Monday, January 26, 2015

Manufactured homes, a staple of rural areas, cost less, but come with higher interest rates

After several years of declining sales of manufactured homes—more commonly known as mobile homes or trailers—sales are beginning to climb. While manufactured homes are cheaper than houses, they come with high finance rates, which in the long run make the homes a bad investment, Lance George, Director of Research and Information at the Housing Assistance Council, writes for the Daily Yonder. More than half of all manufactured homes are located in rural areas, a large portion of them in the South.

Sales of new manufactured homes were at 58,000 in 2014, up from 56,300 in 2013, George writes. There are about 6.8 million occupied manufactured homes in the U.S., with manufactured homes selling for an average price of $64,000, compared to $269,000 for a newly constructed single family home. (For an interactive version click here)
While it might appear that manufactured homes are a better deal, "the majority of manufactured homes are still financed with personal property, or 'chattel,' loans," George writes. "With shorter terms and higher interest rates, personal property loans are generally less beneficial for the consumer than conventional mortgage financing. Roughly 60 percent of manufactured home loans in 2013 were classified as 'high cost' (having a substantially high interest rate) which is more than eight times the level of high cost lending for newly constructed single family structures."

"Manufactured homes are typically sold at retail sales centers where salespersons or 'dealers' receive commissions, often exacerbating these finance issues. In some cases, dealers resort to high-pressure sales tactics, trapping consumers into unaffordable loans," George writes. (Read more)

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