A Severe Mercy

by Michael Barnabas

Punishment is one goal of the criminal justice system. Another goal is rehabilitation and reform - or at least - it should be ideally. Similarly, when an industry experiences a punishing downturn, part of the lesson should lead to self examination and reform.

In a sense, the market and economics can provide us with could be called a Severe Mercy. Let's see how that severe mercy can play out for the manufactured housing industry.

We must begin by agreeing that we have been dealt a severe blow. When your industry drops from 372,000 shipments to 50,000 over the course of 14 years - about an 86% decline - such a blow would cripple and kill most industries. It is a testament to the survivors and those who adapted their business models already that our manufactured housing industry still stands.

Our survival is a testament to our homes enduring value to Americans = Amer-I-CANs!

To borrow a cliched term from the last election cycle, "yes we can."

But will we?

That is the question that a severe mercy poses. When the criminal goes to jail, does he clean up his act? Does the criminal reform and learn his lesson? Or does he just slide back into past patterns of behavior?

The truth is, it depends. Some do, others don't.

How does this apply to manufactured housing?

We ought to accept the notion that most of the professionals who come to this online trade journal for manufactured and modular housing are not scalawags! It wouldn't take reading too many articles here that preach the value of 'doing it right' to either drive a scalawag away or get them interested in the value of turning the corner to new and better ways.

Manufactured housing is arguably the best value for new (or pre-owned) single family home construction in America. But if that is so, why are we in a 14 year overall declining rut?

The answer is clear as crystal.

We have failed to deliver what the broader housing market demands.

"Wait!" some will protest. "We have scores of people every month who want our homes and can't get financing!"

True. And that isn't a case for the defense. It is part of the argument for the prosecution!

What?

Think free enterprise and our Republic. If financing was our sole issue, and it could be provided profitably by third party lenders, sufficient demand and profitability = one or more companies who would provide it. You don't have to listen to Larry Kudlow on CNBC to know that is true. You don't have to listen to Fox Business News to know that Adam Smith was far more on target and that Karl Marx was all wet.

Because we see so many companies – retailers, communities, others – that often attract those clients who can't qualify, it tells us something that should cause every business owner and every association leader from coast to coast to sit up and take notice!

There are reasons why land lease communities have perhaps a quarter million vacancies in the United States. Apartments are at high occupancy? Why not manufactured home communities?

The answer is that the necessary adjustments have not been made. One should also ask aloud the question; will the rental home trend in manufactured home communities soon come back to haunt those properties? How long before investors ask, if I'm going to run horizontal apartments in manufactured home communities, why not just buy and operate higher density apartments?

The number of questions like those above are too many for an article, sadly, we could fill books on the subject of the things that are warning signs and cause for quiet alarm.

It is great that we see 9 months of rising shipments. But we must attract customer with better credit, or risk sliding backwards again. The Dodd-Frank regulations that are likely to come down from the Consumer Financial Protection Bureau (CFPB) virtually assure us that we will see a large percentage of our personal property/home only lending vanish on loans in the 30-50k or under category.

When that happens, the factories that serve the Industry that were close to the edge will again be faced with another crisis. The same will be true for a number of retailers and others who are only now hanging on or beginning to recover.

The severe mercy of the last 14 years should tell us the following:

1. We should be doing more land/home business, not just personal property business. The Census Bureau reports that about 75% of all our sales today are financed via chattel loans. If retailers don't diversify their lending to include more land/home loans, then a critical lesson from the severe mercy of the last 14 years will be lost.

2. We must reach out to more upscale customers. There are many articles routinely here on that topic, so I'll leave others to elaborate on that subject.

3. Businesses should have their own image improvement strategies, until associations and the Industry at large are wise enough to get behind a common sense effort to educate and improve our Industry. Those who are doing so are already seeing the benefits.

4. Image must include education of local, state and national officials. We will continue to be pounded by regulators, the media and others until we individually or collectively take the time and effort to change the false narrative about manufactured housing that exists in tens of millions of people today.

5. Best Practices and consumer focused processes that deliver what people seek in a friendly fashion.

6. Remarketing that mirrors in manufactured housing what takes place with Realtors must be created, if we are to attract better credit customers and more lending. The losses lenders and home owners all too often suffer at repossesion or selling time can only be cure by a profitble remarketing processes.

There is more, but this is plenty to chew on for now.

We are Americans. Amer-I-CANs. Don't wait for someone else to do these steps, you take the lead in your business. You organize your peers or call on your association to do these things. Team up with forward thinkers.

Failure to do so will lead to more jobs and businesses lost. But if we take the lessons of our 14 year long severe mercy, the rewards for those who make the needed changes will attract more qualified customers, create happier customers and our long downturn can prove to have been a blessing in disguise.

Evolve or die. The choice is up to you. # #

Michael Barnabas (MB) is a pen name for a multi-decades veteran of the manufactured housing industry. MB is not selling consulting services or any other products or services for that matter; he's a ranking executive working for a well known company in the Industry, and compensates the publisher for the privilege to pen columns like this one. As with all columns we publish, his opinions are his own, and may or may not reflect the views of MHProNews.com (MHMSM.com).