5 Manufactured Housing REITs and Builders for a Booming Industry - Cabot Wealth Network

5 Manufactured Housing REITs and Builders for a Booming Industry

Manufactured home communities are growing rapidly and these three housing REITs and two builders are capitalizing on the trend.

Home held by housing reits

Manufactured homes today don’t look anything like the mobile homes of my childhood. The industry has evolved into sustainable housing for more than 22 million folks in the U.S. That’s more than 6 ½% of our total population and presents new opportunities for housing REITs! And the industry is heating up around the globe. The worldwide manufactured housing market  was valued at $27,188 million in 2019, is growing at a CAGR of 6.5%, and is expected to reach $38,848 million by 2027.

Manufactured housing is quickly becoming one of the answers to our affordable housing crisis. The average price per square foot for a new manufactured home is $45-$60, according to Manufacturedhomes.com. Alternatively, Homeadvisor.com reports that the average price to build a single-family home today is $150-$200. On average, you can buy a manufactured home for $81,900, compared to the average $287,148 that a stick-built home will set you back.

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And manufactured homes are no longer the dumpy cousins of stick-build residences. Numerous technological advances now allow homeowners to choose from different architectural styles and exterior finishes, as well as opt for two- or even three-story homes. Today, you can even jump in and customize your home, as I recently witnessed with one of my real estate customers, who bought a Clayton home. Clayton allowed her to change the configuration of the inside of the home. She removed walls, and I’m here to tell you—you couldn’t tell that it was a manufactured home!

A Growing Opportunity

According to Commercial Property Executive, today’s manufactured homes “are built with many of the same materials and construction techniques as foundational homes and are nothing like the early mobile homes” (built before 1976, when the HUD code was introduced).

Besides affordability and quality, there are several other trends that are boosting this industry, including:

  • The proliferation of manufactured housing communities. There are more than 43,000 land-leased communities in the U.S. And some of them are pretty amazing, in terms of amenities: swimming pools, golf courses, tennis courts, pickleball courts—you name it.
  • For the community owners, rental rates rose 3.7% compared to the previous year, which makes the ownership of such a neighborhood attractive.
  • The national occupancy rate is 93.3%, with low turnover.
  • As you can see from the following graph, baby boomers who have begun hitting their golden ages are a growing demographic. The majority of manufactured homes are owned by those 50 and older, although you can see by the graph that the younger folks are also choosing this affordable housing option. And the expected 55 million Gen Z renters by 2030 will, no doubt, be on the hunt for reasonably priced housing (I’m sure their parents will be happy to help!).
  • Supply of manufactured homes has decline by 1% from 2019.

The Housing REITs Investment Strategy

Right now, there are three housing REITs that focus on manufactured housing communities:

Sun Communities, Inc. (SUI) owns, operates, or has an interest in a portfolio of 432 communities comprising nearly 146,000 developed sites in 32 states and Ontario, Canada.

Equity LifeStyle Properties, Inc. (ELS) owns or has an interest in 423 quality properties in 33 states and British Columbia, consisting of 161,229 sites.

UMH Properties, Inc. (UMH) owns and operates 124 manufactured home communities containing approximately 23,400 developed homesites. These communities are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan, and Maryland.

I like the looks of all of those housing REITs, but thought while I was reviewing real estate stocks, that I would also look at these two companies that make manufactured homes:

Legacy Housing Corporation (LEGH) builds, sells, and finances manufactured homes and tiny houses primarily in the southern United States. The company markets its homes under the Legacy brand through a network of 100 independent and 13 company-owned retail locations, as well as direct sales to owners of manufactured home communities in 15 states in the United States.

Skyline Champion Corporation (SKY) operates as a factory-built housing company in North America. The company offers manufactured and modular homes, park models RVs, accessory dwelling units, and modular buildings for the multi-family, hospitality, and senior and workforce housing sectors.

As you can see from the following table, each one of these stocks looks pretty interesting at the moment.

 

STOCK SYMBOL ANALYST RANKING 52-WK RANGE ($) DIV YLD (%)
Sun Communities SUI 1.8 153.64 – 211.79 1.92
Equity Lifestyle ELS 2.1 65.52 – 88.70 2.08
UMH Properties UMH 1.7 18.95 – 27.50 3.34
Legacy Housing LEGH 2 15.28 – 28.84 n/a
Skyline Champion SKY 2.3 38.96 – 85.92 n/a

In addition to their individual merits, there are several other reasons why investors might want to take a look at these manufactured housing investments:

  1. U.S. housing inventory is still low, but has improved from historical lows, as you can see by this graph (courtesy of the St. Louis Fed). The National Association of Realtors recently reported 6.3-month supply at the current sales pace, due to a cooling rate of sales and increased building.

U.S. Census Bureau and U.S. Department of Housing and Urban Development, Monthly Supply of Houses in the United States [MSACSR], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MSACSR, April 13, 2022.

  1. Housing REITS have outperformed the average REIT for eight years in a row.
  2. Manufactured housing REITS have a decent yield, although the new manufacturers do not pay dividends.

So, if you’re in the market to take advantage of the housing boom, these ideas might just be the way to do it.

Do you prefer to invest in physical real estate or housing REITs for sector exposure?

Nancy Zambell

Learn from Expert Analyst Nancy Zambell

Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. As a lecturer and educator, Nancy has led seminars for individual investors at the National Association of Investors, Investment Expo and the Money Show. She has also taught finance, economics and banking at the college level, and has been quoted extensively in The Wall Street Journal, Investor’s Business Daily, USA Today, and BusinessWeek. Now let her give you the tools and resources, including a monthly magazine, for gaining the peace-of-mind to live comfortably now and in retirement in her Cabot Money Club.

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*This post has been updated from a version originally published in 2021.

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