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Manufactured Housing Report
Dream Home. . . or Nightmare?
MANUFACTURED HOUSING HAS COME A LONG WAY. BUT IT'S STILL 'BUYER BEWARE' IN THE MARKET FOR MOBILE HOMES.
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Living in paradise Margaret
and Freeman Smith of Lakeland, Fla., retired to this tidy manufactured
home by a lake. Solid construction and timely maintenance help preserve
the look of the Smiths' manufactured home. |
Dreams drowned The
Gearys were attracted by the affordability of manufactured housing, but
they've endured a host of problems. On the Gearys' mobile home, the
wood trim and metal drip edge near the roof are falling apart. |
Christine and Michael Geary thought they'd found
ideal housing they
could afford when they moved themselves and Christine's children from
New Jersey to sun-drenched Polk County, Fla., five years ago. The
double-section, 28x68-foot manufactured home they decided to buy sits
on a grassy one-acre plot, giving them more privacy than is common in a
mobile-home park. Best of all, priced at just $55,000 for both the
structure and land, the then six-year-old house fit their budget.
But then the rains washed away the Gearys' illusions of
easy-maintenance life in a manufactured home. The siding and windows
leak, and the air-conditioning ducts are perpetually clogged from water
damage. As he runs his hand over the flaking wood near the base of a
wall, Michael tells a visitor that he still has 17 years remaining on
the loan he took out to buy his home; he wonders whether the house will
last as long.
Five miles away from the Gearys, you follow a tree-lined main road to
reach the lakeside home--make that manufactured home--of retirees
Margaret and Freeman Smith. Perched on a manicured 85x95-foot lot
overlooking one of the two golf courses that wind through the 800 acres
of Cypress Lakes, a retirement community in Lakeland, Fla., the Smith's
airy three-bedroom house has a cathedral-ceilinged living room, a sun
room, and a kitchen with bleached-wood cabinets.
The Smiths purchased their new triple-section, 2000-square-foot
manufactured home and the lot it sits on, and added a porch and a
garage, for just over $100,000. They haven't had cause to regret their
choice since they moved in almost four years ago.
Manufactured housing--still commonly referred to as "mobile homes"--is
emerging as a mainstream residential choice for millions of Americans
across a wide spectrum of incomes. Today, 18 million Americans live in
manufactured housing, and new construction was up 7 percent in 1996.
Manufactured houses now account for nearly one-fourth of all new
single-family homes built.
Yet for all of the evidence of broader consumer acceptance, a two-year
examination of the industry by CONSUMER REPORTS found that
manufactured-home ownership can be beset with problems. Our
investigation included tours of a half-dozen factories where the
structures are built, visits to dealer lots and mobile-home communities
in four states, and a national survey of the ownership experiences of
1029 consumers who had purchased manufactured homes built since 1977.
Our main findings:
- Manufactured housing can last as long as site-built housing.
More-expensive mobile homes, though, have fewer problems than
lower-cost ones. The latter typically have lower-quality materials,
like plastic plumbing fixtures, metal roofs, and cheaper carpeting that
wear out quickly or are easily damaged.
- Eighty-two percent of our survey respondents reported that they
were
largely satisfied with their manufactured home, but a majority--even
those whose home was less than five years old--also told us that they
had had at least one major problem. (See How to avoid weak spots for
the most common trouble spots and advice on how they can be avoided.)
- Consumers who lease the land on which their manufactured house
sits--including just under half of our survey respondents--are
vulnerable to sudden, and sometimes dramatic, jumps in the rent on
their lots. Those who cannot afford the increases or who lose their
lease have few options other than to bear the expense of having their
home moved. Or they can sell the home--often to the landlord at a
distress price.
- A major factor in raising manufactured housing's quality and
reliability has been a code of construction standards imposed by the
U.S. Department of Housing and Urban Development (HUD) to ensure that
manufacturer-built homes meet minimum performance criteria. But more
than 20 years after the HUD code was adopted, large gaps in the
regulation of the fast-growing industry remain to be filled,
particularly in the area of installation.
How safe?
Installation can be a serious safety issue for manufactured housing.
