Mobile Homes – Victim of Subprime Lending

Housing starts fueled by subprime loans appear to have reduced demand for mobile homes.

That is the conclusion of economists at the Congressional Budget Office, who in November  2008 put together a nice analysis of the demand for new housing for the next four years.

“Some subprime loans for permanent-site single family homes were undoubtedly made to borrowers who would have otherwise lived in mobile homes.”

So chalk up another victim in the subprime housing crisis – the manufactured housing industry.  The evidence in the marketplace is apparent, as builders like Champion and Fleetwood are struggling to keep their shares lists.  Mobile home placements dropped to just 5.9 percent of starts in 2007.  Traditionally, mobile homes make up about 8.5 percent of starts, and as recently as in 2001, they were 11.2 percent of all starts.   That was right when the bubble for subprime lending was at its peak.

The reports shows that speculation was following the subsidized demand.  Right now, according to CBO, one in six vacant site-built units is a home built after 2001.  That is a lot of homes – probably about one million, based upon the observation that more than six million units are vacant in the period of the estimate (2Q 2008).

What would have happened if those borrowers had purchased singlewides or doublewides? They still might have faced some unsavory loan terms, as many would have faced financing on personal property.  They would also be facing payments that were relatively similar, because loan terms were often for fifteen years, and not thirty or even forty years, as was the case with some site built housing.

Nonetheless, its one more piece of evidence that shows that the “experts” had it wrong about manufactured housing, and that those opinions mattered.  People were told to get into housing that could appreciate in value.