The family in this story bought a house.
They saved up and paid for it. No sub-prime loans or exotic balloon-payment ARMs. No granite countertops or vaulted foyers. Just a nice, modest $89,000 piece of the American dream with an affordable, $926-a-month mortgage.
Then his job disappeared and now they're going to lose the home. But this family isn't facing foreclosure, they're facing repossession.
As they plunged into debt, they couldn't make their home payments. So they looked to refinance, or maybe take out a loan.
After all, they figured, they had that new home -- only two years old -- as equity.
Their nest egg turned into a nightmare.
They joined a growing number of the 5,000 mobile home owners in the mid-Hudson -- and some 70,000 across the state -- who are learning that their mobile home in their mobile home community isn't really considered a house. It's more like a car. ...
As for that $926 mortgage the Halls were paying — plus $426 lot rent?
That wasn't a mortgage; it was really a car loan.
And the home they figured would only increase in value?
"It simply depreciates, like a car," says Lewis Creekmore, deputy director of Legal Services of the Hudson Valley, who adds that "even without the mortgage crisis, we're seeing quite a number" of situations like the Halls. ...
Unable to pay off their loan and without equity for a new one, the Halls lost their home. Brenda Hall still can't fully understand it.
"I bought a manufactured home," she says. "You have to have insurance. You're making monthly payments. And all of a sudden you find out it's not a home?"
The needlepoint samplers are all wrong. It turns out it isn't love that "makes a house a home," it's the deed to the land the house sits on.
So, OK then, let's make these houses homes. Let's convert these cars into homes by converting all of these feudal mobile home "communities" and trailer parks into resident-owned communities -- into neighborhoods with houses that are homes, places where homeowners don't have to pay rent on or worry about eviction from the land on which their house sits.
When I say "let's" I mean "us" as in "We the people." As in the federal government. With taxpayer dollars.
Feel free to call this "stimulus spending" or "a massive new government program," but don't pretend it's going to add to deficits or wind up costing taxpayers anything in the long run. In the long run, we would all benefit.
What we're talking about here are hundreds of thousands of mortgages. Safe, boring, long-term loans that produce a safe, boring, long-term profit. These loans would all be fully collateralized by the land itself, and the people receiving these loans are all, by definition, A) responsible homeowners, who B) already have a track-record of making monthly rent payments on the same land. If the folks at FHA or FDIC or Fannie or Freddie can't figure out a way to turn those rent payments into loan payments while also turning a no-risk modest profit, then those folks need to quit their jobs and let someone competent take over for them.
It might not be dramatic, but this would have a stimulus effect by providing hundreds of thousands of working-class households with a small increase in their monthly disposable incomes. And being working-class families, they'll notice that difference, and they'll spend it.
The impact on the financial security of these families will be dramatic. They will no longer have to fear sudden displacement. A nice side-effect of that is another economy-boosting bit of stimulus. It will suddenly begin to make sense for these families to invest in their homes. And they will begin to do so.
But the story above illustrates the most significant economic implication of converting all of these landless "car"-dwellers into property-owning homeowners. A house that sits on someone else's land depreciates just like a car. It loses value over time. A house that sits on land owned by the homeowner appreciates. That builds equity for the homeowners themselves, improving their security and their lives, but it also builds equity for the economy as a whole. It creates wealth, which is the very definition of stimulus or economic growth.
Look at the Halls in the story above. They spent $89,000 for their home. It's now worth less than that. What happened to that money? It's just gone. Poof. The economy shrank by that amount.
Multiply that contraction by the total number of manufactured homes sitting on landlord-controlled properties and you can begin to get an idea of how these feudal communities and parks are acting as massive machines for the destruction of wealth. Sure, some landlords may be able to enrich themselves by operating these colonies, but no matter how much they're able to skim for their own bank accounts, it can't begin to offset the economy-shriveling effect of the cumulative depreciation of all of those houses.
Reversing that effect -- turning these communities into equity-building engines for economic growth while simultaneously improving the financial health and security of hundreds of thousands of Americans -- would be a large undertaking, but it would not be a complicated one, or a risky one, and it would save taxpayers money in the long run.
So OK, I've written about this a bunch of times and I am, obviously, quite taken with the idea. But what am I missing? I'm too much of a fan of this idea to step back and poke holes in it myself, so please help me out here. Play Oligarchy's Advocate and try to talk me out of this. Tear the idea apart. Highlight its weaknesses. Explain why it couldn't and shouldn't ever happen.
In theory, the case against these kinds of moves is always one of handouts and giveaways. Why does one person get something for free and another doesn't? It might be unfair that Bob loses his home due to some structural issues in land ownership, but wouldn't it be just as unfair if he got it for free, paid for with my tax dollars, while I have to labor to pay my bills?
