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Manufactured Housing REITs: Beat, Raise, Repeat



  • Perhaps, the biggest beneficiaries of the mounting housing shortage, the Manufactured Housing REIT sector, has continued their stellar run into 2019. The already sector-leading fundamentals have improved further this year.
  • Surging nearly 30% so far this year, the manufactured housing REIT sector is on pace to outperform the REIT index for a remarkable seventh straight year.
  • As the most affordable non-subsidized housing option in most markets manufactured housing demand has benefited from the long-awaited acceleration in wage growth among blue-collar workers.
  • Beyond the sector-leading internal growth, external growth through acquisitions and site expansions provide an added boost. While competition has heated up, these REITs command a superior cost of capital.
  • Home sales of manufactured housing and RV units, however, were not immune to the broader housing market slowdown last year. The magnitude of the dip in sales raises some concern.

REIT Rankings: Manufactured Housing

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manufactured housing REITs

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Manufactured Housing Sector Overview

Manufactured Housing represents roughly 4% of the Hoya Capital US Housing Index, which tracks the GDP-weighted performance of the US Housing Industry. Within the Hoya Capital Manufactured Housing REIT Index, we track the three manufactured housing REITs, which account for roughly $25 billion in market value: Equity Lifestyle Properties (ELS), Sun Communities (SUI), and UMH Properties (UMH). Manufactured Housing REITs comprise roughly 2% of the broad-based REIT Indexes (VNQ and IYR).

manufactured housing REITs

Generally, the most affordable non-subsidized housing option in most markets, roughly 7% of the US population lives a factory-built manufactured home. Due to local zoning ordinances, the placement of manufactured homes ("MH") and recreational vehicles ("RV") is generally limited by municipalities to designated "land lease" communities, of which there are roughly 38,000 across the country. Residents generally own their home but lease the land underneath it, paying an average of $70k for a new 1,500 square foot prefabricated home.

By comparison, a new site-built single-family home of the same size would cost roughly $150k including land. The average monthly lease to set their home on a site and hook-up to utilities in MH or RV community can range from $300-1,000 per month. Unlike site-built homes, MH homes in land lease communities generally cannot

This article was written by

Hoya Capital profile picture

Alex Pettee is President and Director of Research and ETFs at Hoya Capital. Hoya manages institutional and individual portfolios of publicly traded real estate securities.

Alex leads the investing group Learn more.

Analyst’s Disclosure: I am/we are long ELS, SUI, CVCO, VNQ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. All commentary published by Hoya Capital Real Estate is available free of charge and is for informational purposes only and is not intended as investment advice. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy. Hoya Capital Real Estate advises an ETF. Real Estate and Housing Index definitions are available at HoyaCapital.com.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (22)

I enjoyed reading this article. Thanks for sharing your insights.
Vandooman profile picture
Great article. I used to provide bank financing for manufactured housing communities belonging to a major owner of high end real estate. Everyone laughed at the idea until I showed them the financial statements. I also knew someone who was sent from Singapore long ago to invest family money in the US. His first purchase was a home park in Arizona. The family was furious. Twenty years later the $50 per pad rent was $400.

Love the concept but the yields are way below what I want from REITs. For growth I can buy other stocks, some with better yields and qualified dividends.
DRIPsexy profile picture
Same here @Vandooman i used to provide bank financing on MH properties in the Midwest, and i really started looking more into REITS In this sector as a potential investment when we randomly had several requests from ex Wall Street bankers striking out on their own starting funds and looking to invest in these parks thousands of miles away.
Why wasn't SKY included? Long since 6/26/19
TAS profile picture
Superb article on this sector. This is the first time I have seen a well-researched article on this topic.
Hoya Capital profile picture
Thanks, glad you enjoyed!
Thanks for the another great article. One request - in your YTD Performance table, could you please specify what exactly you are tracking for short, mid, & long term treasuries? I ask since, for example, 20yr and 30yr treasuries would both be considered long term, but can have very difference returns. Thanks
Hoya Capital profile picture
Short Term: ISTB
Mid Term: IEF
Long Term: VGLT
EliasMouawad profile picture
@Okra1 I can't believe the Mall sector is underperforming the Manufactured housing sector by 36% ytd !
'manufactured housing REITs tend to be more "bond-like" '

I can't justify investing in the common shares, especially of SUI and ELS for yields below 2%. I don't understand why anyone would buy a 2% bond, no matter how safe it is.

I wanted exposure to the MH category for added diversity in the portfolio, but was unwilling to settle for the rather stingy yields of the common, so took advantage of the huge drop in prices last winter in the preferred shares of UMH. My yield on cost is 7.2%. Nice income!
Hoya Capital profile picture
Bond-like from the perspective of being more correlated to bonds than equities. Clearly, bonds or preferreds don't double in value in four years as ELS and SUI common equity have.
Mark Ferry profile picture
@Jus' Thinkin'

"I don't understand why anyone would buy a 2% bond, no matter how safe it is."

Very simple: There are other reasons but here are 2 obvious ones: (1) If you have a very high net worth, safety is the only criterion so any yield is enough. Heck, 0% is enough. (2) For investors in other countries like Japan and Germany, a 2% bond is a huge return because they have NIRP.
DRIPsexy profile picture
My favorite part is that it is seen as a defensive counter-cyclical sector but has beaten average returns. That's why I have an outsized position to this sector
Hoya Capital profile picture
Agree, it's been quite amazing. We raised some concern about a year ago that strong economic growth may eventually weaken marginal demand as residents seek housing options closer to job-centers. We haven't seen any of that to this point.
DRIPsexy profile picture
Just hope this ride continues and I get to retire on manufactured housing not in it :) @Hoya Capital Real Estate hit the follow button as well
Hoya Capital profile picture
Ha, true! Welcome aboard, @DRIPsexy.
03FOSTER profile picture
We own traditional Multifamily Class B Apartment Buildings and our typical tenant is “Workforce “. We have noticed a large migration to Mobile Home ownership in the last few years. It has now come to the point that at current rents many will opt for either traditional home ownership and failing that Mobile Home ownership in a nice park. When the next recession hits Mobile Home Parks will be the place workforce tenants flee to.
Hoya Capital profile picture
Very interesting, thanks for the industry insight!
03FOSTER profile picture
One other thing I would like to add is that I will meet many former tenants, sometimes years later and they express satisfaction with their choice to buy a mobile home. Further they feel they are building equity although the value of the mobile home is in most cases depreciating and the lot lease increases yearly.... go figure.
@03FOSTER ,Trying to remember reading about jacking the rent sky high in these rental parks on SA just a few weeks ago. Owned UMH years ago and they suddenly cut the dividend on me. I'm avoiding.
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