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Don't call them mobile homes.

They're 'Manufactured' Homes -- Now Recognized As An Economic Alternative

First off, they are no longer mobile homes.

They're now manufactured housing.

And anyone having preconceived notions of what these homes look like today is probably wondering who this Jay Leno guy is and what happened to Johnny Carson.

Manufactured housing, as defined by the Manufacturing Housing Institute (MHI), is any home constructed in a factory and whose construction standards are enforced by the Department of Housing and Urban Development.

"In 1976, HUD came into play in this industry," says Betsy Thompson Smith, president and owner of Drew Plaza Manufactured Homes Inc. of Monticello and Arkansas' state delegate to the MHI for the past four years.

It was in 1976 that the National Manufactured Home Construction and Safety Standards law was enacted, requiring companies producing manufactured homes to comply with federally regulated codes and forever changing the outlook on these homes.

"Up until that time, no one was responsible for overseeing the construction," says Smith, whose father opened the Monticello dealership 27 years ago. "HUD set up regulations for construction, standards for performance. At that point, we began to try to let people know that this is something more than the old trailer you could hook up behind your truck."

Apparently someone was listening.

In 1990, 188,000 manufactured homes were produced, compared to 534,000 new single-family site-built homes constructed that same year.

According to the MHI -- a national trade association of builders, suppliers and financial service companies -- the average cost of a manufactured home in 1990 was $27,800, while the price of a new site-built home was $149,000.

"Percentage-wise, we're running about 10 percent over last year," says Smith, who has directed the dealership for 12 years. "All of the manufacturers are so backed up, we can't get the homes in fast enough for us to sell them. Manufacturers love that, dealers hate that."

Getting Into The Spirit

Presently, 85 producers of manufactured homes operate in the U.S., shipping their homes to some 5,500 retailers. While that may seem like a large number of manufacturers and dealers, it isn't, compared to the number involved just 10 years ago.

By 1986, the year John Allison formed Spirit Homes Inc. of Conway, there were 56 plants producing manufactured homes in Texas. Now there are six.

Allison's Spirit Homes was one of five Arkansas manufacturers of the homes only six short years ago. Today, it's the only operation in business.

Allison attributes the decline of manufacturing prior to this year to a lack of business.

"A new manufactured home could not compete with the repossessions on the market," says Allison, who is also president of Capital Buyers Inc., a brokerage firm that purchases and resells new and previously owned manufactured homes. "The industry didn't go through a recession (in the late '80s), the industry went through a depression."

A glut of repossessed homes on the market led more and more manufacturers to close down. Allison opted to remain in business, at one point producing homes without having customers lined up, simply to keep employees on the line.

"Financing was restricted, the economy was bad ... we stayed in because we could see down the road when the economy improved," says Allison. "We could see an opportunity to do well. The key was we had deep enough pockets to stay."

In six years, Spirit produced roughly 5,000 homes, a sales volume of $60 million, while clearing a profit of only $385,000. In 1991 alone, the company made a profit of $60,000 on $20 million worth of homes and expects to make a profit of $1 million by the end of 1992.

Spirit, which employs 250 workers, has added 70 employees since sales began to improve in February and plans to add an additional 40-50 more. A move to renovate the Conway plant is currently under way to increase the number of stations used to produce the homes and better utilize the production space available.

With the majority of repossessed homes from the '80s now sold, Spirit is gearing up for an anticipated very profitable period. The company has a current backlog of 425 homes, valued at $7.5 million.

Nine A Day

Six to seven homes are completed daily at the plant, and Allison expects to see nine rolling off the line daily once the renovation is complete.

"I've been in the manufacturing business since 1969, and it has never been better. It's the best it's ever been," he says, smiling as he knocks on the top of his wooden desk.

While Arkansas remains Spirit's top market, Texas, Oklahoma and New Mexico are quickly closing the gap.

Sales in Arkansas amounted to 52.4 percent of Spirit's production in 1991, but that figure has declined to 31.1 percent as of July. New Mexico has increased from 16.3 percent to 22.4 percent of the company's sales and Oklahoma from 1.8 percent to 4.2 percent. Spirit president Mil Adams attributes that to the fact neither state has a manufactured housing production facility.

Shipments to Texas have increased from 1.8 percent in '91 to 19.9 percent as of last month as the state begins to recover from the disastrous oil bust of the '80s.

Being centrally located in Arkansas has helped Spirit within its market, which includes Missouri, Louisiana and Kansas, says Adams.

"From a production location, we sit in a very key position," says Adams. "We can hit a lot of markets out there."

The images of trailer parks and transient owners are being replaced with young first-time homeowners and even established homeowners looking to avoid costly mortgages.

"The majority of my business is first-time homeowners," says Smith. "That's the young people that, rather than going into a rental and throwing away $200 to $300 in rent a month, can come here and purchase a medium-sized home with a down payment they can afford."

Allison says, "We also see couples that are looking for a second home to put on the lake or a second home to put down on the farm."

Manufactured homes, he adds, "are very popular with retired couples, too."

The average down payment is between $1,500-$2,000, according to Smith. Spirit products, from the 16-feet by 80-feet single-wide home to the 28-feet by 80-feet double-wide, cost as little as $24,000, roughly one-third the cost of a site-built home, according to Adams.

"And we use the same raw materials (site-built home producers) do," says Allison. "The same Sheetrock, the same copper wire, the same studs ... we just assembly line produce in lieu of stick building."

The Arkansas Manufactured Home Commission, the state regulatory agency overseeing home production and sales, has seen 1,281 homes either shipped or produced in Arkansas in the first five months of 1992, a 27-percent increase over the same period last year.

"I'm sure some of it is due to the economy, with the lower interest rates," says Mary Beth Bowman, director of the state commission. "Also, the fact that when you buy a manufactured home, some of the furnishings, appliances and curtains, everything can be in there ... you can buy as much or as little as you want. I think that's attractive when you can look at one payment."
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Title Annotation:manufactured housing
Author:Taylor, Tim
Publication:Arkansas Business
Date:Aug 31, 1992
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