Ultimately, this is the problem with the last several decades of trickle-down propoganda. Most people have accepted the idea that giving the wealthy breaks will result in everyone getting a piece, because... well, because. Examples like 'building speed boats' and 'hiring new employees' are easy to explain, and they feel bigger, more tangible. Tim Hall isn't going to hire any new employees. He and his family might, say, buy more groceries or better clothes for their kids. After decades of relentless trickle-down talk, most people forget that groceries and clothing and a new rake for the yard and other small-ticket items trickle up just as effectively.
Wait, crap. I've just agreed with you. I don't think I'm impartial enough either.
Posted by: Jeff Eaton | Jul 16, 2009 at 04:55 PM
Couldn't happen and shouldn't happen are two different animals. I don't think there's any sane or coherent reason it shouldn't happen. It probably won't happen because the people who write the laws and make the policies either receive more money from the existing landholders than they would the future landholders, or are appointed or hired by those who do.
Posted by: Leighton | Jul 16, 2009 at 05:00 PM
As I see it, is that someone impartial (and Modern American) WILL agree with you, Fred. Feudalism, sharecropping, etc. etc. have all proven to be economically inefficient systems that benefit those on the top not that much, and only by royally screwing over those on the bottom. The problems occur here: " If the folks at FHA or FDIC or Fannie or Freddie can't figure out a way to turn those rent payments into loan payments while also turning a no-risk modest profit." That sort of work is EXTREMELY difficult, actually, as it has to work around all the existing laws and contract language (which is given force of law by the Contracts Clause). Furthermore, because of the relative expenditures of the private and public sectors, the smartest lawyers in this field are on the other side of the table.
Posted by: Erl | Jul 16, 2009 at 05:01 PM
This might not be the best example. If the Halls had bought a regular house or townhouse for $89k, with the exact same loan payments and perhaps were in an HOA that had a $400/mo fee... well, they could STILL be evicted. They were "underwater" which happens to people who buy freestanding single family homes. Until you've paid off the loan, you can be evicted. It doesn't matter whether you have a loan for just the structure or the land AND the structure. And if we've learned anything in the last year, it's that houses don't always appreciate. Here in CA, people are underwater by hundreds of thousands of dollars. Their downpayments have vanished and they have no equity. The fact that they "bought the land too" won't save them.
However, if there are cases of people owning their manufactured homes outright (paid it off or paid in cash), and then being evicted off their rental plot, that'd be a much better example. And knowing the people have endless capacity to be cruel, I'm SURE this has happened.
I'm not really arguing your point at all--seems like these mobile home plots could be set up like condo associations or something--but you need a better lede.
Posted by: Marie | Jul 16, 2009 at 05:09 PM
If the mobile home park spot rent includes water, sewage, electricity and general HOA functions, take up to $250 from their lot rent, leaving about $175. If their mortgage of $89k was amortizable in 30 years on a payment of $926, then the lot price that rent could have covered at the same interest rate was nearly $17,000.
Dang.
I just bought a 60' x 70' bit of semi-rural Central Texas for sentimental/residency reasons, and was out of pocket a whole $4500. However, the smallest house I am allowed to build on it is 1500 sq feet (130 sq meters - a mid-sized family house in Germany), and this house must be at least 15' from the front of the lot (it's on a corner) and 7.5' from the back edges. It's a funny-shaped lot, so I'd have a heck of a time stuffing that 1500 sq foot house (which can only be one story) onto it.
Oh, and I'm absolutely forbidden to put a mobile home on it.
This was one of the LESS restrictive small lots available in my region, by the way.
Fortunately, I have no intention of building on it and intend to keep it natural - it's got some cool cactii and nice little oak trees on it. It was really meant for someone who owned a few of the lots adjacent to it to buy up to add to their property.
It would have been fantastic for a family like the Halls - had they been permitted to build it up in a more economical way than I'd be allowed to.
$17,000 should buy a small house lot in much of the country, and should certainly cover a mobile home plot, even with infrastructure.
If that $426 rent did not include most utilities, then something truly nasty is going on. Most condo fees in nice buildings aren't that high.
Posted by: A Texan in Bavaria | Jul 16, 2009 at 05:15 PM
The HOA fees on similar (or larger) house plots in my region in those godawful "gated" communities were in the $250/yr (yes, year) range.
Posted by: A Texan in Bavaria | Jul 16, 2009 at 05:18 PM
Jeff Eaton:
In theory, the case against these kinds of moves is always one of handouts and giveaways. Why does one person get something for free and another doesn't? It might be unfair that Bob loses his home due to some structural issues in land ownership, but wouldn't it be just as unfair if he got it for free, paid for with my tax dollars, while I have to labor to pay my bills?
