Manufactured housing. No, not the type that can be transported on wheels. I’m talking about the winding down of the manufactured housing recovery. The fundamentals are improving slowly in parts of the country, but it's accommodative monetary policy that has been the driver.
Looking forward to 2014 and beyond, housing will depend more on fundamentals. Right now, these are a mixed bag. The economy is creating some jobs but not nearly fast enough. Many folks that have found work are going back to work at much lower wages. This is adding to or even accelerating a long-term trend of declining real wages, and means many households actually have less buying power. Jeff Ball, CEOAny incremental demand for housing is tied to household formation. Here, there are several factors at play - none of them particularly helpful. Folks that don’t have a job, don’t buy houses. Folks that have a low paying or unstable job do not upgrade from a rental to home ownership. Finally, young people are struggling to leave the nest, so they don’t buy houses; and retiring baby boomers are more likely to downsize or sell their existing home than buy another home.
Does any of this matter for the individual residential investor? It does for our clients. We think many of these trends are long-term. There is and will continue to be a growing need in this country for affordable homes. Americans generally prefer to live in a house, particularly if they’ve previously lived in a house. In fact, according to Kiplinger's 2014 Housing Outlook, "the Conference Board, a nonprofit association of businesses, found that the percentage of consumers who intend to buy a home in the next six months was the highest since 2000." While people can move to where businesses are creating jobs, they often don’t for a variety of reasons. As a group, prospective retirees are woefully under invested for retirement so many will have to downsize and remain near family. Put it all together, and we think there will be growing demand for affordable, single-family homes, both to rent and to own.