Shares of manufactured-housing operators were the big-ticket stocks for real-estate investors in recent years, faithfully posting double-digit annual returns. But now, according to a Wall Street Journal report, some investors have soured on the sector.
Stocks of the biggest operators in the industry, Equity LifeStyle Properties Inc. and Sun Communities Inc., delivered negative total returns of about 2.4% and nearly 14%, respectively, in the past three months. That is a significant reversal from the past two years: Equity Lifestyle returned 22% in 2011 and 13% in 2010, while Sun Communities returned 20% last year and 86% in 2010, handily beating overall stock-market gains.
The falling fortunes of manufactured housing appear closely tied to the rising fortunes of traditionally built homes — and to mortgage rates. Sales of new homes have spiked in recent months and are on track to hit 368,000 this year, well above the 306,000 sold in 2011.
Meanwhile, shipments of manufactured homes are declining. In October, 5,100 new manufactured homes were shipped, down from 5,400 in the year-earlier month, according to the latest data available from the Census Bureau. September saw 4,400 shipments, down from 5,100 a year ago.
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Drew Industries Inc. announced Thursday (Oct. 1) that its wholly-owned subsidiary Kinro purchased from Philips Products Inc. certain inventory and equipment used for the production of front-entry doors for manufactured homes. The $1 million transaction was funded from available cash, the company stated in a news release.
“Not only will this acquisition increase the overall Drew-supplied content per manufactured home, it also adds a new product category for Drew,” said Fred Zinn, Drew president and CEO. “We estimate that the current annual market for front-entry doors for newly produced manufactured homes is about $12 million to $15 million. In addition, we believe there is a similar size market for replacement doors for the millions of existing manufactured homes.”
Elkhart, Ind.-based Philips Products had made windows and front-entry doors for manufactured housing before ceasing these operations in July. Kinro, which already has a significant market share in windows for manufactured homes, will begin to manufacture entry doors at plants in Indiana and South Carolina within approximately 30 days.
“Because of our innovative designs and product enhancements, we have had tremendous success with our entry doors for RVs, which we introduced late last year,” said Scott Mereness, vice president of Kinro. “We plan to leverage this experience, as well as the strong relationships we maintain with producers of manufactured homes and aftermarket distributors, to gain significant market share for entry doors in the manufactured housing industry.”
White Plains, N.Y.-based Drew, through its wholly owned subsidiaries, Lippert Components and Kinro, supplies a broad array of components for RVs and manufactured homes, including windows, doors, chassis, chassis parts, bath and shower units, axles and upholstered furniture. In addition, the company manufactures slide-out mechanisms for RVs, and trailers primarily for hauling boats.