News & Notes Archive - May 2008
Note: The following item recently appeared on the website for The Manufactured Home Global Network (mobilehome.com), which provides information on all things dealing with manufactured homes to park owners, home sellers, home shoppers, home owners and industry professionals.
Q&A with industry expert and consumer advisor John Grissim
Mobilehome.com recently checked in with industry observer John Grissim, the country’s foremost MH consumer advocate, asking for his thoughts on the current housing downturn and what potential home buyers need to know. His two authoritative consumer guides are the bestselling books in the U.S. on anything to do with manufactured housing.
- Q. How is the slump in mainstream site-built housing affecting the manufactured housing sector?
- From what I’m seeing, the slump is hampering an already weak MH sector in three ways: a great many people, retirees mostly, who are ready to downsize and move into a manufactured home, typically in a land-lease community, are unable to sell their site-built homes. And until they do, they don’t have the cash to purchase MH. Second, with many regions flooded with existing single family homes for sale, and prices continuing to fall, the result is a strong buyer’s market. Potential home buyers are understandably waiting to see how far prices fall before making a decision to shop, either for MH or a site-built. And, three, tighter credit standards in the wake of the sub-prime debacle has reduced the availability of financing across the board to all but creditworthy buyers, and that translates to fewer home sold.
- Q. Are there any bright spots for MH?
- Definitely, for producers in the Southeast region—that’s an eight-state swath from Tennessee around to Texas—home shipments are up on average 16% to 32% over a year ago. Texas alone is up 45%. For the industry as a whole, shipments are up nearly 6%. That’s pretty encouraging for an industry that has seems to have been interminably shrinking for the past several years. I wouldn’t say that the bottom has been reached, but by year’s end I expect to see a slight improvement that could signal, finally!, the end of the downturn.
- Q. What’s the climate for prospective home buyers?
- I’ve been advising my clients that the climate is excellent. Here’s why: you can custom order a new manufactured home that is very comparable to an existing site-built home and save anywhere from 15% to 25% over a site-built home that may be ten, 15 or twenty years old. Plus, with the cost of oil going through the roof these days, you can expect future price increases—called materials surcharges, usually in the $1,100 to $1,300 range—that periodically get added to MH prices to cover rising costs of petroleum based components such as fiberglass, adhesives and insulation. So MH retail prices will only continue to rise. Last, the availability of financing for MH, even for personal loans, called chattel loans, for homes going into land-lease communities, is quite good. The MH industry went through its own subprime meltdown in the late 1990s and lenders have really cleaned up their act. So in a sense MH lenders are ahead of the mainstream housing lenders in that regard.
- Q. What advice are you giving to homebuyer’s shopping for a loan?
- I suggest before starting, get a credit report and credit score, called a FICO score. If their FICO is 700 or better, they’re in fine shape to qualify. The 650-699 range is still do-able, but it’s often possible to raise your score by cleaning up some of your credit card debt, by retiring old credit cards, and even correcting mistakes you find in your report. I’ve had some clients improve their score by 50 points in a matter of a couple of weeks that way. I also recommend looking into a new program that Fannie Mae recently started for MH, called MH Select. Under this program, you can qualify for a conforming long term loan at a similar interest rate for a site-built home if your MH meets certain requirements, such as being tied to the land as real estate, being on a permanent foundation, and having a five/twelve roof pitch or higher. Be sure to ask your local bank if they’re aware of this program, because if you are eligible, your bank can sell Fannie Mae your loan just the way they do with site-built home loans. And you end up paying less interest.
- Q. Do you recommend regional or national lenders?
- Sure, if the local possibilities are limited. And this includes financing through a dealer—an option that I generally don’t recommend; for starters, they can be the most costly loans. One national lender in particular that I like is the San Antonio Credit Union (SACU). Toll free; 1-800-234-7228. They have an MH loan subsidiary called CU Factory Built Lending that offers loans in the 6.75%-to-7.25% range. I’ve heard good things about them. Plus, they’re a member-owned credit union, so you won’t find any BS or abusive practices.
- Q. What’s the current picture on government assisted purchasing programs?
- I think you’re going to see some impressive new offerings in the months ahead, especially through federally sponsored programs such as the FHA and the USDA for first-time homebuyers in rural areas. With Congress moving quickly to rescue housing, new laws that guarantee home loans, and for higher purchase prices, will be passed. Prospective MH homebuyers should make the effort to check with their local federal government agencies to see what’s available. They may be pleasantly surprised.
Interview: 15 minutes with...Jack Tibesar
Note: In my role as an industry observer and consumer advocate I speak with people at all levels of the manufactured home industry (MH) to gain insights I share with my readers to help them be better informed. Some I have interviewed for a one-page column that runs in an industry trade publication. In return the magazine runs an ad for the Grissim Guides. No money changes hands. I insist on this. Aside from book sales, I neither solicit nor accept a dime from the industry, and my readers have my assurance I intend to keep it that way. Here’s this month’s interview:
Jack Tibesar, co-founder/owner of Spokane Home Center (WA) and Peter’s Homes (Post Falls, ID)
Who: Co-founder and owner of Spokane Home Center (Spokane, WA) and Peter’s Homes (Post Falls, ID), Governor’s appointee to the State Advisory Commission on Manufactured Housing, member since 1995 of Executive Committee of Northwest Pride.
