What Does 2024 Hold for Manufactured Housing?
There will undoubtedly be headwinds for the sector to navigate, but opportunities will also abound.
Over the past few decades, manufactured homes have developed into a high-demand asset class. Taking note of the booming demand for this affordable product, U.S. developers and investors have been constantly improving these properties, while also building modern MHC communities to satisfy today’s renters’ multiple needs and expectations. Consequently, the stigma that once plagued the industry has been slowly fading away.
“The public’s perception of manufactured homes is rapidly changing—modern design and rapid construction, coupled with affordability, are erasing old stereotypes about prefabricated housing,” Robbie Pratt, CEO & co-founder of Havenpark Communities, told Multi-Housing News.
In 2023, the MHC operator and developer saw applications from those wanting to live in their homes increase by more than 20 percent over the previous year. Since 2022, Havenpark Communities has invested some $55 million in improvements, amenities, and infrastructure upgrades across its communities, while also installing almost 1,300 new homes.
“Innovation in the sector has led to modern manufactured homes being built with high-quality materials, greater energy efficiency, and improved design and aesthetics,” Pratt noted.
READ ALSO: Manufactured Housing Marketing Tips
Manufactured homes have come a long way, now meeting modern construction and energy-efficiency standards, noted Floyd Ridgway, sales manager at Reybold Group, a Delaware-based company that has been building MHCs for nearly 50 years.
Not immune to challenges
The industry’s appeal to investors lies in its supply constraint coupled with robust demand, according to Michael Nissley, vice chairman and national director of Colliers’ Manufactured Housing & RV Group. But when prices increase across the board, it is impossible for the sector to be unaffected.
“Costs for debt, insurance, construction, labor, supplies etc. have gone up, while rent has not been able to keep up with operating costs,” Nissley said. “This accentuates the importance of diligent community management, which can determine if investors hit their target returns.”
The higher borrowing costs have also impacted developers looking to acquire, build, or expand communities. The industry is still dealing with supply chain and material setbacks stemming from the pandemic. Additionally, finding and hiring skilled construction crews has become more arduous, while higher property taxes and insurance costs are adding to developers’ woes. And in the near term, the situation is not likely to improve much.
“Elevated expenses in all areas are likely to cause investors sleepless nights as they diligently seek methods to boost efficiency, focusing on strategies for cost reduction and revenue improvement,” Nissley expects.
What does the future look like for manufactured homes?
With interest rates and inflation showing few signs of abating, Pratt expects manufactured home production in 2024 to resemble 2023. Cumulative production was at 75,040 homes as of October, a 23.8 percent decrease from the 98,506 homes produced over the same interval in 2022, according to data from the Manufactured Housing Association for Regulatory Reform.
Markets that have been among the most coveted until now—particularly those in the Southeast, such as Florida, Texas and Colorado, but also Utah, Colorado and Montana in the West—will likely continue to appeal to developers and prospective buyers alike.
“As the median price of a traditional single-family home remains around $400,000, the popularity and affordability of manufactured homes will only increase and become more attractive to prospective homeowners,” Pratt anticipates.
Nissley believes MHC production will be a crucial topic next year. To cater to increasing demand for affordable living options, new MHC development is desperately needed, and so are infrastructure upgrades, adding modern amenities and innovative designs to communities to align with consumers’ evolving needs and preferences.
“Overall, we anticipate that rates will start to stabilize, and the market will resume to status quo,” Nissley said.
Meanwhile, an emerging trend is the growing popularity of MHCs among younger households, according to Ridgway. Until recently, manufactured homes mainly catered to 55+ retirees looking to downsize or buyers seeking a stepping stone to a larger home, but now all age groups are interested in these quality, less expensive housing options.
“With other single-family home options becoming increasingly unaffordable, even young and growing families will stay in manufactured homes longer due to budget constraints and their increase in quality over the past years,” Ridgway mentioned.
Going forward, MHCs will continue growing as a long-term option across all age groups, particularly as homeownership remains unattainable due to high mortgage rates, and the overall appeal of manufactured homes increases as existing stock is revamped and new supply is added to the market.