Palm Harbor Homes and Mitchell Company Awarded First FEMA Pilot Project for Permanent Housing

Business Wire, June 27, 2008

DALLAS -- Palm Harbor Homes, Inc. (NASDAQ: PHHM) today announced that the City Council of the City of Bayou La Batre, Alabama, has awarded the Company and the Mitchell Company its "Safe Harbor" project, the first Federal Emergency Management Association (FEMA) pilot project for permanent housing in response to natural disasters of any kind. The Safe Harbor project will include a total of 100 to 110 single-family replacement homes for displaced Hurricane Katrina victims at a budget of approximately $9.0 million. The homes will be built through a joint effort of the Florida Division of Palm Harbor Homes and the Mitchell Company of Mobile, Alabama. The Safe Harbor project will commence immediately.

The Safe Harbor project will focus on building quality Green Energy Star-rated homes in a neighborhood environment fostering permanent home replacement instead of the historical FEMA trailer park solution. In addition to storm-resistant construction, the homes will feature bungalow styling with options ranging from a two-bedroom floor plan totaling 802 square feet to a four-bedroom floor plan of 1,360 square feet. All home designs will accommodate the needs of the physically challenged and at least 10 percent of the homes will be built to complete UFAS standards.

Commenting on the announcement, Mike Wnek, vice president of sales and marketing for Palm Harbor Homes-Florida Division, said, "We are very pleased to be selected by FEMA for the first pilot project to erect permanent housing as a disaster response. This award reflects Palm Harbor's leadership position in building storm-resistant modular homes. Likewise, the Mitchell Company's Bayou La Batre projects under the direction of Executive Vice President Chris Sylvester, have a solid reputation for high-quality site development and for integrating the best on-site construction practices, providing assurance that the project will finish on time and on budget. We believe this collaboration will result in an attractive, storm-resistant housing solution that will offer more secure protection from future hurricanes for the residents of the City of Bayou La Batre."

Ken Kvalheim, division president of Mitchell Homes modular group, added, "We presented this concept to FEMA in collaboration with Palm Harbor Homes in June 2007 in an effort to offer a permanent housing solution that could be provided in a high-volume, cost-effective manner. Utilizing the strengths of high-quality modular construction, we can provide a permanent home environment for families in Alabama and other areas who have suffered the ravages of Hurricane Katrina. We look forward to working with Palm Harbor Homes on this exciting and important project."

For more information on the Safe Harbor project visit www.palmharbor.com and www.mitchellcompany.com.

Palm Harbor Homes is one of the nation's leading manufacturers and marketers of factory-built homes. The Company markets nationwide through vertically integrated operations, encompassing manufacturing, marketing, financing and insurance. For more information on the Company, please visit www.palmharbor.com.

This press release contains projections and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These projections and statements reflect the Company's current views with respect to future events and financial performance. No assurance can be given, however, that these events will occur or that these projections will be achieved and actual results could differ materially from those projected as a result of certain factors. A discussion of these factors is included in the Company's periodic reports filed with the Securities and Exchange Commission.