Well, Fred was talking about turning rent payments into loan payments. There’s no handout. It’s just that these people get to own the land rather than just rent it, and that’s a good thing.
Marie:
well, they could STILL be evicted
They could have been, but they also might have been able to pull out a home equity loan, which they were unable to do because their home loan is treated like a car loan. There is no equity to borrow against, so no way they would be able to stay afloat for even an extra few months.
Posted by: Lady Jessica of the OStP with Buttercream Rosettes, Matron of Her Imperial Majesty's Royal Kitchens, and Makener of Cookiez 4 Grate Kitteh | Jul 16, 2009 at 05:40 PM
Well you see shearing the sheep may make more sense academically, killing them will increase my profits next quarter.
I think you see the problem here.
Posted by: Ryan | Jul 16, 2009 at 05:43 PM
How is it that the payments on their $89,000 mortgage are $926 a month? I pay $740 a month on a $102,000 mortgage, and that includes insurance and taxes.
Posted by: Perry | Jul 16, 2009 at 05:44 PM
Ryan: you have encapsulated the core of what's wrong with modern business. You win an Internet.
Posted by: A Texan in Bavaria | Jul 16, 2009 at 05:45 PM
I think you mean "While those big-city, inside-the-beltway, ivory-tower (air quotes)academics(/air quotes) think it makes more sense to shear the sheep, here in Real America, we know that killing them will put mutton on the table *tonight*."
It's even easier if you can mark yourself morally superior to Tim Hall -- I mean, he's a truck driver and he thouight he could own his own home? Stupid poor person! Why should he be rewarded for his bad behavior? He took a gamble that he wouldn't lose his job. You don't pay off someone who gambles and loses! I, on the other hand, chose to be rich, which proves I am smarter than Tim Hall. *I* deserve the benefits of government, so why should he get them instead? Ooh, hey, that stock I old short on just payed off! I'm buying a foreign-made yacht!
Posted by: Ross | Jul 16, 2009 at 05:51 PM
Is there a reason mobile home buyers can't do this in the first place? Buy a piece of land to put their mobile home on? I'd think if they are paying $426 a month in lot rent, plus the $926 for the mobile home they could afford to buy land. Or are land prices so very high there?
Posted by: Perry | Jul 16, 2009 at 05:52 PM
Here's a thought: I, like many other middle class kids, graduated from college with right around $17,000 in Stafford loans, because we borrowed the max allowed each year (started at $2600/yr for freshmen, and capped out at $5500/yr for juniors and seniors). During our undergraduate careers, we did not have to make payments on these loans, and they did not accumulate interest. I am currently paying 5.125% on mine because I consolidated them after interest rates started going up, but some clever folks either consolidated around 3% back around 2005-6, or will be able to now.
Why not loan in similar (or smaller) amounts for house plot/mobile home plot purchases? What about some way to gradually disperse the money, college-loan-style, witch increasing amounts as the borrowers prove their ability to pay it back? And as with federal student loans, forbearance periods if the borrower hits a real rough patch?
Posted by: A Texan in Bavaria | Jul 16, 2009 at 05:56 PM
Lady Jessica--
I'm admittedly not a real estate guru--but can you get a home equity loan if you are underwater or simple have zero equity? I'm seriously asking, not trying to be snarky. Because as before, there are people with regular, free-standing houses but who have no equity due to their house value depreciating too quickly.
If it's possible to get a home equity loan when you have no equity in your home or you are underwater, then I stand corrected.
Posted by: Marie | Jul 16, 2009 at 06:00 PM
Unfortunately, it's true that buying a home outright can still lead to loss of the property - my grandmother bought a house a few years ago to retire to... but now, as she's moving into a nursing home, she's underwater on the house and one of her best options is just to surrender the house to the government.
So it may just end up being the government's problem one way or the other. Generally, I'd see these sorts of communities helped by local government rather than by the Feds, since the whole point is that this is an Issue That Affects People Living Right Next Door.
The bottom line is that we, the people, agreed willingly, and all too happily, during the Good Times to credit conditions and rules that were predicated on the idea that the good rates given to some people were paid for by the people with bad credit who were defaulting and paying ridiculous amounts of interest. Now, when so many people are finding themselves in the position of the defaulter, we can really only say, "well, it seemed like a good idea at the time. Guess it was too good."
And sadly, we may have to wait until the next "Good Times" to make the sort of systematic, smarter changes to the way we do banking, credit, and property ownership. Hopefully we'll have a good memory when the time comes. Because right now we just don't have the money to do all the things we'd have to do to help everyone (like organizing a mobile-home community to pool its money to buy all its land and become independent and secure and self-governing).
