

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Sources tell MHProNews that the FEMA fiasco is sparking a move by some into vertical integration.

Vertical integration may or may not include new home financing – which Clayton Homes does through Vanderbilt Mortgage and Finance (VMF) – and may also include:

  • insurance,
  • transport, and
  • installation.

As regular MHProNews readers know, unlike 21st Mortgage, VMF offers programs that may not be available through their Berkshire Hathaway sister operation, 21st Mortgage. 

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Those differences between 21st and Clayton’s captive lender VMF, tilt toward VMF.  That gives Clayton at least a theoretical edge in the marketplace.  How Clayton does with that edge will be explored in an upcoming report.

 

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A variety of factors has influenced the rise and fall of manufactured home shipments over the years. Among those often noted are economic, finance, competition from easy site-built lending in the early 2000s, regulatory — and the impact of near monopoly” influences.

 …and Going Vertical…

The Daily Business News has heard directly from top executives at two operations, who have told MHProNews that they’re in the process of “going vertical.”

Both have mentioned the frustration over FEMA, as well as other causes for their plans.

While one company set no specific time lines, the other indicated that by this time next year, “going vertical” would be a “done deal.”  To protect proprietary information, and at the request of those sources, the specific details are being kept off-the-record.

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In the mobile home era, hundreds of thousands of more homes were sold than are being sold today. Yet the affordable housing crisis is raging nationally, Plus, the quality, design, appeal and satisfaction of modern manufactured homes are higher today than ever before.  While there are many factors – including regulatory ones – that contribute to the lower new home sales volume today, sources tell the Daily Business News that it’s due in part to what producers across the country have said is a lack of independent MH Retailers. With the FEMA crunch, there are now increased concerns from a growing number of independents about the direction that current events are taking the industry.

MHProNews has also heard from/about two other operations that are testing/going/exploring vertical integration.

All of this comes down to an insufficient number of independent operations,” one source in HUD Code building said. “A competitor of ours is helping new independents open up; not exactly a vertical operation, but a step towards that, as they’re offering floorplan on their inventory.”

Charley Lott, Fleetwood Homes

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Charley Lott, Fleetwood Homes, Cavco Industries, credit, MHProNews.

At the Louisville Manufactured Housing Show, circa January 2007, Fleetwood’s Charley Lott – now part of Cavco Industries – stood in a room with over 100 independent operators in it. 

Lott was making his ‘mea culpa’ to those independent retailers and communities, for the period when Fleetwood “forgot” its independents that helped make them a top player in manufactured housing for many years.  

Lott admitted to that room of independent retail and community professionals that in Fleetwood’s rush for vertical integration –  during their late 1990s contest with Champion – their focus shifted away from independents. He admitted apologetically that it hurt many involved in that process.

Much has changed in the last 20 years, as longer-term manufactured home industry veterans know. 

But the question of vertical integration is a vexing one, which IBIS World and The Atlantic predicted, as was previously reported at the link below the graphics that follow.

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A close reading of the IBIS World/Atlantic report made it clear that the headline was actually focusing on how independent manufactured home retailers were dying off. That projection, now several years old, has proven to be correct.

Some of the causes for the failure of literally thousands of independent HUD Code independent retailers – and later several of the producers which supplied them – has been explored in part in previous articles, one of which is linked here.

How many independent retailers have vanished?  Former Clayton exec turned-speaker, Ken Corbin puts the number around 10,000.

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The above is a collage of some images from Ken Corbin’s presentation at the manufactured housing industry’s 5 State Event in Deadwood, SD. Graphic by Corbin used with permission.

There will be a special report of a process that accelerated the demise of independent retailers and producers. It will explore a related, underlying cause that’s gone under-reported in MHVille. It is one that sources say the Manufactured Housing Institute (MHI) and its key players have allegedly hoped would not “come out” to see the light of day.

Still Several HUD Code Independent Producers Committed Solely to Independent Retailers

Sunshine Homes president John Bostick has made it clear to his retailers that he is committed to them.

That loyalty is valued and respected in the hospitality and meeting rooms where dozens of Sunshine independent retailers and communities gather.  Having attended several of those over the years, the mutual respect at their gatherings is tangible. That independent producer, retailers, communities and builder/developers have forged a bond with each other, that in several cases, spans decades. 

So, one point is that not everyone is ‘going vertical.’ 

Besides Sunshine, several other independent producers and retailers exist, as Bostick has noted on several occasions.  Many are represented by the Manufactured Housing Association for Regulatory Reform

As FEMA and other pressures grow on retailers and producers alike, what the future will hold is literally up for grabs.

Up For Grabs

One of those grabbing for a takeover of more independents is Clayton Homes, as the Daily Business News has previously reported. 

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As pressure on independent retailers mounts from direct and indirect causes, industry professionals have voiced on-the-record concerns that they are being squeezed in the marketplace.  Learn more, click above.

A reliable source tells us that Clayton has “a mandate” to continue growing their retail division.

There are concerns about “the near monopoly,” as Maxine Watters (D-CA) and some of her congressional colleagues have expressed about Clayton grip in HUD Code production.  

But sources note there seems to be less federal oversight on the industry’s retail side.

Some of that expansion by Clayton retail will come, per another source, from expansion and buyouts, like the one previously reported about award-winning Home Mart, in Tulsa, OK.

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A growing number of retailers are selling out to Clayton Homes, as MHProNews has been reporting.

But others, per that source, will come from attrition of the relatively small numbers of independent producers still in the market place. 

That allegation and other concerns noted will be explored in yet another planned, upcoming report. ## (News, analysis, commentary.)

(Image credits are as shown above, and when provided by third parties, are shared under fair use guidelines.)

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L. A. ‘Tony’ Kovach addressing industry professionals in an educational session.

By L. A. “Tony” Kovach, managing member of LifeStyle Factory Homes, LLC – parent company to MHLivingNews and MHProNews.

 

 

 

 

 

 


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