Financing of manufactured homes gaining more traction: Guild

Guild Mortgage, which originated loans on some of the first manufactured homes eligible for new lower-rate Fannie Mae financing, anticipates demand for this housing type will continue to grow this year.

"It's still very early, but manufacturers are starting to build their first few houses and taking time to kind of create more consumer awareness about these higher-quality homes," said David Battany, executive vice president, capital markets, at Guild Mortgage.

When the loans were first launched, concern mounted around how their availability depended on the availability of the structures manufactured to meet the GSEs' exact requirements for the financing.

Manufactured homes are typically built in response to consumer demand. Since the loans were new, it was unclear how much demand would exist.

To address this challenge, initial units were prebuilt. But Battany anticipates the housing will be increasingly made-to-order in time.

"The first two we funded the purchases of involved a developer with a housing tract that included some manufactured homes. In that case the consumer who bought it did so after an on-site walk-through in line with traditional homebuyer's experience," he said.

"As this moves forward, for many or most borrowers, I think it's going to a process where they view a model home but then pick out the exact home they want in terms of design, floor plan and materials. That house will be built in a factory once they've put down a deposit and picked out the precise home that they want."

The lower rates seen during home buying season drove momentum in the market, and likely contributed to interest in the loans. However, the relative difference in costs between manufactured and stick-built housing is so wide the homes probably would have sold even without it, according to Battany.

"The cost savings for the borrower are going to be really huge," he said. "I think that's very compelling and borrower economics will really continue to drive interest."

The average price per square foot for a manufactured home is less than half of what it is for a site-built home, according a June 2018 analysis of public and proprietary data by the Manufactured Housing Institute.

While both traditional and manufactured homebuilders have been working to increase the supply of affordable housing, it still falls short of consumer demand.