3 Ways Inflation is Affecting the Mobile Market
Inflation is becoming the one word no one wants to hear, yet everyone keeps talking about it. It's impacting everyday items people buy, such as groceries and gas to larger expenses like mortgages (due to an increase in rising interest rates) and rent.
Everyone's feeling the strain, including high earners. According to CNBC, even employees making over $100,000 annually live paycheck to paycheck. While only 9% of Americans make $100,000 or more, there are a lot more Americans having to do more with less. Those in the affordable housing market are facing unique troubles and hardship as higher prices grip the economy, too. Here are three things that mobile homeowners should pay attention to for the rest of the year and throughout 2023.
Higher Cost of Living and Lot Rent
Mobile homeowners feel inflation, and parks are taking advantage by increasing lot rent. While many mobile homeowners own their homes, they often do not own the land. So instead, they pay a lot, which is cheaper than other rental units. Depending on where you live, this can vary from a few hundred to over a thousand dollars.
However, low lot rent is not a guarantee, and the increase in lot rent has many owners in these communities afraid and vulnerable. Many parks can raise prices by 4% on current owners every year, and if a new tenant comes in, they can grow to what they deem as market rent, which is a way of staying competitive with other mobile home parks. These price increases hit those who are in the garden already. Still, it also hurts when homeowners try to sell because the higher price impacts affordability and ultimately desirability, thus affecting the owner's ability to sell their home.
Rising Interest Rates
Lot rent impacts the homeowners when trying to sell, but higher interest rates mean higher borrowing costs for prospective buyers. We already see the impact of higher rates in the housing market as buying has begun to slow across the country. For example, someone borrowing $100,000 for a home loan should expect to pay $649/month but compare that to $422/month during the pandemic when rates were at all-time lows. The difference between a 6.56% interest rate versus a nearly 3% interest rate is $227 respectively.
Alternatively, mobile homeowners do not get this rate because their homes are seen as personal property, not real estate (as most do not own the land). This means mobile homeowners face even higher borrowing costs to start. In states such as California, they can be charged up to 7% more than the prime rate, meaning that when most enjoyed low-interest record rates, mobile home owners never fell below 9%. Higher interest makes affordable housing less affordable and detours many from buying, especially when lot rent is seeing a hike; it’s a double whammy to homeowners.
Assuming you can get past these hurdles and can buy a mobile home or stay in the one you are currently in, there are still other challenges you may face in protecting your property. Insurance can be tough to come by for many manufactured homeowners. Insurers have a lot of say in what homes get protected and which ones don’t. In California, owners may have trouble getting insurance if they live in places prone to fire or are located too close to areas with brush as it's seen as a fire hazard. This was the case with our home that was situated in Woolsey Canyon.
There are also places like Florida that are facing an insurance crisis. According to Bankrate, the insurance market may collapse in Florida in 2022. Florida makes up about 9% of home insurance claims, but 79% of insurance lawsuits cost the state billions yearly. And while this is more about fraud than inflation, it hurts the affordable housing market the most as insurance prices tend to be disproportionately higher than traditional homes while being harder to obtain.
Is this the End of Affordable Housing?
While there has been plenty of talk about the lack of affordability, it is not the end of affordable homes or manufactured homes. Despite the obstacles and rise in prices, mobile home parks still provide an alternative to the price hikes going on across the board because of inflation. However, it is terrifying to think that those most vulnerable have the least amount of control regarding the price of their asset and how they can best protect it.