Interesting tid-bit - Posted by RES(ga)

Posted by PaulNM on November 19, 2000 at 13:51:40:

It is SO helpful to have a forum for perspectives from different markets. Upon reading Tony’s first reply I realized I was assuming a distressed market results in park vacancies because that has been my experience where I live.

In my market I think the high end of the mobile home business and park vacancy’s are being seriously impacted by the sales of low priced site built homes.

Longford homes has signs all over town that you can buy one of their 1,100 ft site built homes for $372/mo. You can even use their computer to design the floorplan you like. Now I realize the mortgage is a buy down, it balloons in a few years, the house is unfurnished with no landscaping, sits on a tiny lot, etc. However since many of the nicer parks rent for more than that a lot of people have found it attractive.

One of my broker friends with 40+ years of doing his own deals is already speculating on the opportunities that will become available in a few years when these deals start to unwind.

As Tony said “I look forward to the ride.”


Interesting tid-bit - Posted by RES(ga)

Posted by RES(ga) on November 17, 2000 at 20:17:56:

Getting a haircut the other day and the manager of a local m/h manufacturing facility was there. He was bemoaning the business. According to this guy there is a 2 year inventory of new homes on dealer lots nationwide. With national lenders cutting back and a glut of new homes am I correct in seeing this as good new for us students of Lonnie and Ernest.
BTW, if you haven’t read “Getting Rich Helping Others” by Mr. Tew, buy it. Great read and info especially about parks.

Not a tidbit - Posted by Dan (NC)

Posted by Dan (NC) on November 19, 2000 at 10:47:08:

I’m not sure about the two year figure - I’ve heard six months inventory is sitting on lots or in storage. Many manufacturers have shut down plants as inventory outpaced demand, and stock prices are generally in the toilet. Partly this is due to the lenders finally figuring out that bad loans are not good. With loose lending and dealers submitting packed sales contracts from marginal customers, there’s a lot of bad paper out there. So what does this mean? First, expect to see more repo’s than in the past. Newer, nice repo’s going for bargain prices. And there may be a bonus in that some customers who a year ago could get financed at the dealers will not be able to today. So your clientele may expand, and with better qualified buyers. Now the downside. The manufacturers and dealers have to get rid of inventory. Couple this with many dealerships going out of business, and having to liquidate their stock, and it follows that for a while it is going to be a buyers market. New homes are going to go cheap, which may depress the overall market pricing structure somewhat. For example, there was a series of auctions of dealer inventory throughout the southeast this summer, with brand new homes selling for 65-75% of invoice. If Oakwood or Redman or others go under, and their inventory is liquidated, expect even lower prices, which will drive more dealers out of business. My take on it is that all segments of the MH industry, including the Lonnie dealers, benefit from a healthy marketplace. And right now it doesn’t seem very healthy.

Re: Not a tidbit-Long - Posted by PaulNM

Posted by PaulNM on November 19, 2000 at 12:43:07:

I think Lonnie type deals are facilitated by a distressed market. Some (perhaps to many :slight_smile: ) thoughts and experiences follow.

  1. Are the various market segments tightly coupled? Distressed new homes, dealer liquidations, and cheaper good repos are big ticket CASH items. Even at fire sale prices they are still more expensive than the $1-2,000 cost of homes for Lonnie type deals. However, because of the rising vacancy problem at the parks here (ABQ) they have gotten much more willing to let homes stay and/or less demanding on what can be moved in. Rising credit standards force more people to the seller financed arena. Finally, there is a subset of the population that doesn’t have much money but is smart enough not to buy into these over priced, over financed deals. There are a lot more $100 dollar bills circulating on the poor side of town then the rich side. Conclusion: Lonnie deals are facilitated in down markets.

  2. Human factors modify the effects of economic change so cause and effect may take a LONG time to develop and the process is often counter intituitive.

There is an area east of ABQ (Moriarty) that has been in a slowdown for the last three years. Most dealerships have closed and those that are left mostly sell repos. I would estimate that some subdivisions have 20% or more of the homes vacant.

