Do All Manufactured Homes Depreciate?

 2014-04-27 - doublewide

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PROBABLY EVERYONE HAS HEARD some variation of “All manufactured homes depreciate in value.” Such absolute statements seldom are totally correct. And as you might guess, logic suggests there are manufactured homes that declined in value but not all of them did, just as there are stick-built homes that appreciate in value but not all of them do.

So how did such a notion start? To view this matter we’ll compare the manufactured and stick-built home structures themselves on an “apples to apples” basis by creating an academic scenario that adjusts for different construction codes and equalizes other factors that influence value. We’ll regard the homes and the land under them as separate yet related components to value and momentarily overlook the fact that many manufactured homes are deemed a personal property improvement to real estate (as in a land-lease community) instead of being judged a part of the real estate (as are stick-built homes).

Our scenario then levels the majority of value influencing factors ― such as quality of construction, architecture, regular proper maintenance, age and location ― resulting in the manufactured and stick-built homes having matching ages, configurations and architecture on similarly sized fee-simple parcels of identical value in the same neighborhood. This leaves the value factors of construction quality and maintenance to contemplate.

Envisioned for comparison are low-end homes, both manufactured and stick-built, the quality of which is expected to reflect streamlined construction approaches and minimally acceptable materials. Hence, typical wear and tear plus a tendency toward rapid deterioration are prone to cause early negative effects unless a vigilant maintenance program is utilized. Through our scenario, when such homes and their land receive appropriate attention as and when needed, we see a gain in comparable approximate opportunities at longevity, faring well and enjoying commensurate appreciation in accord with the prevailing housing market. Consequently, any persistent tendency towards depreciation seems less related to structural characteristics and more connected to the other component to value, the real estate under the home.

Many manufactured homes are placed in land-lease communities where they are considered personal property and their owners lease rather than own the land on which the homes rest (whereas the stick-built homes and the land under them are treated as real property). Unlike the stick-built home, in a so-called “normal” economy the land-lease situation contributes no land value to the home value and it is this absence of contributing land value that enhances the prospect of depreciation particularly for the marginally maintained manufactured home.

In the end it seems circumstances of the land-lease and jurisdictions that categorize manufactured homes as personal property appear responsible for the inaccurate notion that all manufactured homes depreciate.

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One Response to “Do All Manufactured Homes Depreciate?”

  1. Arthur Falcone Says:

    Arthur Falcone

    Do All Manufactured Homes Depreciate? | Inhouse Corporation Insights

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