Are We In A Bubble? If So, When Will It Pop

This is a common question in our industry. The straight answer is yes, some of our real estate markets appear to be in a bubble. MH has more interest than ever. But, still there seems as if there’s more to this bubble that can be at play.

For example, cap rates can still come down. Buyer interest still hasn’t plateaued, and it looks like more and more buyers are joining the fray. Keep in mind that the supply of our industry has always been small, and the same remains true now. With this many buyers and so few parks, it’s becoming a growing supply and demand issue.

Is The Bubble Going To Pop?

A lot of the real estate markets are in a bubble, especially single family residences. But how likely is it that the bubble will pop? Let me put it into perspective. Let’s say the industry lost half of its buyers. So long as it isn’t too many of the core 1000 buyers, it likely wont pop. Even then, the demand will still be there, and the spread between cap rates and interest rates will probably still have room to compress. Even if interest rates do increase a bit, the cap rates on stabilized parks have enough spread to cover that increase without significantly lowering the price. 

Many single family residences and higher end apartments are being erected left and right. Still, affordable housing apartments are still not being built much less overbuilt. As it relates to Mobile Homes and Mobile Home Communities, there still is barley any new parks coming online and tenant demand is still strong and buyer demand is through the ceiling. So much so in fact, it’s enough to keep supply trading at a high number.

What Are The Curveballs In The MHP Industry

There are a number of concerns circulating the industry. Many are worried about the 1031 and tenant rights, as well as eviction moratoriums. While these are good to monitor, I still don’t foresee a pop in the MH space. In MHs, there will always remain an excessive amount of demand to the amount of supply in our industry. The same cannot be said, though, for other aspects of the greater real estate field.

With that said, there are still plenty of curveballs in our industry. For example, agency lenders could retreat from lending on this asset class. The last few years, they’ve become more bullish on lending in this asset class. Thus far, we haven’t seen signs that they’ll relent on this approach.

Facing The Bubble With The MHP Expert

This is only the start of the conversation. We’ll continue exploring the bubble and how it’s manifesting in the greater real estate market in the coming part two. Until then, feel free to browse our extensive catalog of industry centered information.

If you need any guidance in any other area of The Mobile Home Park Industry, you’ve come to the right place! The MHP Expert is here to provide you with the support you need. Schedule a consultation with us on our contact page today! We’ll get a head start on servicing your needs.

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