In 2005, damage from Hurricanes Rita and Katrina felled a substantial number of dwellings in the Southeastern United States.

The response for immediate replacement housing was met by FEMA, through contracts with travel trailer and mobile home suppliers.  Clayton Homes booked a substantial amount of revenue from government contracts, although they were hardly alone.

Unfortunately, there were a lot of problems with how those contracts were fulfilled.  It has become fairly well known that levels of formaldehyde in trailers exceeded acceptable limits.  When the health of so many people was put at risk by a government intended to otherwise help them, it made the factory built housing industry look very bad.

In 2008, how will recent history influence the events surrounding this year’s disaster response?  In 2006 and 2007, the hurricane season was mild.  There was no dramatic event.  Already, though, Gustav has roared through with high winds.  Ike may be far worse, in particular if it goes through Miami and up along the East Coast.  The damage could depend more upon the path of Ike then upon the relative ferocity of the winds.

If a lot of homes are damaged, it might be an opportunity for huge sales in manufactured housing.  If only because no other product can adequately house so many people in such a short amount of time.

But any opportunity will be thwarted by memories of how things went just three years ago.

The latest round of earnings reports by some of the leading builders of manufactured homes shows that many are looking for new markets. The environment is tough right now: shipments of HUD-Code homes continue to be way below historical norms. Now, a larger crisis in lending is reducing the ability of buyers to finance new home purchases.

“It is now hard to imagine that the industry will surpass its 2007 shipment level of 95,800,” said William Griffiths, chair of Champion Enterprises, during the firm’s recent annual meeting.

That is bad, but what makes it worse is that there is an eery match between where the lending crisis is the worst and where manufactured housing typically makes its best sales. States like Florida, California, Nevada, and Arizona have witnessed the lending environment tighten this year. Those are places where manufactured housing is very popular, for a number of reasons. They are good places for retirees. They have expensive housing markets. And, they are popular places to live. A lot of people have been moving to these states.

Shipments at Champion, for example, are down by 30 percent in California, Arizona, and Florida. Industry wide, only shipments to the eight Southeastern states are increasing. The South (including Texas) now accounts for 46.5 per cent of new shipments!

For Champion, that is bad news, because they only have one plant in that region. Their firm has a much larger footprint (28 percent of capacity) in the three states mentioned at the top of this paragraph.

In the latest round of reports, though, manufacturers all seem to be hinting that they are looking beyond housing to keep afloat. Fleetwood is looking to expand the focus it has on selling to military bases. Champion is looking into two new segments – education and health care. Their modular business in England (known as ModularUK) will begin working on products for prisons.

When I speak before a group of people about manufactured housing, someone inevitably asks the same question sooner or later.  Usually, it is the first or second question, actually.

The question is — “What is the difference between modular housing and manufactured housing?”

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