Question about Economic Downturns

[cyapt81]

So I have read a bunch of posts in the forum about the effects of economic downturns on parks. Was it really the case that during the financial crisis parks stayed full? Or was that only the case for a few? I am asking because I think that the real estate market is saturated and I am concerned that we are headed for another so called correction. I know that people say the mobile park business is shielded in a downturn but wondering how true that is.

Thanks!

[Jefferson]

Please always search the forum for answers to your questions. This exact question was answered one week ago here:

Economy and Mobile Home Communities

Hello All - Long time reader first time poster. I have been in the mobile home business for over 25 years. I currently own one park. The park was built new in 2000 and we currently have 90 homes in the community and we own and lease out 60 of those homes. My question to the experts has to do with the economy. Everything I read shows the economy is going to take us to places we do not want to go. If the economy does collapse and is worse than the collapse of 2008 where does that leave us in the b…

Thanks,

-jl-

Park Street Partners

[frankrolfe]

Cyapt81,

You are correct that most real estate is over-saturated and in a position to fall, but the difference between everything else and mobile home parks are:

1. You have not been able to build new parks in maybe 30+ years, so the market was unable to over-build like apartments, self-storage, hotels, etc. (believe me, if it could have, it would have). In any niche of real estate that does not have legal limitations on growth, the developers eventually destroy it through overbuilding until they are stopped by the banks that literally shut off their financing. Since new parks are not allowed in most every city and town in the U.S., the park business has been spared from this stupidity.

2. Mobile home parks cater to the bottom third of wage earners, which is a growing market in the U.S., as the economy declines continuously (a recent article said that the next recession is pegged for 2018 – I never noticed that we came out of the last one). It was not always this way in the U.S. The rise in incomes of the 1950s to 1980s were a terrible period for park owners, as the customers all moved out and bought stick-built homes in subdivisions.

The most important thing to remember about mobile home parks is not “how do they perform in recessions” but more importantly “how do they perform when everyone is getting richer?” Because they work best in economic downturns. If you think that the U.S. economy is going down, then parks are a great contrarian hedge. If you think that Americans are going to be getting richer in the future, then mobile home parks are a bet on the wrong strata of society.