Future of Manufactured Housing Forum delves into challenges, solutions for the industry
The manufactured housing (MH) industry is booming, having recorded a seventh consecutive year of growth in 2016, according to the Manufactured Housing Institute. The price point on these homes (about $70,000 versus the site-build average of $350,000), their quality, and durability are attracting low- and moderate-income buyers, Millennials, and those over 55.
However, for industry participants there are challenges including lack of accessible financial and performance data, high cost of borrowing for the consumer, and a negative brand perception. Fannie Mae is hoping to partner with the industry to combat some of these challenges.
Seat at the Table
Fannie Mae recently brought together more than 40 manufactured housing industry executives to reinforce Fannie Mae’s commitment to serving the manufactured housing market and facilitating dialogue around the industry’s toughest challenges.
Key issues included the need to change perceptions, standardize terminology, address appraisal inconsistencies, remove zoning barriers, and, perhaps most importantly, gather more data about almost every aspect of the industry.
As a result of the meeting, Fannie Mae is investigating ways that the entire industry can collaborate to share data, test hypotheses, and explore opportunities. (Look for details in the near future.)
Here are a few highlights.
Affordable Housing in the U.S.
Fannie Mae SVP and Chief Economist Doug Duncan noted that as of 2015 manufactured housing constituted 6 percent of the housing stock in the U.S., which is close to 7 million homes. That’s an important segment of the housing market. In fact, it’s one of the top three most promising areas Fannie Mae is looking at to expand access to affordable housing, he said.
“We need to standardize terminology and gather more data so we can explore new solutions, test innovative options, and scale those that work,” Duncan said.
Industry Perspectives on Manufactured Housing in America
With demand for better quality and additional features, along with many Millennials preferring smaller, more energy-efficient spaces, the panelists suggested that many consumers are beginning to realize manufactured homes can offer better value than site-built homes.
Technological advances such as drones, GPS, Computer-Aided Design (CAD), and software integrations are reducing manufacturing time and lowering costs. In addition, mobile apps are improving the customer experience at every stage of lending, from prequalification to closing and servicing.
“Customers today are demanding more technology features in manufactured homes,” said Panelist Kristian Jensen III, President and CEO, Jensen Communities. “USB ports, online payment, and residential management portals. The MHC mobile platform will be key for customers moving forward, even in the 55+ demographic,” he added.
Panelists noted that the industry would like to see a secondary market with more diversified loan products, and are looking for innovative ideas on how to make financing affordable and manage risk effectively.
Changes in Consumer Behavior and Segmentation
Steve James, SVP, Strategy, Marketing & Insights, Fannie Mae, led a lively discussion with manufacturers, retailers, and academics on “the best kept housing secret in the U.S.” and how consumers are helping shape it.
Increased mobility, frequent job changes, and the quest for green living are prompting Millennials to invest in MH, while the 55+ age group are interested in recreational amenities. However, all MH buyers – typically well versed on the product before shopping ─ are looking for the best value for their dollar.
Panelist Tony Wicke, VP National Sales, Land Home Financial Services said, “We really don’t see a lot of difference between MH and traditional land home borrowers in our portfolio. Their profiles are closely aligned when it comes to DTI, LTV, and FICO.”
Attendees agreed this is the most exciting time in the industry yet. Biggest hurdles? Credit scoring, more accurate appraisals, standardized data, and overcoming zoning issues, and buyer misperceptions.
Innovations in Manufactured Housing Finance
In addition to loan originator software that cuts loan application time, websites that increase transparency, and mobile apps that put more power in consumer hands, participants in the innovations panel, led by David Funk, Pasquinelli Chair in real estate, Roosevelt University, noted that perhaps the most critical area of innovation has been in relationship management.
Based on the belief that building relationships and coalitions is key to innovation, industry participants perform extensive customer data analysis to refine their offerings. “At the end of the day,” said Panelist Barry Noffsinger, Sales and Marketing Manager, Credit Human Federal Credit Union, “we lenders are all the same – it’s about the relationship with the customer – you have to be customer-centric and technology is helping us do that better.”
Participants pointed to the need to standardize underwriting methods, data, and reporting across chattel loans (personal property loans made for the purchase or refinance of a manufactured home); the necessity for a secondary market; and the importance of an image campaign to dispel bias and outdated misconceptions.
The only way we are going to move the needle on chattel market is if we have some industry-wide standards and guidelines,” concluded Tony Petosa, Managing Director Multifamily Capital, Wells Fargo. “Otherwise securitization will remain difficult and there’s no chance of bringing down those spreads.”
For more information, readers can contact Paul Barretto.