Because the purpose of the Index is to show the relationship between family income and the income needed to qualify for a new manufactured home, we defined affordability simply as:

The formula for calculating the Manufactured Housing Affordability Index is:

An Index value of 100 indicates that the family making the median income can afford to buy the new, median-priced home. A value less than 100 indicates less affordability. A value greater than 100 indicates more.

To arrive at the annual qualifying income, it's necessary collect other data (the price of the home and interest rates, for example) and make certain assumptions (cost of land, down payment, etc.) Of course, all indices make assumptions and this Index is no different. The assumptions for the Manufactured Housing Affordability Index may be referred to by clicking here.
 

An Overview Of The Index

Figure 1 (left) shows the Index calculations in graphic form for all three housing types for the U.S. as a whole from 1985 through 2001. (The Master Tables show the actual numbers used to determine the Index.)

Site-built housing was out of the affordable range completely from 1985 through 1991, mostly as a result of high interest rates. In 1998 affordability reached a high of 117, this time due to low interest rates. In 2000, affordability dropped to 105 due to a series of interest rate increases, but rose to 114 in 2001 again due to low interest rates. Indeed, if one examines the Master Tables more closely, it becomes obvious that interest rates alone are this part of the industry’s saving grace.

As an example, consider that in 1987, the median price of the new site-built home rose 13 percent over 1986, and yet the affordability index actually increased. The reason? The mortgage interest rate dropped almost one point. This illustrates why the affordability of this portion of the new single-family home industry is so dependent on interest rates, more so than the actual price of the home itself.

Even between 1997 and 1998, the median price of a site-built home rose approximately 4.6 percent (some $6,700) to an increasing affordability. But an examination of the table shows that a dip in the interest rate, plus a 4.1 percent rise in family income, actually decreased the cost of the home as a percent of total income, thus increasing affordability.

Overall, in fact, the price of the new median, site-built home has risen 106 percent since 1985, while median family income has risen approximately 89 percent. Without low interest rates, new site-built housing is rapidly pricing itself out of existence, at least in terms of families making less than the median income — a figure that by definition is 50 percent of all families.

The Index confirms that real new home affordability lies with manufactured homes. Although interest rates have played an increasing factor here as well, the difference in home price is so dramatic — despite the fact the cost of manufactured homes on private land or in subdivisions rose 146 percent since 1985 — interest rates would have had to approach 17 percent in 2001 for them to have been completely out of the affordable range.

According to the Index, new manufactured homes in land-rental communities in 2001 (with an Index of 171) were 62.8 percent more affordable, and new manufactured homes on private land or in subdivisions (Index of 211) were 100.0 percent more affordable than new site-built homes.

This may be more easily seen in the affordability comparisons in Figure 2 (left), which includes statistics for the northeastern, midwestern, southern and western regions of the country (as defined by the U.S. Census Bureau).

In terms of these regions, the most affordable homes of all types can generally be found in the midwest and the south. Although site-built affordability had been improving in the northeast, it began to fall in 1999 and fell even further in 2000, although it did improved in 2001 due, agaain, primarily to interest rates.

Interestingly, while manufactured homes are far more affordable than site-built in every portion of the U.S., they are "least most affordable" in the West (see Discussion For 2001's Index, below).
 

What does this mean in terms of cold hard cash? For the U.S. as a whole (see Figure 3, right) it means a family needed a qualifying income of $44,344 to purchase the median-priced, new site-built home in 2001.

On the other hand, families could purchase a new median-priced manufactured home and place it in a land-rental community with an annual qualifying income of only $30,265. And they could purchase a new median-priced manufactured home on private land or in a subdivision with an annual qualifying income of only $22,901.

What is most interesting is that it is more affordable to live in a manufactured home on private land or in a subdivision than in a land-rental community. The decision to live in such a community is, therefore, more of a lifestyle choice than one based strictly on economics, and developers and managers should take this into account in both their management and marketing plans.
 

Discussion for 2001's Index

Affordability of manufactured housing during 2001 increased in almost all areas of the country for the first time since 1998, primarily as a result of lower interest rates and a slight increase in family income. The MH housing affordability index rose to 173 from 168 in 2000.

Only in the South did the affordability, in land-lease communities, decrease as the median price of homes jumped 14.7 percent in 2001 – the largest single annual price increase of which we’re aware. The affordability index in this area fell to 172 from 176.

For the U.S. overall, prices (including delivery and setup) for manufactured homes destined for land-lease communities increased 5.4 percent over what they were in 2000: from $46,500 to $49,000. That was approximately 68 percent higher than the rate of increase of the median family income. Community rent jumped as well by approximately 1.6 percent, but this was quite modest compared to past increases.

It was the drop in the interest rate (to approximately 10.5 percent from almost 11.6 percent in 2000) that allowed the increase in affordability. The combination of monthly home loan payment plus rent resulted in such homes being lived in for approximately 13.5 percent of annual income, compared to almost 14 percent in 2000.

Still, a family looking to purchase a manufactured home and place it in a land-lease community needed a qualifying income of more than $30,000.

