The manufactured housing industry is experiencing a significant boom, transforming from its modest beginnings into a robust and dynamic sector. With over 22 million Americans now residing in manufactured homes, this segment represents a growing portion of the housing market. As affordability becomes a pressing issue, manufactured homes offer a viable solution. The global market for manufactured homes was valued at $27.2 billion in 2019 and is expected to reach $38.8 billion by 2027, reflecting a compound annual growth rate (CAGR) of 6.5%. This article explores the leading real estate investment trusts (REITs) and manufactured home builders poised to benefit from this upward trend.
Affordability and Innovation
Manufactured housing addresses the affordable housing crisis effectively. According to Manufacturedhomes.com, the average price per square foot for a new manufactured home is around $85, compared to $150-$200 for a single-family home built on-site, as reported by Homeadvisor.com. Despite rising material costs, manufactured homes remain significantly more affordable, with an average price of $135,000 versus $390,000 for a traditionally built home.
Industry Trends of Manufactured Housing
Manufactured homes now use similar materials and construction techniques as traditional homes, significantly improving their quality and durability. Several trends are driving this industry’s growth:
Proliferation of Communities: The U.S. hosts over 43,000 land-leased manufactured housing communities, many offering amenities like swimming pools, golf courses, and tennis courts.
Attractive Rental Rates: Rental rates for these communities increased by 3.7% compared to the previous year, making them appealing to investors.
High Occupancy Rates: The national occupancy rate for manufactured housing communities is 93.3%, indicating low turnover and stable tenancy.
The Manufactured Housing REITs Investment Strategy
Three primary REITs focus on mobile home parks:
Sun Communities, Inc. (SUI): Owns and operates 667 communities with nearly 180,000 developed sites across 39 states, Canada, and the U.K.
Equity LifeStyle Properties, Inc. (ELS): Manages 450 properties with 171,477 sites in 35 states and British Columbia.
UMH Properties, Inc. (UMH): Operates 135 communities containing approximately 25,800 homesites in various states, including New Jersey and Michigan.
Despite a challenging year for REITs, with declines between 30-50% since early 2022, long-term demographic trends suggest potential growth.
Manufactured Housing Builders
In addition to REITs, two companies stand out for manufacturing homes:
Legacy Housing Corporation (LEGH): Builds, sells, and finances manufactured homes and tiny houses, primarily in the southern U.S., through a network of independent and company-owned retail locations.
Skyline Champion Corporation (SKY): Offers manufactured and modular homes, park models RVs, accessory dwelling units, and modular buildings for various sectors, including multifamily and senior housing.
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Investment Considerations
Manufactured housing investments offer several advantages:
Improved Housing Inventory: The U.S. housing inventory has improved from historical lows, but the National Association of Realtors reports only a three-month supply of existing homes at the current sales pace.
Outperformance: Housing REITs have outperformed the average REIT for eight consecutive years.
Decent Yields: Manufactured housing REITs provide respectable yields, although new manufacturers typically do not pay dividends.
Key Stocks and Their Performance
Here’s a closer look at some key manufactured housing stocks and their performance:
| Stock | Symbol | Analyst Ranking | 52-Wk Range ($) | Div Yield (%) |
|---|---|---|---|---|
| Sun Communities | SUI | 2.5 | 102.74 – 141.52 | 3.16 |
| Equity LifeStyle | ELS | 2.1 | 60.47 – 74.04 | 3.14 |
| UMH Properties | UMH | 2.5 | 13.26 – 16.85 | 5.48 |
| Legacy Housing | LEGH | 3.0 | 17.67 – 26.50 | n/a |
| Skyline Champion | SKY | 2.2 | 52.12 – 86.71 | n/a |
Conclusion
Investing in the manufactured housing industry offers a promising path for those seeking to tap into the growing demand for affordable housing. This sector provides potential for stable income and significant growth, making it an attractive option for investors. The combination of affordability, quality, and evolving market trends highlights the compelling opportunities within this booming market.
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Disclaimer:
The information provided is for informational purposes only and is not investment advice or a guarantee of any kind. We do not guarantee profitability. Make investment decisions based on your own research and consult registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations.
Tristan Hunter - Investor Relations
Tristan manages Investor Relations at Keel Team Real Estate Investment. Keel Team actively syndicates mobile home park investments, with a focus on buying value add, mom & pop owned trailer parks and making them shine again. Tristan is passionate about the mobile home park asset class; with a focus on affordable housing and sustainability.