So if there's any take-away message, it's that looking out for the other guy is something we have to remember to do when times are good - because we may not be able to help or change things when times get bad.
Posted by: Husband of the Katz | Jul 16, 2009 at 06:08 PM
Marie--
I'm admittedly not a real estate guru--but can you get a home equity loan if you are underwater or simple have zero equity? I'm seriously asking, not trying to be snarky. Because as before, there are people with regular, free-standing houses but who have no equity due to their house value depreciating too quickly.
If it's possible to get a home equity loan when you have no equity in your home or you are underwater, then I stand corrected.
I'm not a real estate guru, either, but even if you're not doing that great, maybe you could try and swing some kind of home equity loan? Something? I don't know how hard something like that might be, but of course you can't get a loan with zero equity. That's the problem the Halls had. Their home was a car, not a home. There was no equity to be got. The article doesn't tell us how long they lived there, IIRC, but assuming they had been there for even a few years, if they had a traditional home, there would have been some equity they may have been able to draw on.
Posted by: Lady Jessica of the OStP with Buttercream Rosettes, Matron of Her Imperial Majesty's Royal Kitchens, and Makener of Cookiez 4 Grate Kitteh | Jul 16, 2009 at 06:24 PM
If we did that it would cost money and we would have to pay for it in taxes. Which would make my soda cost more! :)
Posted by: Donalbain | Jul 16, 2009 at 06:45 PM
Which would make my soda cost more! :)
*lobs pillow at Donalbain*
Posted by: Lady Jessica of the OStP with Buttercream Rosettes, Matron of Her Imperial Majesty's Royal Kitchens, and Makener of Cookiez 4 Grate Kitteh | Jul 16, 2009 at 06:49 PM
Says they had the house for two years. If you look at a standard 30 year mortgage amortization schedule, it's not unfathomable that they'd have no equity after only two years. Especially if they either 1) put down less than 10% (which we don't know) or 2)their house depreciated quickly.
Also, for a while, you could get a loan against your car, as long as you had "equity" in it. These loans probably had horrible terms--I never looked into it, just remember being aghast when I heard them advertised on the radio. Don't know if anyone offers those anymore (probably not) but chances are, they are highly inadvisable anyway.
Posted by: Marie | Jul 16, 2009 at 06:50 PM
I know it's Thursday, peoples, but if we can keep this discussion from falling into vilification of the rich, that would be classy.
Posted by: Katz | Jul 16, 2009 at 06:55 PM
Who's villifying what, now?
Posted by: lonespark | Jul 16, 2009 at 06:57 PM
Also, for a while, you could get a loan against your car, as long as you had "equity" in it.
Absolutely atrocious terms, but sometimes you have to eat before the paycheck clears.
Posted by: lonespark | Jul 16, 2009 at 06:58 PM
1) put down less than 10% (which we don't know) or 2)their house depreciated quickly.
But I think #2 would be less likely if they owned the land underneath. If your house is a car, it depreciates, if it's a house then it probably wouldn't, current economy excepted.
Posted by: Lady Jessica of the OStP with Buttercream Rosettes, Matron of Her Imperial Majesty's Royal Kitchens, and Makener of Cookiez 4 Grate Kitteh | Jul 16, 2009 at 07:02 PM
@Katz: Can we at least point out that rich people all go to Hell?
Posted by: efnord | Jul 16, 2009 at 07:12 PM
@Katz- but if we can keep this discussion from falling into vilification of the rich, that would be classy.
I want you to think about what you just said.
*gives Katz a moment to think about what she just said*
The word "classy" carries connotations that "high class" people, in other words, rich people, are superior to the rest of us.
Which, I think, gets to the heart of the matter. Call it Just World Theory, call it stupidity, call it late for dinner, but there seems to be an underlying assumption in our culture that rich people are rich because they are better than the rest of us, and therefore deserve to be rich, and if the rest of us aren't able to get rich, well, then, we deserve squat.
Posted by: Not Really Here , DotF, CoPRatUoT(AC), OoSt.P,wDB | Jul 16, 2009 at 07:46 PM
"Current economy excepted"... but I guess that's my main reasoning for suggesting a different story lede. This is mostly a story about how the crappy economy is screwing over a blue collar family--the fact that they're in a mobile home is tangential. The job losses and home price deterioration of this economy means that, all other circumstances being the same, this unfortunate family would be just as screwed in a regular house.
Like I said, I'm not arguing Fred's proposal to rewrite mobile home contracts--I'm not sure about the method, but overall it seems like there needs to be more regulation/protection for mobile home dwellers. But his story lede doesn't support his "call to action", as it were. Mr. Hall needs a job more than he needs a land deed.
