Favorable Juncture of Circumstances – CMHI Viewpoint

(Editor's Note: The facts industry veteran and CMHI President Jess Maxcy below are written using California statistics, but the same points he's made could be applied to other markets – does that mean yours too? Look at this thinking, and think about how this can apply for your market and state.)

My dictionary defines opportunity as “a favorable juncture of circumstances/a good chance for advancement or progress.”

“Favorable Juncture of Circumstances” A case can easily be made that we have arrived at a juncture of favorable circumstances that could lead to significant gains in home ownership opportunities for California families and increased market share for manufactured housing. Consider the following:

Median Home Price/Affordability

• The median home price in August was as its highest point ($480,280) since 2007. The median price has increased year over year for the past 30 consecutive months.*

• From the first quarter of 2012 to the second quarter of 2014 the annual required income to purchase the median priced home with a qualified mortgage increased 66% to $93,590* • Consequently, the monthly payment on the median priced home increased from $1,410 to $2,340… A payment only 23% of California families can afford!

Qualified Buyers

• The share of equity home sales in California increased to 91% in August and has accounted for more than 80% of total sales for more than twelve months.*

• This favorable circumstance has increased the number of potential cash and/or financeable buyers,

many of whom are looking to down size and are excellent prospects for high value manufactured home

purchases.

• Additionally, the rising median home price has significantly reduced the home ownership opportunities for California’s middle income families for whom midrange and higher end

(developer series) manufactured homes are an excellent answer to their housing needs. While priced

out of the site-built market many have already saved enough for the down payment on a high value

manufactured home. But…it is highly unlikely that middle income buyers will be attracted to model displays and financing and advertising programs that violate their perception of the home buying process. The industry, which encompasses retailers, manufacturers and lenders, all working together, needs to develop a distribution system and financing programs that take advantage of the design advances that have made manufactured homes an acceptable housing option to a wider market.

“A Good Chance For Advancement or Progress”

To have a good chance for progress we must have affirmative answers to the following:

1) Do we have an adequate retail distribution network?

2) Are manufactured home sales centers:

• Consumer oriented?

• Sufficiently stocked with fresh homes to promptly respond to the housing expectations of new consumers as well as our traditional market?

• Arranged to display homes in their best light?

Retail Distribution

To be able to take advantage of these favorable circumstances, to really have a good chance for advancement or progress and increased market share, we must improve our retail distribution

network. Consider the following:

• As of July 2014, our approximate retail inventory was only 761 new homes.

• Of those approximately 193 (25%) were very aged.

• Through August 2014, only 194 California retailers have registered at least one new home sale. Of those 51% have registered only two new homes sales in eight months.

Simply put, there are too few retail sales centers and/or home displays with sufficient fresh inventory to attract new consumers. Especially those who have rejected or not considered manufactured housing in the past. This is especially true for shoppers seeking new rather than resale homes.

Companies that have invested in displaying new homes and properly managing their inventory tend to

outperform all other retailers in their market.

• While there is no single solution to improving the distribution systems, some of the alternatives are:

• More environmental boulevard sales centers.

• Enhanced factory model displays.

• Regional environmental model displays, and

• Model displays /sales centers in new

and existing manufactured housing communities.

Synergy

The first steps toward ensuring a “good chance for progress” and for increasing market share must be a joint commitment to improve our distribution system. This is not a task that can be taken on by only one segment of the industry. Manufacturers and their retailers, working together, must take whatever steps are necessary to develop properly inventoried sales centers designed to meet the needs and buying patterns of today’s home buyers. ##

* California Association of Realtors

Improvement in Site-Built Equity Home Sales Increases Potential
Cash Buyers for Manufactured Housing

Single-Family Equity Home Sales

By Jess Maxcy – California Manufactured Housing Institute (CMHI) President.