American Homestar Announces Commencement of Work on Park Models for Mississippi Alternative Housing Program.

HOUSTON -- American Homestar Corporation (Pink Sheets: AHMS) today announced that it has been awarded contracts to produce modular "Park Model" homes in connection with the Mississippi Alternative Housing Program. The initial contracts call for the Company to produce 600 homes in staged releases. Formal notices to proceed have been issued for the first 150 homes. Based on the performance of the Company and the needs of the Mississippi Emergency Management Agency ("MEMA"), the contracts may be renewed.

The Mississippi Alternative Housing Program is a 24-month demonstration program funded through a $280 million federal grant and administered by MEMA. It seeks to develop and evaluate safer, cost-effective homes that are more comfortable alternatives for persons affected by presidentially declared disasters. Specifications for various models were developed by the State of Mississippi, and the contracts were awarded to several producers based on a competitive bid process. American Homestar is one of three companies selected to produce the "Park Model" homes. The homes will be offered to randomly selected people who live in FEMA-provided disaster housing in the three Gulf Coast Mississippi counties. For more information about the Mississippi Alternative Housing Program, contact its website at www.mscottage.org.

American Homestar CEO, Buck Teeter, said, "We are very pleased to be one of the companies selected by the State of Mississippi to produce the modular "Park Model" homes for this important project. Our strategic relationship with The Home Depot, and its ability to supply American Homestar materials through The Home Depot stores in Mississippi, allowed us to be very competitive in the bid. We look forward to working closely with the MEMA staff to meet their goal of providing quality alternative housing to those most severely affected by the 2005 storms."

American Homestar produces and sells modular, HUD-code, and specialty factory-built housing products from its two plants in Texas and, now, from a third plant (Platinum Homes) in northern Alabama. The Company sells its factory-built homes from 26 company-owned sales centers in Texas, Louisiana and Oklahoma as well as through independent dealers and builder-developers throughout the southeastern and south-central U.S. The Company also has a growing pilot program with The Home Depot and is selling affordable custom modular homes, featuring merchandise and installation services of the Home Depot, in the greater New Orleans area. The Company also provides insurance, financing and transportation services to its customers.