While the U.S. real estate market is starting to shift back to normalcy after a residential property-feeding frenzy in 2021 and early 2022, Americans are adjusting the way they view a buyable home.
In particular, one long-overlooked type of home is emerging as a hot property for homebuyers.
According to a new study by Lending Tree, mobile homes are attracting more interest as prices have risen for smaller homes.
“Median mobile home values across the nation increased by an average of 34.58% from 2016 to 2021 — nearly the same as the average increase of 35.44% for single-family homes,” the report noted.
In general, mobile home values nationwide appreciated in value almost as quickly as single-family homes over the five years from 2016 to 2021, Lending Tree reports. States where mobile home prices are the least expensive include:
— Kansas
— Ohio
— Iowa
— Indiana
— Illinois
States where mobile homes are the most expensive include . . .
— Washington
— Nevada
— Oregon
— California
— Massachusetts
"Although mobile home values have increased significantly in value over the last few years, they are still considerably cheaper than their single-family home counterparts,” said Lending Tree senior economist Jacob Channel. "As a result, mobile homes can be an appealing option for those who can’t afford a single-family home at today’s high prices."
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Are Mobile Homes a Good Deal for Buyers?
With interest rising in mobile homes as both a lifestyle and investment asset, the jury is still out on their long-term impact on buyers.
“Many people, including Millennials, simply can't afford a single-family home right now,” said SD House Guys co-founder Jon Sanborn. “Many mobile homes offer two and three bedrooms and often multiple baths for less than the exact same in a single-family home. For first-time homebuyers, it also can feel like getting a foot in the door to the housing market. For retirees who are looking to downsize, it’s also an affordable option.”
Mainstream homebuyers may be lowering their expectations on what house they can buy, but there are some benefits of owning a mobile home.
“They are less expensive, can be well constructed, have a different (and possibly appealing) tax structure, and, as we see, can appreciate,” Sanborn told TheStreet. “Mobile homes give people the chance to own a place to live and have a more secure living situation.”
Other real estate experts aren’t on the same page.
“Rising prices in mobile homes eliminates the only benefit to a mobile home, which is reduced costs,” said Eclipse Cottages Chief executive officer Justin Draplin. “Long term, we believe this will be terrible for the industry.”
One big problem Draplin said he sees with mobile homes is that financing is “terrible”. “That’s partly because lenders know that they are built terribly and depreciate in value,” he noted.
Ultimately, whether or not a mobile home is a good investment depends on what you buy and where it's located. “If you’re buying a high-quality home, whether manufactured, park model, or another type of mobile structure, and it is located in a desirable neighborhood you’ll have some protection for your investment,” Draplin told TheStreet.
One area of concern for a buyer is a mobile home’s resale price. “There’s a stigma about manufactured homes that could affect its subsequent sale,” said Clint Coons, the author of “Next Level Real Estate Asset Protection: Comprehensive Strategies for Investors.”
Even so, Coons believes mobile homes are “great investments”, especially for investors.
“Our legal and tax firm (Anderson Business Advisors) has slowly been transitioning our portfolio into mobile homes,” Coon said. “As the cost of existing homes has risen we are able to acquire a mobile home at a good price in certain markets, compared to a 20-year-old house that has significant deferred maintenance.
Mobile homes, or manufactured homes, are generally not considered real estate by many government entities and lenders.
They are usually purchased with chattel or personal loans as personal property and not with real estate mortgages. There are exceptions in some situations, such as if the home is on a foundation and the buyer will own the land that the home occupies.
Owners of manufactured housing communities, or mobile home parks, do purchase their properties with commercial real estate mortgages, though.
That scenario could be more pervasive as interest in manufactured homes rises.
“There’s been a push by Freddie Mac and Fannie Mae beginning in 2017 to expand lending on manufactured homes,” Coons told TheStreet. “Buyers can acquire property on leasehold estates and still qualify for preferred financing, such as 5% for the First Time Homebuyer Program. I don’t see buyers necessarily shying away from these properties once they discover the options that are available."
