Due to higher efficiency and better performances of factory production and assembly lines, manufactured homes are increasingly becoming more popular due to affordability in urban design and housing contexts. Local organizations such as the Legal Aid of Western Missouri, are exploring the option of building manufactured homes on lots in the area as part of their Economic Development Unit. Environmentally minimal impact technologies are to be incorporated to reduce the footprint further and improve performance while reducing operating or facilities costs in the four regions of the nation, according to International Energy Conservation Code. The 18Broadway project and the KCP&L SmartGrid Innovation Park in Kansas City, MO are being considered viable benchmark initiatives to gather primary information and baseline data.
With construction costs per square foot for a new manufactured home averaging around 10% to 20% less than costs for a comparable site-built home, independent appraisal studies confirm that manufactured homes can appreciate in value just like other forms of housing. Financial institutions offer different lending programs and houses can be financed as personal property, on leased land, in a manufactured home community or on a privately owned site. Manufactured homes can be financed as personal property. Even when the home and land are financed together, the home is often secured as personal property and the land as real property. So appreciation or depreciation value schedules are to be ascertained from an appraisal perspective based on the circumstances.
Homebuyers may also finance their home and land together as real property using conventional mortgage financing obtained through a traditional mortgage lender. Qualified home-buyers may also obtain loans insured by the United States Department of Housing and Urban Development’s (HUD’s), Federal Housing Administration (FHA). For example, typical terms range from 10% to 20% down payment for terms of fifteen to thirty years, depending on credit profile, size of home, and type of loan for new homes, while for existing homes, it can be 10% to 20% down payment on terms up to twenty years. Actual terms will vary from lender to lender, and terms and conditions on FHA and VA loans are similar to those on conventional loans. Local HUD offices may have more detailed information on loan terms and conditions that may be worthwhile in exploring.
On the other side, the decline of manufactured housing appear closely tied to the rising fortunes of traditionally built homes – and to mortgage rates. For example, sales of new homes have spiked over time and hit 368,000 in 2012, well above the 306,000 sold in 2011. Meanwhile, shipments of manufactured homes were declining. In October of 2012, 5,100 new manufactured homes were shipped, down from 5,400 earlier. Interest rates on manufactured homes are higher because they are viewed more as a depreciated asset like a car, refrigerator, or an appliance. There are strong cases for both sides of the argument, and current literature might be translated as making a case for either side. Therefore, KCMO needs to evaluate the local conditions to make a final determination.
As a result, do the mortgages for traditional homes that are running at record-low levels – some rates for thirty-year mortgages, at below 3.5% – cause the buyers of manufactured homes to pay much higher finance charges? Although Kansas City is poised to move in this direction, major momentum has not yet resulted from the initial intent. The revolution is still very much an underground endeavor.
It is a trend to see lenders charge higher mortgage rates on manufactured homes in part because the homes tend to lose value over time and lenders can have a hard time foreclosing. Will this be the untimely death of this up and coming trend?
Credits: Images by Martin Seliger. Data linked to sources.