Images of uprooted mobile homes flipped on their sides in the aftermath
of a severe storm are frequent news events. That's due, in part, to the
fact that unlike homes built on a permanent foundation, manufactured
houses are commonly propped on piers and tied to the ground with steel
straps. State and federal regulators say manufactured homes are often
installed incorrectly, accounting for more than half the problems
consumers report.
When Hurricane Andrew hit Florida in 1992, for example, almost all of
the mobile homes in the southern part of Dade County were destroyed. By
comparison, just 28 percent of contractor-built homes in the area
suffered irreparable damage. And when the Northridge earthquake rocked
Southern California in 1994, almost half the manufactured homes in the
area slid off the support systems intended to secure them to the
ground, a survey by the California Department of Housing and Community
Development found. (Thirty-six states have agencies that monitor
compliance in their jurisdictions with the federal manufactured-housing
standards; HUD takes responsibility elsewhere.)
Manufacturers are required to include an installation manual with each
home they sell, but state regulators we interviewed say that installers
often ignore or are unable to follow the directions. There are no
federal guidelines for installation, and only 23 states license or
certify installers. Consumers Union supports efforts HUD is making to
improve the installation process.
An affordable choice
For many aspiring homeowners--especially low-income families and
first-time buyers--there are fe)N affordable alternatives to
manufactured housing. The median household income of manufactured-home
dwellers was $22,578 in 1995, the latest year for which government
statistics are available, compared with $31,416 for all households.
Under a recent program, manufactured homes are :being installed to see
if they can help stabilize run-down neighborhoods in such cities as
Birmingham, Ala.; Louisville; Ky.; Milwaukee; Nashville, Tenn.; and
Washington, D.C.
The Manufactured Housing Institute, a trade association based in
Arlington, Va., calculates that excluding land, a contractor-built home
costs $59 per square foot to build, compared with just $28 per square
foot for a manufactured home. In 1996, the average manufactured home
sold for $38,400 and had more than 1300 square feet of living space,
typically consisting of a living room, kitchen, two or three bedrooms,
and two baths. That's nearly one-third larger than mobile homes built
in 1981 and some 500 square feet bigger than the first Levittown tract
houses of the early 1950s. The basic price, moreover, typically
includes appliances and other interior furnishings, transportation from
the factory, and installation on the site. Multisection homes costing
upward of $50,000 can provide living space equivalent to a site-built
home and permit buyers to add options like fireplaces or whirlpool
baths.
The buyer's maze
Shopping for a manufactured home can combine all of the headaches of
buying an automobile with the complexities of any housing purchase. Ten
manufacturers, each building homes configured in a range of floor plans
and interior decors, account for nearly three-fourths of all
factory-built housing units made. But most dealers who sell
manufactured homes --usually located, like auto dealers, along busy
commercial strips on the fringes of town--Have only a narrow selection
from a few makers on display, making it difficult to compare brands and
models side by side. Would-be buyers must rely on descriptions in
manufacturers catalogs and small samples to base purchase
decisions1that can consume the bulk of their financial resources.
Further complicating the consumer's choice is the problem of where to
put the home when it's delivered from the factory. Many municipalities
still discriminate against manufactured housing through restrictive
zoning. Some owners of mobile-home parks try to pressure buyers who
want to lease a site in their community into buying from a retail
outlet they own (only some states prohibit the practice of tying one
transaction to another). And if the prospective homebuyer wants to
lease land in a park that has few vacancies, he or she may be pressed
into buying a home that is already on the site. Of the consumers we
surveyed, 61 percent bought their home from a dealer, 22 percent bought
from the previous owner, and 7 percent bought from a park.
Costly financing
Loan terms for buyers of manufactured housing are superficially similar
to those of conventional mortgages. Putting as little as 5 percent
down, a borrower can take out a loan to be repaid over a period of
between 15 and 30 years. Government-backed FHA and veterans loans are
available to buyers who qualify. And like owners of site-built homes,
consumers who reside in their manufactured home are permitted to deduct
interest payments from their federal income taxes.