Posted by: Marie | Jul 16, 2009 at 07:48 PM
I'll take a stab at it:
Whether or not the house on the land appreciates has nothing to do with who owns the land, or even with whether or not we call the house a "car". Even the appreciation of most normal houses isn't really about the house itself becoming more valuable - it's about the land becoming more valuable. The real cost of building a particular design of house on a given plot of land is going to fall over time. Population growth and natural scarcity drive the value of land up, however.
If we're just talking about wealth creation (and we don't care about distribution), then your scheme wouldn't make a difference. The value of the land that the mobile homes sit on is going to rise over time no matter who owns it, and the mobile homes themselves are going to become less valuable over time no matter who owns the land they occupy. I don't really see how what you're proposing would create net wealth, except insofar as, long-term, it's better not to have a rent-paying underclass and a land-owning overclass.
This is almost entirely a distribution issue and not a whole-pie issue. Rent-seeking isn't terribly inefficient in terms of total wealth, but it does cause transfers of wealth from one group to another when the enriched group hasn't actually added any value. The larger problem isn't to do with the current state of the economy, but in how we decide who has the right to use a piece of land. Unfortunately, it's not easy to think of a feasible system other than the one we have now - where whoever has the deed right now owns the land and can treat it like any other piece of property. There's probably some better system where you require people to be doing certain things with a piece of land in order for it not to revert to the state and be put up for auction, but I'm sure there's also a case to be made that renting helps renters in some cases.
Posted by: Gotchaye | Jul 16, 2009 at 07:49 PM
All houses depreciate, they're artifacts that decay. It is the land whose value rises. A neat way for landowners to capture socially created wealth. That pokes no holes in your idea though. An endorsement even, unless we're contemplating something even more radical and politically unlikely.
Posted by: Brock | Jul 16, 2009 at 07:58 PM
Mobile homes are personal property, and personal property depreciates. I didn't read the article, but I know from experience that if they didn't buy the land, it's virtually impossible that they got a 30 mortgage on a trailer house, simply because the collateral -- the house -- isn't going to last 30 years; more like 5 or 10. (Yes, I know some trailers do last a long time, but a 30 year old trailer is worth about the same as a 30 year old car.) The shorter loan period explains the high payments.
I recommend a few policy changes to address this issue. First, enforce usury laws. If we're going to allow banks to lower credit standards and issue credit cards and loans to anyone breathing and old enough to sign a name, then in exchange the state enforces a limit on the interest rate being charged. Second, audit lending companies frequently. They get licenses from the state which limits their competition, therefore we can control their operations.
Posted by: Karen, Queen Empress of Texas and the Western Lands | Jul 16, 2009 at 08:02 PM
if there are cases of people owning their manufactured homes outright (paid it off or paid in cash), and then being evicted off their rental plot, that'd be a much better example. And knowing the people have endless capacity to be cruel, I'm SURE this has happened.
Yup, it has happened, and does happen. Right now I'm representing a couple who are being evicted from their lot in a trailer park. They (well, the husband's mother) own the trailer outright. They're not being evicted for nonpayment of lot rent, they're being evicted for lease violations but Wyoming law is so ridiculously pro-landlord that they'd lose going to court. So I've been helping buy them time to move the trailer.
I have never heard a story that started out "own the trailer, rent the lot, being evicted from teh lot" that ended well. And I have heard many such stories.
Posted by: Wenzer | Jul 16, 2009 at 08:31 PM
Mr. Hall needs a job more than he needs a land deed.
Ah. I see where you were going. I would probably agree with you on that one.
Posted by: Lady Jessica of the OStP with Buttercream Rosettes, Matron of Her Imperial Majesty's Royal Kitchens, and Makener of Cookiez 4 Grate Kitteh | Jul 16, 2009 at 08:31 PM
I'm taking your request for criticism seriously but want to note that I like this idea and would like to see it work. But I spend all day evaluating legislative proposals, so I can't help myself:
I'm a little concerned about the idea of "resident owned communities". When you've talked about this before, you've talked about these basically being co-ops--the residents of the park would collectively own the land of the park. I don't think you're talking about allowing each individual owner to own each individual lot, but if you are, then ignore this whole post.
Co-ops can work, but require a fairly robust governing system. Anyone who's belonged to a homeowner association knows how horrific those can be--and they don't even own the land your house sits on. A mobile home park co-op could be an HOA squared. You'd need strong state laws that limit the authority of the co-op board to things like maintenance, upkeep, and utilities to prevent them from capriciously making members lives hell because of usual neighbor disputes.
I'd be interested in how your idea compares to co-ops that own buildings in NYC--I think that's a useful model to start from.
Posted by: Roadrunner | Jul 16, 2009 at 08:47 PM
[[most people forget that groceries and clothing and a new rake for the yard and other small-ticket items trickle up just as effectively.]]