Background: Age 63. Born in Ogden, UT. In 1953, at age ten, moved with his family to Elkhart, IN, where his father Peter sold house trailers for the Zimmer Corp. “Dad would tow around an eight-wide Zimmer to show retailers—about 25-feet long with maple cabinetry and a little electric fire, a real classic.” When his parents separated in his early teens, he moved with his mother to MT, then to Shoshoni, WY, attending high school there, meeting his future wife Judy. “We both graduated in ’63 as members of a big senior class of 13.” The two moved to Billings, MT where she went to a business collage and he attended Rocky Mountain College on a football scholarship. The couple married in ’64, following which Jack took a sales position for a veterinary supplies distributor. He proved to be a natural, and in ’66 Dallas-based supplier Thuron Industries hired him as a national sales rep. The Tibesars relocated to Dallas.
A year later, Thuron asked him to start a new division, for pet products. “For this kid out of Montana who hadn’t finished college, it was very exciting. I traveled the U.S., had an expense account and was climbing the corporate ladder.” In ’72, he visited his father in Spokane, WA where the latter had moved to open a mobile home sales center. “We really hit it off, and he said, ‘Jack, get into this business with me. You’ll be well-rewarded and we’ll get to know each other.” Jack agreed, and by ’73 the couple and their children, moved to Post Falls, ID, where father and son that year opened Peter’s Mobile Homes. In ’74 the dealership became an exclusive Marlette retailer. Several years later the partners opened a second exclusively Marlette sales center in Spokane. The Tibesars have three children, Eric, 42, Shawna, 40, and Joelle, 39.
- Q: Thirty-six years in a cyclical business is a long time by any measure. Any particular survival lessons you’ve learned?
- A: Two things come to mind: you have to constantly adjust to market condition and you must evolve or be swept away. For example, for years we had an in-house set-up crew but when this latest downturn hit in earnest, we had to shift to independent contractors to cut costs. And we all know we’ve got to work harder for the deals. As for evolving, we’re diversifying, doing things we haven’t done in the past, like partnering with a developer on a 60-home planned subdivision. And we’re working with community owners to put in spec homes that are turn-key ready and listing them with local realtors. We also encourage our sales staff to work with realtors, for example, in helping our homebuyer’s find property for the homes they want to buy.
- Q: How would you describe your current market conditions?
- A: We’re feeling the recession just like the site-builders. We’re used to seeing cash buyers, such as people from California who’ve sold their homes, but that has slowed. People can’t buy here until they sell their homes. We’re not seeing a lot of young couples with kids in our sales centers as we normally do. They’re hunkered down right now, just trying to pay for milk and gas.
- Q: Have you been affected by the lack of financing that other regions are experiencing?
- A: No, not at all. We’ve developed close relationships with the banks in this area and we’re blessed with a lot of good local financing. They trust us to finish the job and make sure the customer makes payments. So even though I’m a Clayton dealer with access to their 21st Mortgage financing, I don’t need that option.
- Q: You’ve been involved with the Northwest Pride initiative for 13 years. Your thoughts?
- A: It’s been so great to see competing factories and retailers in this region come together and agree to contribute money from the invoice of every home sold to fund TV ads in Idaho, Washington and Oregon promoting manufactured homes in general. That has significantly improved our image. I just wish the industry would undertake the same kind of campaign nationally.
- Q: You’ve given a lot of thought to the accountability issues the industry faces.
- A: I have, and I think if manufacturers and dealerships were to hold each other accountable using carefully worked out, formal franchise agreements, just like car makers do, things would greatly improve. Retailers, for example, would have to follow requirements on signage, and how the inventory is displayed, and the factories would provide protected territory and have to perform warranty service and deliver homes within X number of days. A formal franchise would also give me as a retailer something of value that I can offer when I sell the business.
- Q: Are there any local issues that your facing?
- A: Yes, one in particular: local jurisdictions trying to override the HUD code by enacting regulations for all single family homes, but which actually impact only HUD-code homes. For example, one county banned wood stem walls, requiring they be all concrete. Or requiring every home have a snow load assessment performed by an engineer. It’s gotten to where every home built at the plant has a different roof load, which, for one thing, slows the production line. The net effect is we’re losing the HUD advantages of a single code that allows us to build throughout the region. This is where the state associations need to get involved to lobby for fairness.
- Q: Your take on the future?
- A: We’ll do fine. We’ve been going strong since ’73, with three generations of family members involved. I’m not worried at all. This has been a wonderful business.