But in other major respects, financing a mobile home is more like
taking out a car loan--with many of the same disadvantages. Overall,
interest rates on mobile-home loans typically run some 2 or 3
percentage points higher than those for a conventional mortgage. The
median rate paid by consumers who responded to our survey was 11
percent. The rate varied based on where consumers got their loan--bank
loans averaged 10.4 percent, while dealer loans averaged 12.3 percent.
Rates are high in part because many banks shy away from lending on
mobile homes, especially used ones. Those that extend credit to buyers
who lease their lots generally offer the borrower only more-expensive
personal loans. Dealers typically work with a handful of lenders, and
they try to steer the prospective buyer to one of them so they can
close the deal before the customer leaves the lot, effectively
eliminating the opportunity to shop for better terms. The nation's
biggest mobile-home lender, Minnesota-based Green Tree Financial Corp.,
for example, says it can extend conditional loan approval to would- be
buyers within an hour of receiving an application through a dealer.
Some manufacturers, such as Clayton Homes and Oakwood Homes, operate
their own retail outlets and proprietary finance companies.
Lenders justify the higher rates by pointing out that borrowers who buy
manufactured homes are more likely to default than are traditional
mortgage borrowers. Some 12 percent of all manufactured-home loans end
up in default over the life of the loan, a rate that's some four times
higher than that for conventional home mortgages. But default rates may
also be high because many mobile homes, especially those installed on a
leased lot, lose value over time. In fact, two-thirds of our survey
respondents estimated that their manufactured homes would sell for less
than they had paid for them.
Homeowners insurance on manufactured housing is also costlier than for
a traditional home because mobile homes are more vulnerable to storm
damage. For an equivalent level of coverage, annual premiums on a
manufactured home may be 20 percent higher.
Insecure leases
There are about 50,000 mobile-home parks throughout the U.S. Most are
independent operations, ranging in ambience from little more than dirt
yards with no amenities to country club-like settings with a pool, golf
course, and recreation center. Four publicly traded companies--Chateau
Communities, Manufactured Home Communities, Sun Communities, and United
Mobile Homes--operate some 300 parks. One of the biggest makers of
factory-built housing, Clayton Homes, owns 67 parks. Others are managed
by dealers.
Tenants are vulnerable to the vagaries of landlords who raise the rent
on their lots at will, or who add extra charges for water or for
garbage removal that was once included in the base rent. Even in the 34
states that provide tenants with some legal protection, regulations
lack much enforcement bite. For example, when they moved into Lakeview
Court in upstate New York just over a year ago, Anthony and Veronica
Bertonica were told they could expect the monthly $170 rent for the
site on which their home is anchored to increase by no more than $5 or
so a month after the first year. Then, last fall, their landlord told
them their rent would jump to $275 a month. The couple never signed a
lease, and now they're not sure what their next move will be. A
real-estate agent told them it would be hard to sell their home. Says
Anthony Bertonica, "We're in a no-win situation."
It's not easy for tenants to extricate themselves from rental
situations that turn sour. Ten years ago, Deborah Chapman bought a
manufactured house in Strasburg, Pa. Like many young people, she had
opted for manufactured housing because she couldn't afford the down
payment for a site-built home. When she was ready to trade up, however,
her landlord, who had written into the lease the right to approve any
subsequent buyer, rejected each of the six people who made an offer on
the $9500 home. He then made a lowball bid of his own for $2000.
Rather than abandon her home, Chapman paid some $1500 to have it moved
to a new location, where it sat empty until she sold it a year later
for $7000. She used the proceeds to pay legal costs she'd racked up
fighting her landlord, in the end netting nothing for all the trouble
she went through. Says Chapman, who is now the chairwoman of the
National Foundation of Manufactured Home Owners, "Had I been forced to
sell, the landowner would have sold my home for much more than he paid
for it."
Recommendations
Consumers who would consider the manufactured-housing option should
take the following precautions:
Put together the whole package.
There's a good chance that the dealer who sells you your manufactured
home will also want to arrange your financing and rent you a site at
the same time. But you won't know if the terms are right unless you
shop around for land and a lender independently. And because most
dealers' product selections are limited, you should also be prepared to
visit several to be able to compare brands and models.