Trickle-up works better than trickle-down. It tends to be local, and thus helps Mr Hall's neighbors be able to spend more, which helps their neighbors, and so on.
Where-as trickle-down can go out of a neighborhood, a city, a state or the country at any time.
=================
[[I know it's Thursday, peoples, but if we can keep this discussion from falling into vilification of the rich, that would be classy.]]
Screw them. They haven't made one bit of effort to help out their own country (remember war bonds?). I think seizing property (especially of those who try to move their assets to other countries) is a worth-while endeavor.
Posted by: Jeff, Grand Vizier and Eeeeeeevil Planner-in-Waiting, Ethical Slut, and so on | Jul 16, 2009 at 08:57 PM
Apologies for getting this off-track, but after reading about all the cons of owning a mobile home... why do people buy them? I am seriously (and innocently) asking what the advantages are. I see how they are cheaper than buying a house w/land, but if the structure does depreciate that badly, why is it preferable to renting?
I would appreciate if you didn't flay me alive for my bourgeois question.
Posted by: Marie | Jul 16, 2009 at 09:01 PM
To answer the bourgeois question:
Case 1: In the right conditions, i.e. you already own the land, a mobile home is the cheapest (and fastest!) way to get a house. In the country, this is the standard thing to do while you build your house on your inherited land. This is the one thing that mobile homes are actually good for.
Case 2: If the rent is reasonable and your landlord isn't a bastard, then renting the land is also fine. Those two conditions never occur, of course.
Case 3: If you want to become a landlord, buying a large lot, parking a whole bunch of mobile homes on it, and renting them out is an easy way to build a steady income. Provided local codes allow you to rent out what's left of a mobile home after the ten years it takes you to pay off the loan.
Case 4: IF you can afford to buy one without an oppressive loan, and IF you maintain it as a trailer, and IF you stay within a couple hundred miles, and IF you maintain spartan possessions that can be packed easily, then the "mobile" part comes in to play: you rent land for the two years you live in one area, then move the trailer to a new spot. Those four conditions never happen either.
But the big issue is the depreciation. Mobile homes are shoddily built, and have a reputation for being even shoddier than they actually are. Combine that (hidden) fact with usury and the "houses always go up in value!" and you have a recipe for the Halls.
Posted by: cjmr's husband | Jul 16, 2009 at 09:26 PM
1. Location. In some parts of the country, the only decent place to live in your price range and in range of the things you need to get done is a mobile home.
2. Control. If you own the structure, you can modify it. You can tack things to the walls, add an Arctic entry, get rid of curtains or furniture that you don't like, etc.
3. The feeling that you are an owner, not a tenant. It has proven to be illusory, but in many parts of the country, mobile home parks did persist for decades, long enough to give an impression of stability.
4. Manageability. Even before McMansions, a mobile home wasn't that much house. It gives the impression of being easier to repair and to keep clean, although mobile home owners know that this isn't always the case!
Posted by: Jenny Islander | Jul 16, 2009 at 09:29 PM
Resident libertarian, checking in to be your devil's advocate today =P
So, if this is such a profitable venture, why hasn't some savvy entrepreneur done it yet? Why don't you go about converting these things yourself, sure that you'll get paid back by the mortgage owners, and make a boatload of money?
Posted by: James Vonder Haar | Jul 16, 2009 at 10:27 PM
*mega-sigh*
I've pointed this out before, and been either ignored or shouted down, but here goes yet again.
First off, nothing lasts forever. Michael Moore is boiling mad because Flint's era of prosperity came to an end; I can take him around the West and show him dozens of towns that are dying due to changes (there's no more ore in the mine, for example) or already dead.
Second, in a lot of cases, it isn't the evil landowner himself that's causing this. The culprits are often to be found in the local government---either they've suddenly developed big eyes for more taxes, or they're being pressured by people living nearby who want the mobile home court gone. (And not always without reason---deny it till your faces turn purple, people, but I've been in the real-estate biz for a long time, and I know that many mobile-home parks are loci for all sorts of bad behavior. If your house is being vandalized and your kid's had five bicycles stolen in a row, and you know for a fact that the culprits are living in the mobile-home park down the road, you're going to want it OUT of there.)
I agree, for what it's worth, that finding ways for mobile-home owners to buy the land their homes sit on would be a good thing. I am not sure how to do so without severely damaging the property rights of the court-owners...and creating precedents that may come back to haunt even such righteous folk as you.
Posted by: Technomad | Jul 16, 2009 at 10:46 PM
They saved up and paid for it. No sub-prime loans or exotic balloon-payment ARMs. No granite countertops or vaulted foyers. Just a nice, modest $89,000 piece of the American dream with an affordable, $926-a-month mortgage. If they saved for it why do they have a mortage?
