Manufactured homes — low-cost, pre-built alternatives to traditional single-family housing — are growing in popularity thanks to low inventory nationwide, according to a new report from Marcus & Millichap released Monday.
In Denver and Salt Lake City, where unemployment is low, occupancy of manufactured homes, including mobile homes, has soared by triple digits even as rent continues to rise, said John Chang, first vice president and national director of Research Services at Marcus & Millichap, the Calabasas, California-based commercial real estate brokerage services firm.
“The housing market has become extremely tight over the last several years, and although apartment development has been at its highest level since the 1980s, single-family construction has fallen well short of the total housing needs,” said Chang, a researcher behind the report, who added that median single-family home prices have pushed toward $258,000 since 2012.
“This trend is pushing additional demand toward more affordable housing options such as manufactured housing,” he added.
An aging population could further put a burden on existing manufactured home parks and lead to more demand for new manufactured homes, the report states. Nearly 18 million additional people will reach age 65 over the next decade, and the report believes many will move to resort or retirement communities in manufactured homes, particularly in the Sun Belt.
With overall housing supply falling short of demand, manufactured homes could follow suit, Chang said, especially in metropolitan areas. Currently, vacancy rates have fallen and rental prices have risen across manufactured housing in every major metropolitan area besides Portland, Seattle and Las Vegas, according to the report.
“Developing manufactured housing communities in major metropolitan areas can be difficult, so its unlikely this segment of the market will substantively offset the supply-demand imbalance,” Chang said.
The heightened demand and weak supply of manufactured homes is leading to aggressive pricing, which has also resulted in more off-market buying, according to the report. Prices for manufactured homes have increased in every region over the past decade, with the largest gains in the Midwest, where the price per unit has more than doubled, climbing over $30,000.
The mean price per unit for manufactured homes is now more than $30,000 in every region. The priciest homes are in the western region of the country, where the average is approximately $50,000, the highest it’s been in a decade.
In some parts of the country, one of the main reasons the number of for-sale listings is lower is due to communities banding together and exercising their right of first refusal to turn away potential investors, according to the report.
Manufactured homes tend to be cheaper on average than the median home price — despite having roughly the same lifespan — but often there’s rent to consider as well, which can vary greatly depending on the size of plot of land and it’s location. According to Chang, many people believe buying land is a better investment.
“Of significant importance is where the manufactured home is located,” Chang said. “Because site-built homes typically have title to the underlying land, they tend to retain value and appreciate more than manufactured homes on rented lots. A manufactured home placed on a foundation on an owned lot can have comparable value retention to a stick-built home.”