How many times a day do you hear a modular home builder or a modular factory say they build “Affordable” homes? Personally I hear it a lot. What I hear little about however is exactly what is an “Affordable” house?
The official definition is:
The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.
But that is a little misleading. In fact it’s very misleading. The Index for First Time Home Buyers below shows that a first time homeowner that had a median income in 2015 of $44,000 can only afford a home costing $194,000. That leaves them with several choices. Buy an existing home or buying a small townhouse or condo.
A new home on any home is more than $194,000 unless it is a manufactured home on a rural lot. Any modular home builder that tries to build a home for this market will soon be out of business.
FIRST-TIME HOMEBUYER AFFORDABILITY
Now let’s look at the Affordability Index for all home buyers. They could afford to buy a median priced home for $229,000 in 2015. Again you have to ask yourself if one of your prospective new home buyers can afford to build a home with you.
Quarterly Housing Affordability Index
as a % of
The answer is “probably not.” Yet we all think that modular home factories can magically churn out houses that fit this market.
SO what is the humble modular home builder to do?
First, nobody knows your market better than you. Look at the homes being built in it and find what a new home on a single family lot NOT in a tract development are selling for and/or the amount of mortgage taken out on them. It will take a little digging but all that info is available.
Next, begin marketing to both the markets that are buying in that price range and to the more upscale market where prices tend to bring extra profits.
Let the “Affordable” houses for the Realtors selling used homes and to the manufactured home people and get started promoting your business to the only markets a modular home builder can be successful in, the current average (not median) new home buyer and the upscale new home buyer.