Manufactured Housing: Uncovering its Hidden Strength in CRE Stability

Manufactured Housing: An Overlooked Giant in Real Estate

When envisioning commercial real estate (CRE), one might picture glamorous skyscrapers or upscale condominiums. However, a hidden powerhouse is quietly reshaping the landscape: manufactured housing. Representing about 5% of the U.S. housing stock—roughly 7.4 million units—this segment is gaining attention for its resilience and intriguing market dynamics.

Manufactured housing, once relegated to the fringes of the real estate narrative, is gaining traction as an investment vehicle. In the last decade alone, production has surged, doubling to over 103,000 units in 2024. Typically associated with lower-cost living, the manufactured housing market boasts consistently low vacancy rates of 5.2%, presenting stability and reliability in uncertain times.

Why Manufactured Homes Are Gaining Popularity

Traditionally viewed as a less desirable investment, manufactured housing communities (MHCs) are now emerging as valuable assets in the CRE world. With around 43,000 communities across the U.S., MHCs are transforming public perception, moving away from the stigma often associated with “trailer parks.” Investors are now recognizing these properties as viable and profitable opportunities.

The economic advantages are compelling. The median monthly cost for a manufactured home is about $660, which is significantly lower than single-family homes, with ongoing influx of buyers who appreciate the affordability. Additionally, cap rates, a critical metric for assessing real estate profitability, have seen a decrease from 8.15% in 2015 to just 5.13% in 2022. This illustrates a growing valuation for manufactured housing as an attractive investment relative to multifamily properties with cap rates around 5.67%. The potential for institutional growth is enormous, with only 20% of these communities currently held by institutional investors.

A Bright Future for Investors

The influx of investment into manufactured housing is indicative of its potential as a stabilizing force in commercial real estate portfolios. As vacancy rates remain impressively low and production ramps up, investors are increasingly looking to this sector as a hedge against market volatility. In contrast to traditional housing markets vulnerable to economic downturns, manufactured homes exhibit a level of stability that is hard to overlook. With this predicted growth trajectory, the importance of manufactured housing in the CRE sector cannot be overstated.