By Michael Dixon
Average U.S. home values have increased nearly 70% since 2011. While some segments of the economy struggled during the COVID-19 pandemic, increased demand continued to drive home prices up. Unfortunately, these trends put homeownership further out of reach for low- and moderate-income homebuyers who rely on affordable housing options to build equity and wealth.
It’s Fannie Mae’s mission to provide affordable housing opportunities across the country, and we recognize the critical role manufactured housing plays in fulfilling that mission. The high-quality, affordable housing segment is needed now more than ever before as rising prices put site-built homes out of reach for more and more borrowers.
Manufactured Homes Have Come A Long Way
In the decade between 2010 and 2020, shipments of manufactured homes have almost doubled in the United States. Despite that fact, manufactured homes represent only 6.3% of the nation’s housing stock, and 10.4% of new houses sold.
These numbers, while modest today, represent a great opportunity for growth. With aesthetic features like higher-pitched rooflines and low-profile foundations, durable siding materials, and high-end interior finishes, we can see great potential for incremental sales of today’s modern manufactured homes, which is why we launched MH Advantage® financing in 2018 to support this new and growing market.
MH Advantage financing is different from traditional manufactured home mortgages in several critical ways. Homebuyers purchasing eligible homes may qualify for home loans with as little as 3% down and lower interest rates than other manufactured home loan options. What’s more, if there aren’t other MH Advantage homes available as comparables, appraisers use the best available comparable home, which may include site-built homes.
With similar features and similar financing to site-built homes, MH Advantage-eligible homes are positioned to appeal to homebuyers who might not have considered manufactured homes before, growing market share and increasing sales of this home type. And new sales channels can help replicate the site-built buying experience as well.
MH Advantage-eligible Homes in Subdivisions
Picture a homebuyer driving down the road. She sees a sign advertising new homes and decides to go check it out. The homebuyer meets with a sales rep, who takes her on a tour of a model home, maybe several, and talks through all the customization options she can choose from.
This could describe someone visiting a manufactured home retailer, or it could describe someone visiting the sales office of a homebuilder starting a new community. The consumer experience in these two situations has a lot in common. And the end result, a brand new, high-quality, customized home permanently affixed to a plot of land, is the same as well.
But there are a number of big differences to consider. For example, a site-built home in a subdivision will often be more expensive and take longer to build than a manufactured home. It’ll be subject to weather delays and involve significantly more waste. And with material and labor costs skyrocketing, every bit of efficiency can make real impacts on the bottom line.
With MH Advantage-eligible homes maintaining aesthetic and durability features of site-built homes, they are an ideal fit for builders and developers to consider in their next subdivision model when looking to offer a more affordable product to customers without sacrificing the quality their customers expect. Industry stakeholders are already seeing some positive results as they begin to realize the value of including MH Advantage-eligible homes in subdivisions.
Seeing Early Successes : High-Quality Housing to Meet Growing Demand
Strong economic activity in the surrounding regions has sparked an interest in Oroville, California, as an appealing, affordable destination for homeowners in recent years. While the Butte County city experienced a 10.7% population growth between 2010 and 2019, it reported a growth of 20% between August 2019 and August 2020. This city has a substantial need to quickly ramp up its affordable housing supply.
A partnership between Skyline Champion Corporation and west-coast builder W&R will deliver 134 MH Advantage-eligible homes, with the first model units being installed in a new subdivision in 2021. These newly built MH Advantage-eligible homes are estimated to cost nearly $100,000 less than comparable existing site-built properties in the Oroville area, lending credence to the idea that newly constructed manufactured homes are cost-effective, without compromising on quality or aesthetics.
Traditional Retailer Changes Business Model to Capture New Market
In the Cordell Oaks subdivision, located in Guadalupe County, Texas, the population continues to grow, and home prices continue to increase. The metro area population of nearby San Antonio saw a 2.07% increase between 2020 and 2021, while the average sales prices for new and existing homes increased 5% during the 12 months ending July 2020.
One of the home builders who developed this community chose MH Advantage-eligible homes to offer affordable housing with prices substantially below comparable homes in the area. The resulting Cordell Oaks subdivision features 21 one-acre lots, and it serves as the first full MH Advantage-eligible community in Texas. The home prices start at $201,995, while similar site-built homes on an acre of land are at a $300K price point in that area.
The project is a result of the work of Spark Homes and Champion Home Builders.
Manufactured Homes are the Affordable Homes of the Future
Manufactured homes already provide an affordable source of housing to 22 million Americans. Still, as home prices increase and borrowers continue to be priced out of the site-built market, there remains a gap that manufactured housing is poised to fill. Particularly with MH Advantage-eligible homes, getting these high-quality products in front of consumers is the first critical step to breaking down mental barriers that stand between a buyer looking for a site-built home and considering a manufactured home.
MH Advantage-eligible subdivisions give consumers that opportunity to see manufactured homes with all of the must-have features and finishes in an affordable package in the same environment they’re used to seeing site-built homes. These subdivisions will help site-built homebuyers see that a manufactured home is a solution that puts the house that they want within their reach.
Michael Dixon is on Fannie Mae’s Environmental, Social and Governance team as part of Impact and Engagement. He manages the manufactured housing initiatives to support Fannie Mae’s Duty to Serve Plan.