I guess one lesson from this is if you buy a mobile home make sure it's really mobile, so you can drive off and find a new place.
Posted by: pesterfield | Jul 16, 2009 at 10:54 PM
Presumably people wouldn't be renting land for a not-actually-movable 'mobile' home if they were allowed to buy a lot for one. As it is, apparently you either have to be way out beyond the boondocks where there's no zoning and you can do things like put a trailer on your land, or rent a spot in a 'park.' How you go about changing the arrangements for current units I don't know, but probably it's slightly less impossible to not keep setting up more rental-land. Good luck changing the no-one-does-anything-anywhere-ever theory of zoning, though. Given that generally the current homeowners will fight against obviously nice things that will clearly benefit they themselves personally now (All change is bad! Never build anything anywhere!)
Posted by: Beige | Jul 16, 2009 at 11:14 PM
Technomad,
I agree with you completely that nothing lasts forever. Every bubble bursts (or at least shrinks dramatically), and every age of prosperity does seem to eventually come to an end. At the same time, there are options as to how that end is managed. In the case of the intricate financial system that eventually collapsed and actually hurt real people, the downfall is still hurting people. If we can manage it better, we might have a chance.
Posted by: OverlappingElvis | Jul 17, 2009 at 03:26 AM
So, if this is such a profitable venture, why hasn't some savvy entrepreneur done it yet? Why don't you go about converting these things yourself, sure that you'll get paid back by the mortgage owners, and make a boatload of money?
The short answer is private capital is perhaps the least efficient method of controlling and generating funds. It's actually one of the largest problems I have with libertarins (well, one of several.)
There are two ways to generate such a program privately. Set up a public corporation, or finance it privately.
Public corporations have a legal obligation to stockholders to turn a profit. They can't be in the red from the initial outlay for the first 5 years while it starts rolling. Investors would bail and the project would die. So to keep the investors happy, you need to make money right away, meaning you have to continue the abusive practices currently in place, thus defeating the point.
Private financing would not able to generate enough funds to begin the work.
It's the same reason why the internet is really, really great, but with such an initial cost outlay, and decades before a practical turnaround came about, ONLY the government could fund such a project.
The same is true here.
Posted by: karpad | Jul 17, 2009 at 03:48 AM
I'm very, very uncomfortable with the idea of eminent domain in the first place. At best I think of it it as a kind of necessary evil when the property seized is used for public benefit or improvement, but disgustingly evil when government seizes private property to turn it over to another person. That's unfortunately what Fred is advocating here; seizing the property of the person or corporation that owns the mobile home lot and parceling it up and turn it over to the renters.
I have no problem if an apartment building goes co-op and tenants have opportunity to purchase their residences. I do have a problem, however, with compelling the sale of privately owned property.
Posted by: Benjamin | Jul 17, 2009 at 07:27 AM
A friend who is making mortgage payments on a "double wide" on a lot that they own explained to me the difference between a "mobile home" and "manufactured housing". If it is built on steel beams, so that wheels "could" be attached, it's a mobile home but if it's built on wood then it's a house. A mobile home not only depreciates, like a car, lenders usually charge significantly higher rates to begin with and tend to favor adjustable rate mortgages. You end up having to get insurance from a company that also charges higher rates -- normal homeowner insurance carriers don't want to touch them. And if, as in the case Fred describes, you don't own the land, it's unlikely that you have a long term lease. The property owner can decide to sell it to a developer who wants to put yet another strip mall or bank branch on the spot and then you have to find someplace to move to and pay for it.
Posted by: Elmo | Jul 17, 2009 at 08:45 AM
Marie: I suspect there wasn't anything to rent for USD 1352 a month or less.
With rent, you always pay a "get away fast" premium, a surcharge for not being in debt. If you can expect to live in the place your mortgage is on until the mortgage is paid off, you usually come out on top even if your place is worth zilch at the end of the period. You gamble on your ability to stay, and as with any game, you might lose. But you might also win big and actually own a place that is worth something after a few decades.
And your "get away fast" premium is the landlord's profit, if you rent (economics of scale excluded), because the landlord (usually) has to pay mortgage the same way you would if you paid directly to the bank and not to the landlord.
Of course, with a trailer on rented ground, you have an unmovable personal item on rented property, but you'll still save on mortagage vs. renting on the trailer, if not on the ground. But you have twice the risk now: You are not only gambling on your ability to stay, but on your landlord's willingness to let you. Risky, but can you afford safer?