You would think supply and demand would make prices under these circumstances drop like a stone. It hasn’t.

The usual pattern is this. Homeowner gets in trouble for some reason and lists the property for sale with a Realtor. However, it has to be priced to pay closing costs and the existing loan. Since an individual is selling it there are no dealer financing incentives and a new bank loan with hard terms will be required. If they bought with a low down and thirty year terms the sellers are probably under water if they have owned it for less than ten years.

The finance companies know this so if the owner manages to make an occasional payment and/or is activly trying to sell they probably hold off. A year goes by and the owner finally gives up and leaves. Now the foreclosure process starts, but the finance company staff is very busy, and really would rather not have the loss realized on their shift anyhow, so another year goes by.

Once they have the house back, the finance company remarketing department takes over and they sell to anyone who can fog a mirror, with nothing down and payments the buyer hasn’t a prayer of making. The buyer lasts from spring to fall (heating bills and bad roads kill those deals in the winter)and the process repeats.

Eventually the wholesale repo dept. gets the house and sells it to me. I recently bought two, a 1987 and a 1985 for $1,400 (total) where the previous owners debt totaled $20,000.

This whole process can take years and in the meantime you drive around and see all these nice homes getting destroyed by vandalism, neglect and the weather. But if you can locate the owner you find they are still priced at retail + 40% !!!

Conclusion: Supply and demand is an interesting concept, but human factors can really confuse the path the process takes.


Interesting Topic - Posted by Tony_VA

Posted by Tony_VA on November 19, 2000 at 12:16:44:

We talked about this topic at the recent MH workshop. It was interesting to get input from Lonnie dealers across the nation. Many are experiencing the beginning of what you have described.

I have seen parks fill up almost overnight as Repo homes are brought in and set on empty lots. The installers can’t keep up with the business. The finance companies are really relying upon the Brokers to sell these homes fast and cut the holding costs. My curiousity is, who is going to do the financing this time?

As you mentioned, the chickens have come home to roost for the mobile home lending industry. This affects not only lenders but dealers, brokers, parks etc.

I have not experienced any impact in my Lonnie deals, because as you mentioned, very few people can find financing. This may very well be a good thing on the sell end.

What I am watching is how this will affect the buy end. In theory, we will be able to buy up new, nicer repo’s at more reasonable costs. This may be a great opportunity for parks to upgrade their homes (provided they have lots that can fit these bigger homes).

Herein lies my curiosity. I wonder if parks will become more stict about forcing older homes to move out when sold. I believe that if a lot will fit the newer Repo home, you can bet the Dealers will be putting pressure on parks for those lots. The dealer still has to make his cash so these homes, once on site, may not go for the same price that old home would have. This could affect our Lonnie homes that we have to repo. If we don’t have a good rapport with the park, we may have some negotiating to do in order to keep that home in the park when it resells.

This industry backlash will be interesting to witness. I agree that everyone benefits from a strong market. By remaining a Lonnie dealer and sort of bottem feeding, we may well be in the right place at the right time despite the industry downturn.

Just my thoughts. Interesting topic.


Not restricted to… - Posted by Tony_VA

Posted by Tony_VA on November 19, 2000 at 13:11:53:

…mobile home lenders either. A local mobile home dealer provided the following: “The same buyers that I cannot get financed for a $50,000 new mobile home, are walking down the street and getting financed for $125,000 townhome.”

Will these townhome lenders make the same mistakes? The townhouse developements go up in a day, on every square inch of room it seems. Someone will have to finance these sales. Townhomes are typically billed as “Starter homes”. Here we have buyers who need their first “Starter Home”, be it townhome or mobile home.

In my area, it seems that this dealer may well be correct. I do believe that Lonnie dealers will have some interesting repo prospects and perhaps buyers of less credit risk, but we will not necessarily be the only game in town. The market will find someone to finance them on a home that builders need to move fast. It would appear that the townhome lenders may be in for some rude awakenings if they too do not learn from Conseco’s mistakes.

Whenever a market adjusts, wealth changes hands. I look forward to the ride.