Recovery still 12 to 18 months away - shipments of prefabricated housing in the United States - Brief Article - Statistical Data Included

Home Channel News, May 1, 2001

According to the Manufactured Housing Institute, manufactured home shipments at the wholesale or production level were off 28 percent in 2000. An uptrend in repossessions combined with continuing consolidation and inventory adjustment in the retail channel are likely to hold down manufacturing levels in 2001.

End of easy money: Loose credit, spawned by increased competition in the consumer finance sector, combined with an explosion in the number of retail locations from 1994 to 1999, caused an unsustainable boom in the manufactured home sector. As lenders sought to grab a bigger share of what was perceived to be a high margin / high growth lending opportunity, credit standards plummeted. The low quality loans of the 1995 to 1998 time period led to rising default rates and loan losses.

Industry is still in a downdraft: Consolidation in the retail sector is forcing excess inventory into the system. Industry participants estimate that approximately 2,000 retail locations have closed since 1999, bringing the current number of locations to roughly 7,000. Additionally, an estimated 90 manufacturing facilities have already been idled, representing 27 percent of industry capacity.

The trickle-down effect: Building products manufacturers that have a substantial amount of revenue derived from the manufacturing home sector are reporting lackluster performance in 2000. Some sectors that are adversely impacted include vinyl siding, floor covering, roofing and molding. We are looking for production of homes to bottom out in 2002 as excess product is purged from the retail channel.

Sources: First Union Research, MHI

[Graph omitted]

[Graph omitted]