Before you settle on a community, talk to residents who live there, and
ask about their experiences with the landlord. Read the park's rules
carefully, make sure the site you're shown is the one you would
actually rent, and insist on having a lease. Have an attorney look over
the rental terms, being careful to pay close attention to any
conditions that may limit your freedom to sell your home to whomever
you choose. For referrals to an association of owners of manufactured
homes in your area who can help you with your decision, call the
National Foundation of Manufactured Home Owners (717 284-4520).
Buy extra strength.
Manufactured homes are required by H U 0 standards to be able to endure
various weather conditions, depending on where they'll be sited. Those
slated to go along the Gulf of Mexico and the Southeast coast must be
sturdy enough to withstand hurricane winds. Mobile homes destined for
the colder North must be packed with extra insulation to hold in heat
against subzero winter temperatures. But even mobile-home owners who
live in the South should consider upgrading to heavier insulation as a
way of cutting their cooling expenses.
Hire a home inspector. Spending
a few hundred dollars for a licensed engineer to supervise the
placement of your home on its site or to inspect a used home you buy
could save thousands in repairs down the road. Mobile homes are
typically inspected only once, before they leave the factory, to see
that they conform to HUD construction standards. But then they're
towed, sometimes for hundreds of seam-loosening miles before they reach
the site where they'll be installed. Some local building departments
have a permitting process to ensure that installation on the site meets
the manufacturer's requirements.
Plant a solid foundation. Most
retailers include the cost of installation in a home's price. This is
an area where consumers should consider spending extra money. If you
own the land beneath your home, you can increase the home's stability
and value by putting in a permanent foundation with a poured concrete
slab and a crawl space. Whether you or the dealer arrange the
installation, check the installer's references, and call the Better
Business Bureau and the agency that regulates manufactured housing in
your state.
Spell out who's responsible for
correcting defects. Manufacturers offer warranties, but they
often exclude damage caused in transit or by faulty installation.
Transporters and installers are inclined to blame problems on each
other--or on the manufacturer. To minimize the runaround, look for a
mover and an installer who are insured, and consider buying
supplemental insurance to cover you until the home is permanently
anchored to its site.
Sidebars
Home Styles
Manufactured home. Still
popularly known as mobile homes, most never move after their trip from
the dealer or manufacturer to the consumer's land. These homes are
built on a chassis (a metal frame) to conform to a regulatory code
established by HUD. Most rest on piers and are anchored to the ground
by steel straps. Median price: $35,700 without land.
Modular home. The entire house
is built in a factory, shipped to a consumer's land in sections, and
assembled on the site in accordance with local building codes. It is
installed on a permanent foundation. Prices can be similar to those of
site-built homes.
Recreational vehicle. Often
confused with mobile homes, these traveling home-like vehicles are
popular with vacationers and retirees. Versions include motor homes,
travel trailers, and pop-up campers. The average price: $47,000 for a
compact motor home.
Site-built home. Also known as
a stick-built house, this is constructed piece by piece on land you own
to conform with local building codes. Median price: $140,000 with land.
Regulations need refurbishing
The current guidelines regulating construction of manufactured housing
haven't had a wholesale overhaul since they were first put in place
more than 20 years ago. Those standards are inadequate and badly need
to be upgraded. Manufacturers have balked at reform efforts, including
the tougher wind-resistance standards that HUD imposed in 1994 in
coastal areas to stave off problems like those caused by Hurricane
Andrew. But the old standards remain essentially unchanged in much of
the U.S., even though a HUD study found that over a period of 10 years,
a manufactured home exposed to normal wind conditions was five times
more likely to suffer a structural failure than a conventionally built
home. That is mainly because the manufactured homes are not adequately
anchored to the ground. The industry has also stalled on improving
warranties that would make it easier for consumers to have defects
corrected, whether they occurred in the factory, in transit, or during
installation.
HUD is expected to begin a much-needed review of the construction code
this year, an initiative Consumers Union supports. Still, the federal
effort is not expected to include a national installation standard.
