Research

Manufactured Housing Communities

Market Trends and Valuation Index Report
November 03, 2021
Contributors:
  • Scott Belsky
  • Zach Bowyer, MAI
  • Tony Lenamon, MAI
  • Geraldine Guichardo
  • Tyler Sullivan

Institutional investment activity in the manufactured housing sector surged over the past 12 months as investors looked to place capital in operationally resilient sectors with favorable return profiles.

In conjunction with unprecedented investment volume in the multi-housing sector, valuations for manufactured housing communities reached an all-time high of $46,970 per pad in the second quarter of 2021.

As the need for affordable housing options increases, stabilized occupancy rates continue to reach new highs at 95.4%. The rate of rent growth increased throughout the pandemic, to 2.6%, pushing average monthly rents to an all-time high of $800 with collections averaging a 1% to 4% discount to contract rents.

The prevalence of delinquent loans remains near all-time lows, representing a mere 0.3% of all loans. This is in stark contrast to a delinquency rate in excess of 5.0% in the height of the Global Financial Crisis.

Capitalization rates for the manufactured housing sector continue to compress, declining 121 bps from a year ago, to 4.8% in Q2 2021, displaying increased investor confidence in the performance of the sector going forward.

The JLL Valuation Index reports key pricing metrics. The aggregate market value of this dataset totals approximately $14.9 billion, or 6.4% of the total estimated market valuation of the institutional manufactured housing sector.

The year-over-year JLL Valuation Indices show three-star properties experienced the largest decline in capitalization rates, dropping 86 bps. Two- and four-star properties experienced a decline of 18 bps and 46 bps, respectively.

The largest price appreciation year-over-year was experienced by three-star properties, increasing $11,800 (+22%) per pad. Two-star properties closely followed, climbing $5,690 (+16%) per pad, and four-star properties increased $5,580 (up 6%) per pad, on trailing four-quarter basis.

Early third-quarter 2021 transaction volume data is indicating the highest trailing four-quarter investment volume on record, at $4.5 billion. JLL expects similar growth indications for occupancy and rents as the demand for affordable housing increases.

The need for affordable living options within the aging millennial population along with America’s aging 55+ population present favorable demand tailwinds that are expected to drive mid- and long-term demand for manufactured housing and promote innovation within the sector.

Beyond the affordability component, advancements in various technologies and the utilization of recycled materials are a few of the ways manufacturers are reducing energy consumption and waste, further attracting investors who are ESG focused.

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