On the scale of 100 indicating that the family making the median income can afford to buy the new, median-priced home, while a value less than 100 indicates less purchasing power and a value greater than 100 indicates more affordability, the national affordability of manufactured homes in land-lease communities was almost 47 percent higher than for a site-built home. That may sound good (and it is), but the percentage difference in affordability between these two housing options fell. In 2000, it was 58 percent.

As in years past, manufactured homes in subdivisions or on private land remained the most affordable home option for Americans. With a median price tag of $89,913 in 2001, they were almost twice as affordable as site-built housing, with an index of 229 compared with 118. The annual mortgage payment for these homes consumed only 10.9 percent of income, compared to 14.4 percent (home loan plus rent) for homes in land-lease communities and 21.1 percent for site-built homes.
However, the price tag for such a manufactured home did jump almost 6.9 percent from what it was in 2000 and most of that was due to the price of the home as opposed to the land. The price of land for a home site was approximately $40,903, up about $1,200 from 2000 and was 45.5 percent of the entire land/home package. By comparison, the cost of land in 2000 was approximately 47 percent of the same package.

Regionally, with an Index of 185, the affordability of land-lease homes in the Midwest outpaced all other regions.  It’s not that homes here were the least expensive (the South still held that title) but that the increase in median family income combined with lower interest rates more than offset the 4.5 percent increase in the median home price. The result was that the monthly home loan payment was down 1.6 percent (approximately $380 from $386 in 2000) and the annual qualifying income was identical to that 2000 – just under $30,500.

With an index of 247, manufactured homes on private land or in subdivisions were also the most affordable in the Midwest. Again, this was due to lower interest rates that more than offset a 2.9 percent increase in the land/home package. In fact, the monthly mortgage rate in this region dropped about $39 from its all-time of $513 in 2000, and the annual qualifying income dropped by 7.5 percent.

As in years past, the West continued to have the least affordable manufactured homes. This was ironic in that it was the only region where the price of a home destined for a land-lease community actually dropped, by 2.5 percent to $58,500 from $60,000 in 2000. But even with the decrease, the price of such homes remains the highest in the country. Still, the combination of the price decrease plus lower interest rates resulted in a rise in the affordability index to 129 from 121 in 2000.

Due to the cost of land, however, the median price of a manufactured home on private land or in a subdivision rose to $108,649 from $106,154 in 2000; the most outlay of bucks in the country. Again, lower interest rates saved the day and the affordability of such homes rose to 190 from 170  in  2000.

Regardless of price, however, there wasn’t a region in the country where manufactured homes were not significantly more affordable than their site-built cousins.

Manufactured homes on private land or in subdivisions in the Northeast were 126 percent more affordable than site-built homes. Such homes in the South were 86 percent more affordable than site-built homes. In the Midwest, they were approximately 91 percent and in the West, they were 96 percent more affordable.

And even in the West, where the difference is narrowing between homes in land-lease communities and site-builts, manufactured homes are approximately 33 percent more affordable. And for a lot of families, that’s the difference between owning a home and not.

^{click here to go back to Figure 1}

 

The Manufactured Housing Affordability Index Assumptions

 
1. Median family income is used rather than median household income, since family income reflects the resources of those most likely to purchase a new, single-family home, as opposed to those more likely to rent (households include non-related persons and persons living alone).

2. The price of a manufactured home includes cost of delivery and setup.

 
3. The cost of land for housing is identical whether the home placed on it is site-built or manufactured. As such, the median price of new, manufactured homes in subdivisions or on private land has been inflated to include a cost for land similar to that for site-built homes. This is estimated to be 20 percent of the cost of site-built housing through 1997 and 23.5 percent from 1998 on, according to the National Association of Home Builders (NAHB); statistics that are generally used by most home builder associations nationwide. In addition, the use of an identical land value allows for more direct comparison between housing types.
 
5. The mortgage rate is a composite figure for new, standard fixed- and adjustable-rate 30-year loans and is identical for both site-built homes and manufactured homes w/land included. In the case of manufactured homes being purchased without land (and destined to be located in land-rental communities), the interest rate is based on the home purchase as personal (rather than real) property for 15 years and is generally 3.5 points greater than for real property.
 
6. Mortgages for site-built and manufactured homes assume a standard 20 percent down payment. The loan for manufactured homes purchased without land assumes a standard 30 percent down payment.
 
7. The median monthly community rent figure for manufactured home rental communities is based on 1990 Census data, modified for other years by the Consumer Price Index and confirmed by survey. Data combines rental fees for single- and multi-section homes.
 
8. The monthly mortgage payment for new, site-built and manufactured homes on private land or in subdivisions is based on the current Fannie Mae requirement that a family may spend no more than 25 percent of its monthly income on housing payments (excluding taxes and insurance). This figure has been carried over to homes in rental communities.
 

Data sources: U.S. Bureau of the Census, U.S. Department of Housing and Urban Development, Federal Housing Finance Board, U.S. Bureau of Labor Statistics.

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The MH Affordability Index For:

Northeast

South

Midwest

West

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