From a small northwestern observatory…

A great report crossed my desk this morning from Marcus & Millichap — Manufactured Home Communities National Report. These communities generally occupy a niche below apartments and rental houses. Housing shortages and climbing costs have increased demand across all of the residential sectors, including this one. In recent years, there has been a very real stagnation in the supply manufactured home communities, and so rents have climbed accordingly, although not as fast as for apartments and houses. Regional vacancy rates range from the low-teens in the Great Lakes region to below 2% on the west coast. Accordingly, average rents range from $460 to $488 in the Great Lakes and Gulf Coast regions (up from about $439 last year) to nearly $1000 per month on the west coast. In some high-cost areas, for example Santa Cruz, rents are nearing $2000.

Many of these communities appeal to retirees, and there is a sub-sector of “age restricted communities” among manufactured home communities. Vacancies are even tighter in this subsector, but rents tend to be somewhat lower.

According to Marcus & Millichap, investor interest “continues to grow” with “robust property fundamentals.” I would note that several REITs invest in this sector, including UMH Properties (UMH), Equity Lifestyle (ELS), and Sun Communities (SUI). UMH has enjoyed a 1-year total return of 26.51% as of this writing, while Equity Lifestyle has returned 22.52% and Sun Communities 21.61%. Note that this is not a recommendation to invest but reported for informational purposes only.

As always, if you have any questions about this or real estate in general, please don’t hesitate to reach out. I look forward to hearing from you!

John A. Kilpatrick, Ph.D., MAI — john@greenfieldadvisors.com