That's a big omission. Installation is a major cause of structural
defects experienced by owners of factory-built homes, accounting,
regulators say, for more than half of all complaints reported.
Make that "Money Tree" Lawrence Coss, chief executive officer of Green
Tree Financial, the biggest lender to manufacturedhome buyers, made
$102 million in 1996. That made him the highest-paid corporate
executive that year
House Wears: How to avoid weak spots in manufactured homes
Floor
 Problem:
The particleboard
subfloors found in many mobile homes can swell when wet and break down
over time.
One-fourth of our survey respondents experienced some of these
problems.
Solution: Choose a home built
with plywood subfloors, or pay a few hundred dollars more to upgrade to
plywood where possible. Because you will be less likely to encounter
potentially large repair bills, plywood can be the more economical
choice in the long term. Keep an eye especially on the flooring beneath
windows and around doors for damp carpeting or uneven linoleum –
evidence of water.
Central heating and
coaling
 Problem: Improper placement of
registers can result in uneven heating and cooling of the home. More
than one-fifth of our survey respondents reported having had problems
with these systems.
Solution: Choose a system
appropriate for the climate where you live, paying attention to the
kind of fuel – oil, gas, or  electricity-you'll
be likely to use, and
its cost. If you live in a temperate or warm part of the country
and
will be heating with electricity, a heat pump will help lower your
electric bills. Cooling outlets should be located in the ceiling. If
you reside in a colder region, a gas or oil furnace may provide more
economical heating. Look, too, for a home with heat outlets located
along the exterior walls. That placement will be less likely to result
in obstructed heat flow and more likely to provide even heating.
Plumbing
Problem: Polybutylene piping
with mechanical fittings may leak. In the kitchens and bathrooms of
lower-cost models, cheap plastic !sinks, tubs, and shower
enclosures aren't as durable as porcelain fixtures used in many
site-built homes. Many manufactured homes lack shutoff valves at every
plumbing fixture, making service less convenient. Thirty-six
percent of our survey respondents reported having had problems with
plumbing during the time they owned their home.
Solution: If your budget
permits, find a model that comes equipped with higher-grade acrylic or
porcelain fixtures, especially for high-use plumbing such as in the
kitchen or master bathroom. Conduct periodic inspections of, around,
and under all plumbing fixtures for early signs of leaks. And don't
forget look for evidence of water leaking beneath the home, as well.
Have any leaks repaired quickly, because the subfloors can be easily
destroyed by exposure to water. Choose a home equipped with shutoff
valves at each fixture for a .quick, convenient way to stop water flow,
particularly in an emergency.
Roof
 Problem:
Seams common in metal
roofs, spots where a roof ends flush with a house's exterior walls, and
points where pipes protrude through any roof are potential leak spots.
Thirty-one percent of our respondents reported having had roof problems.
Solution: Homes with
shingle-roof construction may be more durable and less prone to leakage
problems. Look, too, for a roof with eaves that overhang the exterior
sidewalls. Not only do overhangs reduce the risk of water seepage, the
larger ones provide greater protection from driving rains and the hot
summer sun.
Windows and doors
 Problem:
Gaps between windows
and doors and the walls in which they are placed are filled with
caulking material at the factory, but transportation may break the
seal. Low quality windows often have corners joined
with fasteners instead of a continuous weld, creating more gaps' that
air and water can leak through. Thirty-two percent of our respondents
experienced leaking windows and doors.
Solution: Look for a home with
welded vinyl windows and insulated glass. Insulated steel or fiberglass
doors provide cost-effective weather barriers. Maintain weather
stripping around windows and doors and the home's exterior to keep out
the elements.
Foundation
 Problem:
If the home is
supported directly by surface soil, where normal freezing and rainfall
can cause the structure to settle, cracks may develop in walls, and
windows and doors may be difficult to open.
Solution: An enclosed permanent
foundation is the best choice. Otherwise, have soil analyzed for
load-bearing capacity. Footings and piers on which the load of the home
sits should be sized to transmit weight to the soil without exceeding
those limits. In cold regions, footings should be below the frost line.
The ground should be graded to direct water flow away from the home.
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