Its not an impossibility that a recession could restore the manufactured housing sector.
Consumers often change their purchasing habits when times are tough. You know the logic — less steak, more hamburger.

Today, we have evidence of some of that kind of thinking. Dollar Tree just blew away its earnings (more…)

Recent quarterly reports show that the financial performance among the producers of manufactured housing are behaving differently than site built home builders.  Cavalier and Cavco have both released their 8-Ks in the last month.

In the case of Cavalier, the company swung to a profit of 1 cent a share, compared to a loss of 21 cents per share during the same quarter last year.  For Cavco, revenue was up 1.1 percent.  Operating profit remained in the black, but there was still a dip compared to last year.

Compare this to the performance of groups like Pulte (PHM), Toll (TOL) , or Hovnavian (HOV).  All of these firms are showing dramatic drops in sales and have been posting operating losses for the year.

Management at Cavco points to a few reasons for the disparate trend.  For one, many buyers are returning to manufactured housing because there are fewer alternatives to buy more expensive site built housing.  The easy financing that enabled those kind of purchases is drying up.

“The affordable housing we build should play an increasing role in serving our nation’s housing needs given the tighter credit markets and the absence of the aggressive mortgage financing of recent years that enabled a disproportionate number of buyers to consider more expensive homes,” said Cavco CEO Joseph Stegmayer in remarks prepared for their 8-K.

As well, producers have been able to keep their prices down.  Average prices actual declined at Cavco.

Listening to a conference call from UMH Properties (formerly United Mobile Homes) in Sept. 2007 is uncanny. “Next year at this time, affordable housing is going to be the number one political issue in this country,” says UMH founder and President Eugene Landy. “People are not going to be able to get mortgages, they are not going to be able to buy homes. They are going to have to buy housing that they can afford.

Landy believes that manufactured housing stands to gain from these changes.  People still need housing, due to the expanding population.

“It is going to be a trend for our industry,” he says. “The Federal Reserve numbers are that people are (more…)

Are you due some help from the federal government?

Not, I don’t mean mortgage securitizers or bond traders.  I mean the tens of thousands of low to moderate income Americans living in mobile home parks that are being closed with frightening regularity.

Well, if you are in the latter group, you are not going to get any help from the feds.

Still, if you live in Oregon, you will.

Oregon is one of the most progressive states in the nation and often one of the more creative places for addressing planning issues. Oregon is the site of the Urban Growth Boundary in Portland.

In 2006 Oregon instituted a credit for tax filers who were living in mobile home parks that closed. For tax year 2007, the credit was expanded. Now, owners of mobile homes living in parks that close can qualify for up to $12,000 in refundable tax credits.

Refundable credits are the best kind. In the event that a filer does not have enough a tax liability of $12,000, this credit will be transformed into a payment. The Earned Income Tax Credit and the Adoption Tax Credit are examples of refundable tax credits.

Filers who want to get the mobile home park closure credit in Oregon must meet all of the following requirements:
• You (and all members of your household) must move out of a mobile home park in 2007 or later because the park is closing, and
• You own your mobile home, and
• You rent space for your mobile home in the park that is closing, and
• You occupy your mobile home in the closing park as your principal residence, and
• You receive a notice that the park is closing, and
• You move out of the mobile home park on or after January 1, 2007 because of the park closure notice.

It is not enough to move out of the park and not move the mobile home as well. Filers have to prove their costs were for the moving their home.

Jackson-Hewitt, just the kind of preparer that might be utilizing this credit for its clients’ returns, has the details on its site. This will be the first and last time that this blog links to Jackson-Hewitt.

This is an innovative approach to deal with some of the dramatic hardships facing a lot of families in America. Many mobile home parks are closing as development pressures in exurban areas make the sites excellent targets for redevelopment. In rural areas, many parks are no longer able to generate adequate cash flows subsequent to the decline in manufacturing work.

Origen Financial, the Michigan-based REIT, announced losses of $39.1 million in the fourth quarter of 2007 today.

Origen is a large originator as well as a securitizer of manufactured housing loans.  It is one of the businesses with the most concentrated exposure to manufactured housing finance.  For that reason, it offers some good insight into what is happening to manufactured housing lending.

Origen acknowledged in its conference call today that it had a rough quarter.  Here were some of the ‘high’ lights:

• As its share price ($0.95 per share) was now well below book value ($7.87 per share), Origen elected to write off $32 million in goodwill.
• Although it has paid a quarterly dividend in the past, Origen suspended its dividend this quarter.

Origen finds itself a victim of the credit troubles roiling the whole economy.  Origen would prefer to package its loans and sell them on the secondary market.  It needs to sell some of those loans in order to satisfy its ongoing debts.  Right now, Origen can’t sell its securitizations.  It has resorted to selling loan elsewhere.  Those loans, sold at distress prices, are not generating ideal value for the company.

In fact, Origen would have been profitable for the year, were it not for the impairments it took in selling its loans.  The company reports that it would have made $9.7 million.  However, in February of this year, Origen sold an asset-backed security for $22.8 million to satisfy four obligations.

There are some consequences to today’s filing.  For one, Origen announced that because of the lack of an exit for its loans, that it will cease originating new manufactured housing loans.  It will continue to take on loans through 3rd party channels — presumably loans from brokers — but this certainly slows the flow of loans.

Since it is one of the largest lenders (US Bank, Clayton, and GreenTree are the others) for manufactured housing loans in the country, the availability of capital for borrowers will surely suffer.  New shipments are declining.  This probably makes the recovery of builders an even more remote possibility.

The company needs to address how it will meet obligations on its $146 million warehouse facility.

Origen plans to seek some alternatives.  If there was ever an invitation for a grave-dancer, then this is it.