PHOENIX, ARIZONA (February 10, 2023) - Don Vedeen, vice president for national manufactured housing investment sales with Northmarq, was highlighted in a recent story published in Multi-Housing News (MHN) titled, "Are Manufactured Homes a Good Investment in 2023?" The story surveys a group of industry experts as they investigate the historically stable assets class, and offer their predictions.
Vedeen told MHN that in 2022, investors compressed cap rates to levels that would have been deemed “laughable” 12-to-18 months earlier. But rapidly increasing interest rates threw a wrench into investment volume in the second half of the year.
“Many investors put a full stop on acquisitions, which has slowed the market down. Buyers are looking at the higher interest rates as an opportunity to buy properties at a higher cap rate or lower valuation," he said. "The problem is that owners have grown accustomed to having brokers ‘wow’ them with inflated values and that isn’t happening right now. Buyers are looking for a deal, while sellers are holding onto hope of a large sale price… I see this as a waiting game to see who gives in first—buyers or sellers."
One the key points Vedeen made to MHN focused on how manufactured housing projects could be employed to mitigate the U.S.’s housing shortage as financing traditional housing development becomes increasingly difficult “There needs to be more regulation allowing manufactured housing to increase its supply,” he said.
Northmarq has been involved in several manufactured housing developments over the past few years, but compared to traditional apartment developments, new manufactured housing communities are almost nonexistent. In Texas alone, for example, the brokerage estimated that some 20,000 MHC units were at some stage of development at the beginning of this year, but the need for affordable housing in the state is incomparably higher.
“Just Googling affordable housing need in Texas shows a need for over 600,000 rentable units right now,” Vedeen said. “Manufactured housing could help that but the red tape to get the communities built is exhausting.”
When asked about what lies ahead, Vedeen stated that “Investors need to plan for the long term. I envision the market to continue to cool down in the first and the second quarter, but I think at some point a domino will fall and investors will begin buying again and compressing cap rates despite the interest rate.”