What's it worth?

Murky pricing hurts consumers
in the manufactured housing industry

January 2005
PDF Format

Executive Summary
We Recommend

Report:
The problem with murky pricing
Manufactured Housing: The recent shakeout
Murky pricing - part of the problem
Long-term solutions
Sticker prices
Appraisals
Recommendations

Sidebars:
Deja-vu all over again
Fifty years of auto sticker pricing
Real estate: Appraisals are the norm
$42,000, $34,000, or $25,000?

Director
Reggie James

Author
Kevin Jewell

Editor
Kathy Mitchell

Design
Amanda Frayer

For more information, contact:
Suzanne Henry,
Policy Associate
512-477-4431 x121
shenry@consumer.org

Kevin Jewell,
Policy Associate
512-477-4431 x125
jeweke@consumer.org

Rafael Ayuso,
Media Director
512-477-4431 x114
ayusra@consumer.org

Click here to find out more about manufactured housing.

Real estate:
Appraisals are the norm

The conventional housing market has developed mechanisms to stabilize its prices. Tight underwriting standards, independent appraisals, and transparent transaction prices all contribute to relatively consistent prices by region. Residential real estate prices do go through cycles that reflect the strength and weakness of the market, however, extreme busts and booms are relatively localized and frequently result from the underwriting and appraisal process becoming less transparent and independent (see chart.)

One of the largest real estate swings in recent history was a result of the failure of the Savings and Loans industry to use appropriate underwriting and appraisal standards. One policy response to this was the development of consistent appraisal standards for many of the large real estate transactions involving federally regulated banks and financial institutions.¹

The GSEs (Fannie Mae, Freddie Mac, etc) have recognized the importance of independent appraisals and create de-facto appraisal standards for residential purchases through the underwriting standards they require for the loans they package for the secondary market.

The more transparent nature of real estate transactions also assists the marketplace. Information about real estate transactions is filed with local governments, allowing the governments to monitor values and ownership for tax purposes. This information also allows both appraisers and other consumers to develop an understanding of current market prices. Consumers can quickly narrow their search for a home to one in their price range without undergoing a credit check first or entering a discussion with a particular seller. Independent realtors can check the Multiple Listing Service (MLS) at any given moment and review up-to-date information on the price of houses currently on the market. The manufactured housing market has not widely adopted the MLS sales process, although some internet-based MLS style systems have appeared in recent years that focus exclusively on used manufactured homes.

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¹ Committee on Government Operations, House of Representatives. Implementation of Title XI, The Appraisal Reform Amendments of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. p 1-3. Opening statement by Chairman Barnard. May 17th 1990.