Manufactured homes

[Bugs]

To answer the questions about framing, you’ll find very few subdivisions here that weren’t built with 2×4 framing. All of Bressi Ranch is 2×4; everything I’ve seen in San Elijo and 4s Ranch is 2×4. It’s everywhere. It’s not just the framing either. The roof trusses are 2×4, the fopundations are pured at the minimal depth; the plumbing and electrical schedules are average at best.

That’s not bad in and of itself; there’s nothing wrong with “Average”. It just cracks me up to see the words “luxury”, “custom”, or “quality” used in connection with these projects. People from back east look at this stuff and just smirk.

[CardiffBaseball]

What are the names some of the better manufacturer’s out there? Who knows I might be in the market someday and want to at least consider this option. I wonder if the VA looks down on these?

[rankandfile]

I agree with Bugs and SD Realtor. The manufactured and modular homes they are coming out with these days are nothing short of spectacular. They are only going to get better as technology and methods improve. SD Realtor is right in a way about the perceived value of these types of homes in different markets. This is only a perception, however, and it will change in time to the point where they are actually FAVORED over site-built homes. It’s only a matter of time.

[anxvariety]

Cookie cutter has sort of a bad name.. but most people don’t realize how often stuff is just a rehash of something that already exists and has been proven to work.. Obviously just because something is cheap doesn’t means its low quality..

Companies can make a lot of money selling something like software that another customer paid to build.. it also represents a big value proposition for the customer.. Each customer before paid to have the bugs worked out.. and it took time.. Now you can just buy the software and it’s ready to go, and alot less expensive. Won’t the manufactured housing industry following the same pattern? Building a house isn’t that complicated and when you do it a couple hundred thousand times and you work all the bugs/faulty designs out.

Why build a custom car, when for cheaper you can go get a Toyota with components that have been tested and refined/improved over the last 20 years?

[Anonymous]

You sound pretty positive about Cavalier. What sets them above all the rest? Their stock is at 3.00 a share, sure buy low, but what makes you think they aren’t going to go belly up? They have shut down quite a bit of their business over the last few years. Didn’t I read somewhere that they had major problems with FEMA housing, to the point of them using Katrina cottages? Please share I could use the extra money.

[Wiley]

I’m a retailer of manufactured homes here in So. Cal. I was also a principle in a company that we sold to chb years ago. In my opinion these stock are only good for a trade right now but not an investment.

This industry goes when they turn on the money and shut off when the financing dries up. There is nothing elso to consider fundamentally as to when they’ll do well. The last bull market in this industry was when abs (asset backed financing) really took hold and openend the faucets. In ’99 the industry shipped roughly 360,000 units. In 2000 they turned off the money. Last year I think we shipped 130,000 units, during the greatest bull market in housing. A lot of carnage.

Fyi, I see exactly the same thing happening in RE right now. Too much money chasing yields here creating overcapacity, fraudulent lending, and too lax lending criteria. I have no doubt the same cleansing is ahead for real estate.

Regarding Buffett’s forey into the industry…I have to admit I was puzzled. I’m a big fan of his and have read his biography’s. He’s made some mistakes in the past and as humbly as I can, I’d say this is one also. I think he purchased Oakwood out of BK not realizing how fruadulent their portfolio was. I believe he then bought Clayton to help handle the the giant Oakwood mess. I could be wrong though.

Fleetwood, formerly the cadillac of the industry is now so leveraged many believe it won’t survive. CHB just bought a modular company in England so what their thinking is behond me. Not too familiar with CAV.

Well I just thought I’d offer my perspective since it is a weird industry to try to understand. As for comparisons I think you’d be better to compare it to GM or F. Same type of finance driven, both are manufacturers, etc.

[ybc]

Bugs, what’s 2×4 and 2×6? Any difference? Thanks!

Wiley, very interesting perspective. Don’t you think that if everything has cycles, then manufactured homes may actually pick up once all the problems with bad credit get worked out? Supposedly, manufactured homes is counter-cyclical to real estate.

