When the North Carolina Housing Coalition gave Susan Fisher, a state representative from Asheville, its Legislator of the Year Award, it marked a new priority in North Carolina housing circles.

The choice of Fisher marks a change in some of the gospel within housing circles. Fisher has championed the reform of our state’s manufactured housing. The underlying principal of her aims should make sense to other “housers“, as manufactured housing provides shelter for the least well off in the state – families make less than half of the median family income.

Still, it is a new direction. Advocates from both inside and outside of North Carolina have resisted seeing the light on manufactured housing for years.

Fisher sponsored and helped to pass H1700, “Prevent Displacement of Manufactured Homes,” which gives park owners a tax incentive to sell their mobile home parks to resident groups.  It covers sales to non-profit groups or even to resident-owned cooperatives.

Chris Estes, the Housing Coalition’s Executive Director, highlighted Fisher’s work on manufactured housing.  It provides shelter for the least well off in the state – families make less than half of the median family income.

Estes framed up Fisher’s work within broader advocacy for manufactured housing. “Mobile homes house 18 percent of the North Carolina residents.” (and one-third of all housing starts). “They are on the largest source of non-subsidized affordable housing in the state,” he added.

Fisher accepted the award but acknowledged that more can be done.  She emphasized its fit with the  goal of homeownership, Perhaps she was reaching out to state leaders attending the Summit.  Sen. Joe Sam Queen, who arrived later and reiterated several longstanding critiques of manufactured housing, remains dedicated to increasing homeownership.

In many ways, the recent history of mobile homes mirrors our current credit crisis and its impact upon home sales.

In 2000 and 2001, major suppliers of credit for manufactured homes froze up.  After acquiring Green Tree in in 1998 in order to move into consumer finance, Conseco went entered Chapter 11 in 2002. At the time, its shares were trading at $0.45. In Chapter 11, all shareholders were wiped out and most of Conseco’s debt was forgiven.

Conseco emerged from Chapter 11 soon afterwards, in 2003.  However, they changed their commitment to manufactured housing.  They sold Greentree in 2003.  They largely withdrew from the industry and instead moved to focusing on insurance.

In the 1990s, shipments of mobile homes surged. Many manufacturers develop their own finance operations.  They would provide loans to consumers, much in the way that automobile manufacturers have done for years.

The credit arms of these companies remained for the next decade, but lending standards changed.  More than half of all applications for loans on manufactured housing are rejected. It is a tough market.  This new and tougher credit policy is probably one of the reasons that shipments of mobile homes have dropped so dramatically.

This chart, attained from data produced by the Census Bureau’s 2007 American Housing Survey, tells the story pretty well: mobile home shipments were probably in a bubble in the last half of the 90s.  With the change in supply of credit, shipments soon dropped dramatically and continue to be dreary.

This is relevant for single family site built home purchasing.  It shows how long a credit freeze-up can last.  Mobile home lending has increased – there are several dominant mortgage firms, and there is even a secondary market.

Another key fact is that no public policy intervention was devised to overcome this problem.  It was simply allowed to happen.  The work in Treasury and the Federal Reserve is potentially the kind of salve that will stop this from being repeated on a much larger scale.  Never mind that their concern reflects  concern that seems to end with households below the middle class.

It’s like what one mobile resident, living out of unit with no electricity in an abandoned park, told me. He said, “the government, they’ve got nothing for us people struggling in poverty.  They are just worried about those voters in the middle class.”

Now, he didn’t vote.   He was largely exempt from public relief because he was a felon.  I think he wrote some bad checks.  Nevertheless, his analysis was very prescient.

All of this is why mobile home lending offers us some interesting perspective on what we could be facing without intervention.

Warren Buffett’s annual shareholder letter spends a good deal of time talking about manufactured housing.  Some of his thinking focuses on Clayton, the Tennessee manufactured housing company that he bought several years ago.  Buffett calls the company one that is built by solid, sensible underwriting.  Here is an excerpt:

Our borrowers simply looked at how full-bore mortgage payments would compare with their actual — not hoped-for — income and then decided whether they could live with that commitment. Simply put, they took out a mortgage with the intention of paying it off, whatever the course of home prices. The borrowers didn’t depend on refinancing, weren’t enticed by teaser rates and didn’t assume eternally rising house prices. Jimmy Stewart would have loved these folks.

This is a great insight.  The lower prices on manufactured housing make sense.  This is a country where incomes have been stagnant for many workers, relative to inflation.  The run-up in housing prices has not been supported by a corresponding increase in earnings for many households.  Exotic mortgage products only made it possible for this imbalance to prolong itself.  Refinancing got people out of trouble, but as we know see, that was a short-sighted strategy with consequences that impact beyond the immediate transactors (lender, borrower, investor, mortgage insurer, loan servicer) and into our broader economy.

In North Carolina, the average price of a singlewide sold in 2007 cost $39,000.  A doublewide was $79,000.  Nationally, the numbers are not much different: $37,200 for a singlewide and $74,100 for a doublewide.  (US Census survey)

Buffett goes on to describe how the meltdown in the manufactured housing market that took place from 1999 to 2001 is a foreshadowing of the current crisis across the entire real estate sector. Buffett points out that in both sequences leading up to the sector implosion, lenders adopted looser underwrited standards.  Both began to make overly optimistic assumptions about the repayment ability of borrowers.

Greentree, a large manufactured housing lender, went bankrupt in 2002.  Prior to that, it had acquired Conseco  Both put a lot of liquidity into the lending market.  Both utilized the presence of a secondary market to fuel their demand.  Greentree is now privately held, but it remains the largest servicer of manufactured housing debt.

In his annual letter to shareholders, released today, Warren Buffett talks up one or two bright spots in the Berkshire Hathaway portfolio.  Geico, he says, has some buying opportunities in the insurance industry.  “Like mosquitoes in a nudist camp!” quips the Sage.

And, Buffett points out that loans made within Clayton Homes, the Tennessee manufactured housing company that he acquired several years ago on the urging of a group of MBA students, is actually performing very well.  In spite of all the factors that could lead to it having difficulty, less than four percent of its homes are in foreclosure.

This is an ineresting statement.  On the one hand, four percent in foreclosure is actually pretty high.  Yet, (more…)

Obama and Biden have published a thoughtful list of policy plans for rural America.  Fitting the style of our leader, the list is detailed and full of things that reflect the input of a few good wonks.  For every item that hints at a continuity of the symbol-driven approach of our past administration (protect Sportsmen!) there are several that are too arcane to probably even make the editorial pages of your average newspaper.

Several..make that many: My favorite example is the support for payment in lieu of taxes (PILT) for counties where the presence of federal lands hurts their ability to generate enough tax revenues.  That would make a difference in large parts of the American West, for example, where the Bureau of Land Management is one of the largest landowners.  Coincidentally, it would probably also make a difference for the District of Columbia.

What I don’t understand, though, is why there is almost no mention of housing issues.  Sure, there’s an initiative, again very (more…)