Posted by: inge | Jul 17, 2009 at 09:10 AM
I've never understood why houses appreciate. Yeah, currency slowly inflates, such that a 1940 dollar was a considerably more valuable thing than a 2009 dollar. But houses and real estate are supposed to offer REAL appreciation--an increase in value above and beyond the inflation of currency AND--if we're honest with ourselves--above and beyond increases in people's incomes. That part seems crucial--and never honestly admitted-to--because an increase in prices that only parallels an increase in income is not appreciation at all: It's just more inflation.
So why do houses appreciate?
They're not like rare works of art, where maker is dead and he'll never add to his opus again: There are new houses being built all the time. And it's not like a house becomes a better and better place to live each year (unless you spend MORE money to improve it). Far from it: Roofs need to be replaced, boilers explode, basements leak. An old house--which has, supposedly "appreciated"--is, maintenance-wise, a considerably more expensive proposition than a new one.
I *sort of* understand the argument that "home ownership offers security" in the sense that they give you a place to live that you control the particulars of. But I've never understood why they're considered "an investment" that will net you a giant windfall and provide for a luxurious retirement forever and ever, amen. That schema seems predicated only on the idea of generational wealth-transfer in which the older generation bilks the younger generation out of much, much more money than they (the older folks) paid for the same exact house they're selling.
And then, in any more expansive sense of the term "security" than the merely financial, houses fall flat: You aren't "secure" once you have a mortage; you have to work *harder* and worry about *more* things. You sleep worse. You can't change jobs. You can't move. Your free time is less free, occupied as it is with hours of sweating yard work and painting and fixing things and hand-wringing over aging appliances. You have to carry a great big insurance policy. If taxes increase too much, you risk losing your precious, precious appreciation, so you're at the existential risk of becoming Republican and/or the risk of becoming That Guy who squints at the slightly-too-brown new folks moving in and worries.
I love renting.
Posted by: Maji | Jul 17, 2009 at 09:23 AM
I've never understood why houses appreciate.
Houses don't appreciate, land appreciates.
Posted by: cjmr's husband | Jul 17, 2009 at 09:29 AM
Maji: So why do houses appreciate?
Supply and demand.
When my mother started to buy her house, it was in a middle-of-nowhere village with a small store and three pubs, 40 minutes communte to the city, 10 to the next town. These days she owns it, and new houseing has 70 minutes commute to the city, and the town has died (so has the store and two of the pubs). Many people would like to save that hour per day on commute, so there's more people who want a house in that particular exurb than there are houses to be had. Demand outstrips supply, prices go up.
When she gets too old to keep the house, it will sell for only a little less than she paid to the bank over 30 years, making the whole endeavour nearly cost-neutral over a lifetime. Which renting would not have been.
Note that is is all about place. An empty lot would have gained value just the same. (That's how my grandfather made his money, bought land and kept it until the town had reached it, divided it into lots and made a killing.) But you cannot live on an empty lot, and you need to look after it anyway.
(Note: I'm not in the US, neither is my family. There might be structural difference. But I'd expect the basics of interest, and of supply and demand, to be similar enough.)
Posted by: inge | Jul 17, 2009 at 09:41 AM
*Houses don't appreciate, land appreciates.*
Why? Land doesn't get better with time. Do you mean because land is constant while people multiply? If so, then I'm still right: Home ownership isn't a virtuous, George Bailey-an dream but rather a cynical, malthusian war.
Posted by: Maji | Jul 17, 2009 at 09:42 AM
*When she gets too old to keep the house, it will sell for only a little less than she paid to the bank over 30 years, making the whole endeavour nearly cost-neutral over a lifetime. Which renting would not have been.*
Is homeownership really cost-neutral? In the popular parlance, rent is money "thrown away". Except, of course, that so is mortgage interest. And of course, it's old news that most people don't keep a house for 30 years anymore; they keep them for *maybe* 6-7 years. Or at least they *used to*, back when we could all safely assume that houses were perfectly liquid and we could sell them whenever we wanted to.
There's a probably a coupla million Michiganians (Michiganites? Michigi? Peninsulars?) who deeply, deeply wish they'd rented instead of bought right now.
And again: I refuse to ignore the existential costs of a mortgage. I lead a pretty "square" personal life; 9-5 technology job (actually I wish it was 9-5; it's more like 8:30 to 6), wife, kid. But when the working day is done and the wee one is tucked in or playing in her room, I get to think about lots of things *other* than whether the neighborhood is "going downhill" or what needs fixing next on the house and how much it will cost me. I'll probably get 2-3 total months more of free time over my lifespan just from time NOT spent walking the aisles at Home Depot.
The only time "home" ownership excites me is when I look over at the Colorado Yurt Company website. I'm betting a yurt has a considerably better depreciation curve than a trailer. You can fix it with a felt-mending kit and I'll take the scent of sheep over the scent of formaldehyde any day. ;-)
Posted by: Maji | Jul 17, 2009 at 09:59 AM