Business

Market for mobile homes experiences a sea change

It's been a decade since the mobile home industry started crashing, and the tumble continues.

Almost every year since 1998 has been worse than the previous one for the industry, as first one bubble burst, then another and now the economy is in the tank.

Just this month, the Skyline Homes plant in Halstead closed, costing 82 jobs, and one of the few remaining dealers on South Broadway is shutting down. The industry that remains is trying to adapt to the new conditions.

Yet, trade groups say, there are signs that the industry is about to turn the corner.

In Kansas, sales of mobile homes have fallen from nearly 4,000 in 1998 to fewer than 400 in 2008, a drop of 90 percent.

In the '90s, there were 25 dealers in the Wichita area. Now there are six.

The problem was a credit bubble in the '90s that allowed too many un-creditworthy people to buy mobile homes.

The industry shrank but had nearly worked through the bubble when the regular housing bubble inflated, drawing mobile home customers into site-built homes with easily available subprime loans.

When the housing bubble collapsed in 2007 and '08 and credit tightened dramatically, it also dried up much of the financing for mobile home buyers.

Then the economy took a nosedive.

"It's just been one thing after another," said Thayer Long, executive vice president of the Mobile Home Institute.

Consolidation

Ryan Andes, co-owner of Eastside Mobile Homes, 10727 E. Kellogg, got into the industry in 1998 at its height.

He and his partner, Scott Vanderhoofven have lasted through the hard times, increasing market share as competitors left town. But 2009 felt like the toughest year yet, with credit remaining tight and layoffs striking potential customers.

They recently decided to consolidate their two dealerships into one, closing Factory Outlet Homes at 3101 S. Broadway.

"We sold basically the same product in two different locations," Andes said. "Our belief is that we can sell the same volume with fewer people."

Andes said he has laid off 10 people in the consolidation.

He said that through the third quarter sales at the two dealerships were flat compared with 2008, at about $7.5 million.

They are selling the last eight mobile homes at Factory Outlet Homes at a discount, he said.

"We don't want to move those homes out of there," he said.

Adapting to the times

While many finance companies, manufacturers, dealers and park owners have sold out or closed, some have been able to adapt.

Larry Womack has owned Lamplighter and Riverside mobile home parks for decades.

It's made him wealthy, but the things he has seen in the past decade made him worry. Every morning he would come into the office to find reams of ads for repossessed mobile homes on his fax machines.

Every time he found one in one of his parks, he bought it. The prices were 30 cents on the dollar, he said.

Today, he owns 145 mobile homes, a dramatic change in business model. Traditionally, mobile home parks have rented the lots but the occupants owned the homes.

The change has made him a major landlord and increased the number of staff he needs to maintain the property.

It also allows him to lower prices, letting him compete for those who want to live in mobile home parks. He estimated that there are 3,000 to 4,000 vacancies in Wichita mobile home parks.

The change from renting lots to renting homes helps keep his parks full as the credit market for those seeking to buy remains tight and foreclosures push people out of homes and into rentals.

"My business is picking up," he said. "They've got to live somewhere."

Reasons for optimism

There are several reasons for optimism, said Long, the industry official.

The mobile home bubble is gone. There are few repos remaining to pull down asset and sale values.

Lenders have been tight on their lending standards for years, so those who get loans can afford them — assuming they don't get laid off.

Sooner or later, he said, investors will recognize that and again start buying the securitized loans that drove the industry in the '90s.

"If you look at loan performance over the last five years, we're performing much better than our site-built counterparts," Long said. "We have to be more attractive to investors."

The federal government has also helped out this summer by raising the limits on mobile-home loan guarantees backed by HUD to almost $70,000.

And in the long-term, he said, demographics favor growth in the industry as the Millennials, the children of the baby boomers, reach prime home-buying age. They will be the first generation, he said, to be less wealthy than their parents — and in need of affordable housing.

"I'm optimistic and hopeful that we're there, that we've turned the corner, that we'll see an uptick very, very soon," Long said.

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