[anxvariety]

Wiley thanks for the excellent post.. I am going to stay in my positions for the time being as it encourages me to follow them more closely(and I think there could be some buyouts).. I did not buy as much as I had originally intended. I realize the risk.

Wiley I’m curious what percentage of the houes you’ve sold are permanent or bought to rest on a foundation? I’ve heard that banks are more willing to finance a manufactured home on a foundation.. correct/incorrect?

Some intersting stuff – manufactured housing tidbits from 2002:
http://cp.foremost.com/market_facts_2002/

[greekfire]

The 2×4 and 2×6 refer to the type of wood used in the framing. A 2×4 is a 2″x4″ stud, and a 2″x6″ is a similar stud, only thicker. I think the 2×6 stud is preferred as it is thicker, provides more structural support, and allows for the inclusion of more insulation.

[powayseller]

I built my house with 2×6 studs, giving me 50% more wall thickness and insulation. It costs a little more, but is one of those things that sets apart those crappy look-alike tract homes that I abhor, from the creative well-built solid construction, which is real building.

A house on a permanent foundation is considered a house for lending purposes. Otherwise, it is a mobile home and the lending guidelines are much tougher. The house we bought in 2000, before the fire, was a manufactured house on a permanent foundation. Nobody knew it was manufactured; the only way I was reminded was from the hollow sound in the floor when walking around, and the strips on the bathroom and kitchen walls to connect the drywall sheets. The newer homes don’t have those strips. BTW, I looked at a 2300 sq ft rental house outside of 4S Ranch ($3100/month), and I could tell right away when walking in it, that it was a manufactured home; the hollow sounds gave it away.

[sdrealtor]

Congratulations on having your manufacured home burn down and having some insurance company provide you with the capital to rebuild it better than it was. I wonder how well that house would have resold last year had it not burned down. It sounds like the Cedar Fire created an incredible financial gain for you.

[powayseller]

Yes, the insurance company gave us the money to replace the manufactured home. The adjuster and I collaborated on the estimates, and the manufactured home dealer was helpful to us both in that process. We provided a recent appraisal and the blueprints we’d just made for our addition. The adjuster thought we were a dream job, with so much forthcoming information. Then of course we added our own money that we’d saved, a line of credit, and the code upgrade coverage, and we ended up with a much better house.

There was no financial gain in the fire as far as the house goes. We were insured enough to be compensated for the financial loss.

The non-financial loss was that my husband never got to do the addition he designed and worked on so hard, even studying all the building codes and working side by side with a structural engineer, making calcuations, etc. This is still a loss for him to this day. He had made the blueprints and got them approved the night before the fire. We lost all our family pictures and videos too, and other heirlooms. My kids were frightened by the experience.

sdrealtor, it takes a real asshole to congratulate someone on having their home burn down. Since that fire, you are the first person to congratulate me for losing my home in a fire. Are you even human? What a lowlife….

[sdrealtor]

Of course I dont wish a fire on anyone. It is an awful experience and I feel for the pain that you and your family went through. With that said, your arrogance is astounding.

[Anonymous]

Wiley-

I was just reflecting on the very nature of home financing moving in the direction of auto finance. It seems, and my perception may be wrong, that a great deal of the sub-prime and loans other than prime are ending up in packages very similar to auto loans and the like – the abs’s that you mention. And your terminology of it turning on and off resounds with me as the rating from the credit rating agencies could affect the market within minutes of a decision regarding how packages will be rated. The ratings affect Wall Street’s ability to market the securities and debt obligations so an increasingly large part of the mortgage market is subject to more volatility. Basically, you don’t have the endorsement and encouragement of the government to fund lower quality credit (other than FHA) or the bank’s being asked to provide targeted credit.

It seems as though a number of people in the mortgage field packaging loans have migrated over from the finance company and auto credit side of business – not that this is bad, it appears to just be a trend.

[anxvariety]

In other news… CAV is up 9% today.. WHY?

http://finance.yahoo.com/q?s=cav

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