A Possible Solution to Rapidly Increasing Home Prices
Have you been home shopping lately?
Surging home prices, intense buying competition, rising interest rates, inflation and a distinct shortage of homes hitting the market is creating a very unique purchasing climate. How do you navigate this type of market while facing all these economic headwinds? Like any complex problem, one should decompose it to more manageable parts and focus on one part. The shortage of homes. While this exercise won’t literally put more homes on the market for eager buyers, we may find a useful angle to consider.
I have been in the building industry since graduating a Blugold, nobody really knows what that is, and this building climate is really unlike any other. Closing a $14M window business during the last recession (2007-2009) taught me valuable lessons about how fast an over-heated building climate can reverse its course. We attribute most of the collapse during those years to predatory lending and less-than-favorable banking tactics. To be fair, let’s give homebuyers during that period some credit for the failures as well.
Come on, a no-money-down, 7-year, interest-only payments on a variable rate 15-year balloon mortgage. Is this financial tool even a real thing? While I didn’t see a signed document, this loan package was explained to me in confidence during a lull in traffic while working a trade show. I don’t believe the fellow was making it up. If building economics were the spokes, financial illiteracy like this was the stick thrust directly into them.
While paying rent may be the solution for some, how about looking into manufactured homes or modular homes? Manufactured homes are based on the national code established in 1976 by the Department of Housing and Urban Development, HUD code, and are a really attractive solution. HUD homes are set on a gravel base or a concrete slab while Modular homes are set on a crawl space or basement. We will stick with HUD homes for this exercise.
HUD Manufactured Home benefits:
1) Built-in climate-controlled facilities
2) On-time delivery and predictable move-in date
3) Very minimal cost overruns
4) Energy-efficient construction methods
5) Name brand building materials
6) Lower cost price point
7) Both Contemporary and Traditional design aesthetics
8) Third-party code verification
So, is it time to get the banking industry, your local zoning officials, the appraisal community, and builders to start looking seriously at manufactured housing? That is a pretty impressive list of positive attributes for their consideration. While I am sure one can find a redeeming quality in the loan package for the site-built home in the example above, most people would agree that factory-built homes wrapped in a neatly wrapped financial package would be a much better solution.
