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Addressing Manufactured Home Misconceptions

Manufactured homes are 35 to 47 percent cheaper per square foot than site-built housing, but despite the misconceptions, Urban Institute and the FHFA found that manufactured homes actually appreciate at a level similar level to other homes. The FHFA included manufactured homes in its Q3 House Price Index, paving the way for new data on manufactured homes.

According to the Urban Institute, manufactured home appreciation is much more volatile than the on-site home appreciation, declining more between 2005 and 2012 and increasing more since then, and the manufactured housing index is usually slightly lower than the site-built index. However, with quarterly fluctuations eliminated, average annual growth rate of 3.8 percent versus the manufactured housing index at 3.4 percent. This means the two are not quite different, but manufactured homes still show a slower overall rate of growth.

However, there are barriers to measuring manufactured home appreciation on national level. Important to note is the fact that in some of the most robust home markets by state, manufactured homes are underrepresented. For example, California makes up 18 percent of the housing market but accounts for only 4 percent of the manufactured homes market in terms of units shipped.

Additionally, the Urban Institute notes that manufactured housing cannot entirely be measured in the same way traditional homes can. The GSEs underwrite mortgage loans on manufactured homes only when both the structure and the land are financed, and most of the financing in the manufactured homes market is done on the structure only through chattel lending. From 2013 to 2017, the GSEs underwrote just 8 to 13.5 percent of the manufactured home market by loan count compared with 45 to 49 percent of site-built originations.

In 2017, the average GSE manufactured home loan was higher than the average for all purchase loans, at $130,000 compared to $95,000, though this is most likely due to the fact that land is included with the structure in GSE loans.

Urban Institute notes that the misconception about manufactured home being a depreciating asset rather than an appreciating one is one of the factors that makes it so difficult to obtain financing for these homes, and the lack of data from the GSEs make it difficult to prove otherwise. According to Urban Institute, the new FHFA Index data is a “huge step forward in increasing our knowledge of the manufactured housing market.”

About Author: Seth Welborn

Seth Welborn is a contributing writer for DS News. He is a Harding University graduate with a degree in English and a minor in writing, and has studied abroad in Athens, Greece. An East Texas native, he also works part-time as a photographer.
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