In the midst of an increasingly challenging housing landscape, mobile home parks are emerging as a surprising beacon of stability. Frank Rolfe, co-owner of one of the largest mobile home parks businesses in the US says he’s more bullish now on parks than he’s ever been before. As interest rates remain high and policies continue to change in the country, Rolfe says, “Parks seem to be the only thing on the right side of the dynamic.”
Let’s take a look at the insights of all housing sectors…
Single Family Sector
The single-family housing market continues to face affordability issues. Berkadia released a report on the single family market, here’s what they said:
- Beyond Insights reported last year that the United States’ single-family housing market had hit the lease affordable point seen in decades.
- The National Association of Realtors (NAR) reported that the median existing home price for all housing types in May was $419,300, this highest price ever recorded and an increase of 5.8% from one year ago.
- Monthly payments on a new 30-year fixed-rate mortgage are now at all-time highs.
- Home sales plunged 16.5%
- Sales of previously owned homes decreased 0.7% from the prior month.
Multifamily Sector
Costar’s insights into the Tampa apartment market depict a challenging scenario:
- Tampa’s multifamily vacancy rate is hovering around all-time highs, currently at 9.8%
- Demand continues to be outstripped by new completions so far this year, to an even greater degree than in 2023.
- This disparity has caused landlords to compete for tenants by lowering their asking rates and offering concessions.
- Over the past few quarters, the development fever has cooled down, decreasing the active pipeline to a two-year low
- Asking rents have declines for four consecutive quarters and are currently down -1.7% from last year.
Mobile Home Parks
Let’s now take a look at some market data from CoStar on Mobile Home Parks aka Manufactured Home Parks.
Mobile Home Park Market Trends: Despite broader housing market challenges, mobile home parks have shown resilience. While transaction volumes slightly decreased from 32 to 24 in the first half of 2024, average prices per property and per space have notably increased. However, caution is warranted in interpreting these figures. With real estate sales data, the data selects itself rather than having a random sample which is an underlying principle of statistical analysis. With a property type with the potential for variability such as mobile home parks, the price differential can be explained by market forces or just differences in quality, location, rent per space, etc.
Market Indicators: In the first six-months of 2023, almost 20% of the mobile home park sales in the analysis sold at list price while in the first six-months of 2024, all sales resulted in some discount from the list price.
Apples and Oranges Comparison: Comparing mobile home parks to higher-end apartments underscores their different market dynamics. Mobile home parks typically cater to working families and retirees seeking affordable single-level housing with a small yard, contrasting sharply with the demographic and lifestyle offerings of apartment complexes.
Affordability Challenges
Affordability remains a critical issue across the housing markets. With median home prices around $400,000 according to NAR and median yearly income for wage and salary earners in Florida reported at $51,500 by ADP, there is a huge disconnect. Florida mortgage rates are reported by Bankrate.com at 7.1% for July 2, 2024, the principle and interest rate alone for a median house with 20% down would be $2,150 per month or 50% of the median income reported for wage earners. Add another $500 per month for property taxes, and $250 per month for Florida homeowners insurance, and the ratio goes to 68%. The median household income for a 4-person family is reported at $83,452 and the ratio for a median house would be 42%. Lenders typically want this ratio to be less than 25% to 28%.
Mobile home parks have been the weak sister in the investment world. Triple net investments tend to be more fun to talk about at cocktail parties. But the factors that Mobile Home Parks interesting are:
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- This is largely a land investment with some interesting rates of returns.
- The inventory of parks nationwide is declining. Some older parks are well located for retail and other uses and are being redeveloped. Jurisdictions don’t want new ones built and some say this result of the taxes are paid. One hundred single-family homes pay $215,000 in property taxes while 100 mobile/manufactured homes pay license fees – maybe $9,000. The owner of the park pays property taxes but the combination falls short of other types of development.
- So the combination of a declining inventory and increasing potential customers results in what? Naturally, the government keeps getting involved which complicates the formula but as Frank Wolfe says, “I’m more bullish now on parks than I’ve literally ever been before…”
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Jim Boyd, MAI
Florida Licensed Real Estate Broker
Florida State Certified General Real Estate Appraiser
My background spans several decades of experience in appraisal, brokerage, and development. I have a solid background in retail properties, office complexes, industrial properties, mobile home parks, self storage, residential subdivisions, apartments, and vacant land of all types. Having received the MAI designation in 1980, my licenses include the State Certified General Appraiser and Qualifying SVN Real Estate.