Manufactured Housing REITs: Housing Shortage Intensifies

Jun. 30, 2020 11:00 AM ETAWP, CVCO, CWH, ELS, FREL, ICF, IGR, ITB, IYR, JRS, KBWY, ILPT, MNR.PC, NRO, REET, REIT.IND, REZ, RFI, RNP, ROOF, RQI, RWO, RWR, SCHH, SKY, SRET, SUI, THO, UMH, UMH.PB, UMH.PC, UMH.PD, USRT, VNQ, WGO, XHB, XLRE28 Comments

Summary

  • It'll take more than a pandemic to slow down the perennially outperforming manufactured housing REIT sector. These REITs have proven to be immune from coronavirus-related headwinds, collecting nearly 100% of rents.
  • Powered by the macroeconomic tailwinds associated with the affordable housing shortage and favorable demographics, Manufactured Housing REITs have been the best-performing real estate sector of the past decade.
  • The positive momentum should be enough to keep the sector rolling in 2020. Beyond the sector-leading internal growth, external growth through acquisitions and site expansions have provided an added boost.
  • Near-term headwinds related to delayed openings at RV resorts, impaired rent-paying capacity among lower-income residents, and a slowdown in RV and MH unit sales remain risks to monitor.
  • Trading at the loftiest valuations in the REIT sector, investors will continue to demand perfection but haven't been let down in quite some time. Low supply and strong demographic-driven demand for housing continue to provide a compelling backdrop.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

REIT Rankings: Manufactured Housing

manufactured housing reits

(Hoya Capital Real Estate, Co-produced with Brad Thomas)

Manufactured Housing REIT Overview

Powered by the macroeconomic tailwinds associated with the affordable housing shortage, Manufactured Housing REITs ("MH REITs") have been the best-performing real estate sector of the past decade, and it isn't particularly close. Within the Hoya Capital Manufactured Housing REIT Index, we track the three MH REITs, which account for roughly $25 billion in market value: Equity LifeStyle Properties (ELS), Sun Communities (SUI), and UMH Properties (UMH). In addition to MH communities, these REITs also manage resort-style RV parks, which account for roughly 30% of the REITs' portfolio.

mobile home REITs

While not included in the REIT indexes, it should be noted that Cavco Industries (CVCO) and Skyline Champion (SKY) are the largest publicly traded builders of manufactured homes, while Winnebago (WGO), Thor Industries (THO), and Camping World (CWH) are all closely linked to the performance of the RV sector. MH units, colloquially known as "mobile homes", are typically the most affordable non-subsidized housing option in most markets. MH REITs own roughly 5% of the five million manufactured housing sites in the United States. MH REITs comprise 2% of the "Core" REIT ETFs and also represent 4% of the Hoya Capital US Housing Index, the benchmark that tracks the GDP-weighted performance of the US housing industry.

housing 100 index

As we'll discuss throughout this report, while the sector faces near-term headwinds related to delayed openings at RV resorts, impaired rent-paying capacity among lower-income residents, and a slowdown in RV and MH unit sales, we believe that the positive momentum should be enough to keep it rolling in 2020. Beyond the sector-leading internal growth, external growth through acquisitions and site expansions have provided an added boost. Below, we present our framework for analyzing each property sector based on their direct exposure to the anticipated COVID-19 effects, as well as their general

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