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THE EFFECT OF FORMALDEHYDE
LITIGATION ON THE MOBILE HOME PARK SIDE OF THE BUSINESS.
Written by Frank Rolfe and
Dave Reynolds, MobileHomeParkStore.com, LLC
One of the biggest news stories emerging from the embattled mobile home
manufacturing and sales side of the industry is the current and proposed
litigation concerning formaldehyde contamination in mobile homes. As you may or
may not be aware, formaldehyde is used in the creation of the products that are
used to build a mobile home, such as wood products, I believe. Recently, there
have been some studies that may suggest the level of formaldehyde in some homes
may exceed the safe level. But my question is what the worst-case scenario might
be from litigation regarding formaldehyde, as it affects mobile home park
ownership and operations.
The worst case scenario, of course, would be a virtual standstill of mobile home
construction and sales at dealerships while the problem is studied and
addressed. If litigation is successful, it might lead to judgments that could
theoretically damage the ability of manufacturers to build new homes. And it may
also cause a huge backlash against the product due to safety and health concerns
by potential buyers.
So what would the worst-case scenario do to your mobile home park? Well, it
looks to me like it might have favorable near term consequences for park
ownership. And I’m not sure the long term impact is that large, either.
If the formaldehyde issue causes many of the victims of Hurricane Katrina and
other natural disasters, who live in FEMA provided mobile homes, to be forced to
move to alternative housing, clearly that bodes well for vacant units inside
mobile homes parks – both for sale and for rent. It also will fill up a
substantial amount of apartment vacancies, thereby leading to supply and demand
inspired higher rents, which again makes homes and lot rents seem more
affordable (and lead to more lot rent increases). It will also potentially
cripple the land/home business, which relies on new homes and has been a thorn
in the side of community ownership for years now. Reducing the supply of
land/home communities can only help the mobile home park owner.
In most of the studies that I have read, it appears that formaldehyde is reduced
over time, which means that older mobile homes will be more attractive until the
issue is resolved. Again, this will benefit existing park owners who have older
inventory. For the neat term, the competition from new homes may be abated, and
the age of a home will be looked upon as a plus and not a minus.
As for the long-term effects, the sales of mobile homes have been horrible for
almost seven years. Barely over 100,000 units per year have been produced (about
25% of 1999 levels), and a large number of those are multi-section which
normally don’t end up in mobile home parks anyway. These days, it is a rare call
indeed when someone inquires as to a vacant lot for a new home. I’m not sure
that a complete halt to the construction of homes would even be felt in the park
business – it already seems like that now!
The formaldehyde issue is a terrible problem for both the customers involved and
the manufacturers and dealers. But before you throw the baby out with the
bathwater, I think it is worth taking a minute to examine the real impact on the
mobile home park business model. It appears that this problem may just be
isolated to the manufacturing and sales side of the industry. And the terrible
decline in sales over the past seven years may have been a blessing – preparing
us for a potential even greater and overnight slow down in sales of new homes.
About MobileHomeParkStore.com
www.mhps.com is the leading website for mobile home park investors and owners.
On the site you will find everything you need to make your mobile home park
investment a success. From financing and insurance to the largest directory of
mobile home parks anywhere, you can browse the site for free. Our sister site,
www.mhbay.com is fast becoming the leading website for buyers and sellers of
mobile homes. You can sell your mobile home for free on the site as well as
locate financing and insurance for your manufactured homes.
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