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What Manufactured Housing Competes Against

August 7th, 2012

l;ance-inderman-mhpronewsI think we need to take a serious look at what our industry is competing with in the housing marketplace and the regulation that each of our housing competitors are facing.

We worry way to much about what one of the 3-C's of manufactured home building are doing than we should. As a percentage of new homes sold, we just keep loosing ground.

The site builders are pushing us further and further into the rural abyss. I have a partner that builds homes with me in Lubbock and we are able to build a brick home with porches and 6/12 roof pitches for around $40 a square foot including material and 100% subcontract labor.

I have another friend that builds about 125 new homes a year with annual sales of about $35,000,000 and a little over 10% net bottom line. He does this with 9 employees, no multi-million dollar building, total work in process and finished goods of about $1,500,000. He has no licensing requirements. His company and his salespeople have no continuing education requirements. He does not offer paid vacations to his employees or laborers. He is not faced with massive unemployment taxes if he does not have a house to build tomorrow. Government mandated health insurance does not affect him. Basically he has almost no regulation and very little overhead. He builds a quality product and is very successful.

I drove down the beach between Beaumont and Galveston and pass one RV park after the other with all types of RV's up to buses that cost over a million dollars.

I saw manufactured homes that were at least 12 feet in the air to protect a $40K double wide from flooding. The construction cost to complete these jobs has to be close to exceeding the cost of the home itself. This does not appear to be a very efficient way to supply housing to me. It looks to me that the RV industry is getting a big piece of our pie and the site builders are getting an ever increasing bite as well.

We have to become more efficient at what we do from the factory to the finished product.

I think the factories do a fabulous job building 16×76's, its the most efficient 3 bed 2 bath housing I have ever seen. But by the time we: 

  • market that 16×76 to our customer at retail,
  • deal with all the regulatory requirements to install and complete the home,
  • deal with private finance against government subsidized financing on site built's,
  • escrow over priced insurance and taxes and
  • then deal with the cost of servicing a home in the middle of nowhere,

our monthly payments are as much or more than most people can buy a new starter home including land in a tract home subdivision.

We must do everything in our power to control these costs, including, but not limited to:

  • getting our finance on a level playing field,
  • getting higher deductible lower cost insurance in our market,
  • factories working with the retailers/installers to do everything possible to lower the cost of installs and
  • last but not least keeping the regulators at bay.

I think our industry has a remarkable product that we can build and a great story to tell but all you hear and see is "I don't want a trailer in my back yard."   Most of those yards now include a brick home with an RV in the driveway.

I've said it a 1000 times that if we did not have FHA, FNMA and Freddie Mac that our industry would be producing the most affordable quality housing option on the market. What gives?

Lance Inderman

l;ance-inderman-mhpronews(Editor's note: Lance Inderman is arguably one of the most successful independent retailers of manufactured homes in the country. Champion Homebuilders recently purchased Athens Park Homes, a HUD Code, modular and park model builder that Lance and his associates operated. He was the Chairman for the Texas Manufactured Housing Association in 2010-2011 and remains an active player there. Lance plans to attend the TMHA annual event.)  

  1. Sheryl Sage
    August 8th, 2012 at 10:21 | #1

    Very well said!  Somthing for me to ponder…

  2. JJ Allen
    August 10th, 2012 at 10:50 | #2

    I could not have said it as well but I certainly agree. In an effort to prove our
    homes were as good as the site built; we have over regulated and out priced
    ourselves.

  3. Jimh3098
    August 10th, 2012 at 19:45 | #3

    Do you want to be in the trailer business or the housing business?   Those RV parks you are jealous of have their own problems, that MH park owners don’t have to deal with.  Like filling spaces nightly.  
    Which regurgitation would you like to make go away?  Building codes, installation standards?  Consumer lending rules… Those pesky things only protect our end users.  If our industry did not have such a rotten reputation for customer satisfaction we might be able to turn the clock back.Under regulation is what put the economy in the dumpster.  Until we separate investment  and banking again, our economy will continue to be ruled by the same greedy interests that brought the economy to its knees.   I agree, the price of our product has exceeded the affordability of our traditional customers.  First home and last home buyers can no longer afford or find financing for our homes.  The country’s largest producer of manufactured homes continues to loose money building and selling homes.  They are making making their profit by financing and insuring the homes they build.  Our world is upside-down!.  That largest builder just adjusted their retail sales-peoples commissions DOWNWARD. Most of their sales people will no longer be able to afford the product they sell.When we are ready to stop mimicking the conventional home product, return to affordable housing and mend the industry’s image by standing behind our products with something like Hyundai’s 100,000 mile bumper to bumper warranty, our business will return to profitability.  As long as the industry continues down it’s current path doubling down on its shaky reputation, we will continue to slide into the abyssWe cannot solve our problems with the same thinking we used when we created them.  I thought this site was going to be different.  Calls by this web site to create a better market for our pre-owned homes along with end user involvement in an industry renascence have been pushed to the side in favor of the site managers traditional income streams.  Any intelligent fool can make things bigger and more complex… It takes a touch of genius – and a lot of courage to move in the opposite direction.
    Albert Einstein   

  4. Tony
    August 10th, 2012 at 21:00 | #4

    Sheryl, JJ, thanks for the comments on Lance’s article.

    JimH, this might be the most interesting comments you’ve posted to date. You see some of the issues, but my concern is that you have mis-identified the causes and thus the cures. Dodd-Frank as it stands is no friend of the people at large. Free checking is vanishing from the banks in a steady stream. The smaller banks can’t afford the regulatory burdens. The causes and cures won’t fit in a sound bite. What you can count on is the fact that we passionately care about consumers, as do smart retailers and communities.

  5. Lance Inderman
    August 15th, 2012 at 11:10 | #5

    Jim,

    I have no problem with building codes or installation standards as long as they don’t make the cost out of reach for the customer. In a perfect world everyone could afford a home that would have a useful life of 200 years, able to resist the most violent weather that god could create and be built to withstand the little rascals. I believe price is the #1 factor why someone picks a house over another and that was the purpose of my diatribe. Price unfortunately equates to monthly payments for the majority of our customers.

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