In the video interview with Kevin Clayton, the son of Jim Clayton says what Warren Buffett, Chairman of Berkshire Hathaway says is what’s wrong with the manufactured home industry.
Per Clayton, Buffett says it’s resale.
“Kevin, it seems to me that the problem of your industry is resale.” – Warren Buffett said to Kevin Clayton, per Clayton’s video interview.
That may seem simple. But it is profound.
In the same video interview posted below, Clayton says that he can see the day when their company’s manufactured homes may also be sold via the Berkshire Hathaway real estate arm.
Another source tells the Daily Business News that Kevin – speaking at an Illinois state association event – said, “Resale is the key. As Warren Buffett says ‘the MH industry is not going to grow until we expand the market by improving resale’s” – said Joanne Stevens, whose community brokerage operation is also part of Berkshire Hathaway.
Speaking of real estate, in Buffett’s recent annual letter, he says they now have 3 percent of the real estate agents in the country. ‘Just 97 percent to go,’ Buffett said.
The above begs a question. Realtors weren’t necessary for the industry to hit is previous highs. So why are the necessary now?
But setting that question aside for now, with respect to the broader housing market, resale and realtors are important topics. Buffett and Clayton are correct in saying its an issue, as what follows will reveal.
Realtors and Manufactured Housing
Among the consulting projects this writer has done in manufactured housing over the years is to successfully get real estate agents to engage with manufactured homes being sold in land-lease communities.
The following observation is neither a defense, nor a hit, on the Government Sponsored Enterprises (GSEs) of Fannie Mae and Freddie Mac, and their toe-in-the-water approach to manufactured home lending – especially home only, chattel lending.
- realtors were engaged in resale’s of manufactured homes in communities,
- if the exit strategy for manufactured housing on leased or owned land were easier,
- it would logically be a game changer for the industry.
Why? Because it would be a game-changer for lenders, as it could cut hold time and losses on homes that repossess or foreclose.
It would also be appealing for manufactured home owners too, because they would know that they’ve got an obvious exit strategy when the time comes to sell their personal home.
Buffett and Clayton are logically correct.
Realtors and Resales of Manufactured Homes
Don’t misread. There are already real estate pros listing and selling manufactured homes. There are realtors who sell new as well as pre-owned, “existing” manufactured homes.
But a little like the GSEs, for most real estate agents, that engagement is at toe-in-the-water level.
The End of the First Quarter of 2018 in Manufactured Housing
As the first quarter of manufactured housing in 2018 is about to hit the history books, what the past tells us is that the industry’s still at levels far below historic norms. The chart below is an example.
A combination of factors causes those relatively low levels of new HUD Code manufactured home sales. HUD and third party data reveal that quality isn’t an issue, so what is?
Among them is a scarcity of independent retailers.
Who says? Producers of HUD Code manufactured homes, all of whom – including those who are members in the Manufactured Housing Institute (MHI) and the Manufactured Housing Association for Regulatory Reform (MHARR) that were asked about this – confirmed that a lack of independent retailers is as an issue.
As was previously noted in the Daily Business News, some are attempting to address the problem by ‘giving vertical.’ Others told MHProNews that they are considering going vertical. A few have made strong commitments to their independent retailers, and said they would never go into competition with their dealer base.
Beyond the lack of intendent retailers, what else holds the industry back? Stop and consider these bullets.
- Berkshire could bridge the gap between real estate (RE) agents and manufactured housing with ease. Why hasn’t that RE agent switch – which Kevin imagined coming in 2011 – been more broadly turned on?
- Berkshire has its own array of newsmaper/media outlets. Why don’t their media outlets do a steady stream of fact-based articles on the wonders of modern manufactured homes?
- Several other challenges facing the industry could readily be addressed by a snap of a finger in Omaha.
- Why haven’t those industry growth steps already occurred? What could be the logical motivation for Berkshire Hathaway keeping a foot on the break peddle of the industry’s growth? Isn’t that counter-intuitive?
The Answer to those BH Questions…?
Are the same reasons Buffett’s Berkshire brands not boosting manufactured housing, as the bullets above suggest they could be, similar to why Buffett supported POTUS Obama, and then Secretary Hillary Clinton for president?
Both Clinton and Obama opposed changes to Dodd-Frank. Those changes in CFPB regulations, that Tim Williams, President and CEO of Berkshire Hathaway owned 21st Mortgage said he wanted those regulations modified by MHI’s multi-year – and still unsuccessful – pursuit the Preserving Access to Manufactured Housing Act.
Given the sheer size of Berkshire Hathaway, if one imagines a foot on a brake pedal, artificially slowing the growth of the industry, whose foot’s on that brake? And why?
Is it because the greater percentage of the industry will fall into Berkshire’s hands? Buffett has said that he loves a bargain. Buffett has also said that he tells his managers to fight competitors, including by expanding their “moat.”
In that context, isn’t it worth noting that MHI President Richard ‘Dick’ Jennison touted on video his desire for slow growth for manufactured housing? Who did that slow growth serve?
HUD Secreatary Carson was so enthusiastic about manufactured housing’s “Amazing” progress and quality, that he is almost gushing about it in the video posted below.
The professionals working for the GSEs this writer has privately spoken with are impressed with the quality and value of today’s manufactured homes.
When professionals from outside of our industry are properly exposed to manufactured homes, they are routinely blown away by the value. At a recent trade show, a senior vice president for an international operation told MHProNews that he was shocked that manufactured housing sales levels were so low, given their quality and value.
What did the Urban Institute miss?
Is it what was went undisclosed in their report on manufactured homes?
If you have a long Easter weekend, this may be a good chance to catch up on the study of your own industry. “Warren” – says Kevin Clayton – has studied manufactured housing.
Perhaps it’s time for more industry pros to do the same? See the linked resources and reports, including the Warren Buffett and Kevin Clayton videos, found below. “We Provide, You Decide.” © (News, analysis, and commentary.)
Related Reports – some with videos – to the above.
(Third party images, cites are provided under fair use guidelines.)
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