News & Notes Archive - September 2005
Hurricane Katrina jolts the MH industry into high gear. FEMA seeks up to 100,000 homes, will build evacuee communities, each with as many as 25,000 ‘mobile homes.’ What this means for home shoppers not impacted by the disaster.
When Hurricane Katrina struck New Orleans and the Gulf Coast August 29th, causing the greatest natural disaster in U.S. history, the devastation left in its wake triggered a monumental and unprecedented recovery effort that will take years and dwarf any previous disaster relief undertaking. With hundreds of thousands of families in the region displaced and/or homeless, the Federal Emergency Management Agency (FEMA) wasted no time in turning to the RV and manufactured housing industry for help.
The response was immediate. On September 2 Clayton Homes, the country’s largest MH builder, sold to the federal government about 1,800 homes from lots on its sales centers from California to Florida, shipping them to a staging area in Texarkana, Texas. The company intends to bid on a contract for up to 3,000 more, built to government specifications. Clayton promised to keep their profit margin to a minimum to avoid any suspicion of price gouging. The FEMA homes will be plainer than regular models, with metal rather than vinyl siding, and no kitchen dishwasher.
FEMA’s first preference is for single-section homes but is not ruling out two-section homes, including used and re-possessed. Elsewhere, the agency was also ordering tens of thousands of RVs, mostly travel trailers and fifth-wheelers large enough to accommodate families. In all, by September 14, FEMA had ordered more than 100,000 manufactured homes, an astonishing total ten times greater than the number ordered following the 2004 hurricane season. Note: prior to Katrina, industry observers predicted the total number of manufactured homes built in 2005 would be around 120,000.
An August 31 housing alert to all MH builders from the industry trade association Manufactured Housing Institute, stated FEMA’s immediate preference was for: -- Existing inventory ready to ship now -- Preference is for homes 30-35’ in length, under $28,000, but they want to know all available inventory ready for immediate shipment -- Homes must be new, have furniture, AC/heat, and a warranty -- Electric appliances (not gas) strongly preferred
By the time the new housing units are fully deployed, the federal government will have found housing for up to 200,000 displaced people for three to five years. In some cases whole new communities will be created, each with up to 25,000 homes, complete with their own utility infrastructure, police force, newspaper, government services, and schools. The effort is a gigantic, expensive undertaking, unprecedented in US history.
While no one would ever wish such a terrible disaster be visited upon any community, clearly the sudden demand for housing in the wake of Katrina is a huge, and much-needed shot in the arm for an MH industry just beginning to emerge from a steep five-year slump that began in 1999, resulting in a 65% industry contraction. Many MH builders have factories that have excess capacity and will be able to accommodate FEMA’s demand while still providing homes for their regular customers.
How will all this activity impact home shoppers around the country who are not Katrina victims and who are looking for a new home? On the whole, the impact should be minimal, although some homebuyers in the region hit by Katrina who place custom factory orders may have to wait a few weeks longer. For example, many Clayton customers, as a caring gesture, have voluntarily agreed to wait 4-6 weeks longer for their homes.
The recovery effort will also mean a significant reduction in the number of repossessed homes available for purchase in the region. When the MH market crashed early this decade, up to 100,000 repos flooded into the market. That total currently is down to 19,000. If previous post-hurricane experience holds true (Andrew in 1991, for example), those repos available at sales centers in the region affected by Katrina will be quickly snapped up by hurricane victims who will receive home replacement funding from either FEMA or their home insurance companies. Anxious home buyers will likely take whatever homes, new or used, are available, often sight unseen.
Outside the Katrina-affected region, however—Texas, for example—the inventory of repossessed homes will be largely unaffected.
The Katrina recovery effort is still very much a breaking story. In the weeks and months ahead, look for further postings here as developments warrant, particularly as they pertain to changes in the manufactured home marketplace, and what it means for home shoppers.