Home > Economics - General > Trailers?

Trailers?

September 23rd, 2003

This piece in the NYT reports that Warren Buffett is making a countercyclical move into manufactured housing. Until recently, at least, this form of housing (pejoratively referred to as ‘trailers’) has been very significant in the US – around 20 per cent of all new houses, and up to 50 per cent in rural areas.

This raises a number of questions. First, why there is no comparable development in Australia, where manufactured units are typically used only as holiday accommodation? Is it a matter of building regulations, and if so should we be changing these regulations to bring down housing costs? Or, as the NYT story implies, does this kind of housing degenerate rapidly towards slum status. The rapid decline in the manufactured housing market during the boom of the late 90s seems to support the view that this is a last-resort option.

There’s also a bigger question which I’ve been puzzling over for some time. Real incomes for the bottom 40 per cent or so of US households haven’t risen since the 1970s. At the same time, ownership of items like TVs and washing machines has expanded significantly. That’s not surprising, since the relative price of these items has dropped. But that implies that other relative prices have risen, and housing is an obvious candidate. Has housing quality declined for low-income Americans? If consumption of all items has increased, while income has been constant, the implication is obviously that savings have declined, presumably because of the availability of new forms of credit, and the story also hints at this.

I’d be very interested in any comments and grateful if anyone has useful references on the points I’ve raised.

Categories: Economics - General Tags:
  1. Don
    September 23rd, 2003 at 18:00 | #1

    John,

    According to a Landcom NSW study manufactured housing doesn’t have the price advantage here that it does in the US. In America manufactured housing is about 50% cheaper than site built housing while in Australia it can be more expensive than buying a project home.

    I remember reading somewhere about the Beaufort Home (?) a kind of steel prefab house manufactured in Australia after world war II. I don’t think it was a success.

    While it’s more common to live in a trailer or manufactured home in the US than in Australia there were still almost 69,000 Australians living caravan parks in 1996.

    In Queensland the government estimates that there are 24,000 people living in caravan parks (more than any other state) with around two thirds of these owning their own caravan.

    The number of caravan park residents has been falling in Australia. It 1991 it was over 100,000.

    The ABS has published statistics on caravan park residents along with a commentary in the 2000 and 1994 editions of Australian Social Trends.

  2. Observa
    September 23rd, 2003 at 22:19 | #2

    A couple of issues can impact on the propensity to, partly or completely, factory build dwellings. Australia generally has mild winters compared to northern hemisphere countries. I was reminded of this when my business partner recalled how his Dutch carpenter father had made the decision to emigrate to Australia in a particularly cold winter. As an apprentice, if he complained about working in the heat, his father would tell him it was better than having the nails stick to his fingers in the ice and snow, although you wouldn’t feel a miss-hit with the hammer until they thawed out at home.

    Inclement weather also has some regional influences in Australia. Wetter cities like Sydney and Melbourne, saw pre-fabricated timber wall frames and gang-nail roof trusses long before a Meditteranean climate like Adelaide, which still predominantly ‘stick-builds’ framing.(The switch to steel framing has seen factory pre-fabrication of this input now with about 1/3 of the SA framing market. The banning of Organo-chlorine termiticides in 1997 as well as a shortage of 25-30yr old plantation pine has spurred this sector) Climate differences can also be seen in tilt-up concrete construction. The eastern states use 3m wide, factory made panels, while SA largely casts much larger panels on-site prior to erection.

    There is also the influence of travel time to site in this preference. Smaller cities like Adelaide may be accessible in 30-45mins by vehicle for sub-contract trades, whereas in the larger cities this time could easily double. It is not hard to calculate the extra cost of building a dwelling, in man-days, where this is the case.

  3. dsquared
    September 24th, 2003 at 16:04 | #3

    As I understand it, “manufactured housing” is a larger category, which includes trailers as a subset. I think that the majority of US manufactured homes by value are quite similar to what Observa calls a “project house”. On the face of it, it seems pretty unlikely that 20% of new housebuilding in the USA is trailers.

  4. September 25th, 2003 at 04:54 | #4

    I think Dsquared is right. Here in Seattle (land of good coffee, John, and don’t you forget it) they’re constantly advertising Quadrant homes, which are some sort of manufactured home that is not a trailer.

    I’m not sure that trailer is really a term of abuse. I’ve literally never heard them called anything else, by anyone, ever.

  5. Barry
    September 25th, 2003 at 11:10 | #5

    I don’t have the figures, but durinng the 1970′s and 1980′s, in the US, many newspaper/magazine articles listed education, housing, medical care and energy as having prices increasing the most rapidly. From personal experience, in the US, tuition at a third-tier public university in 1984 was almost what it had been at a first-tier public university in 1979. That was in nominal dollars, but it still must have been a 50% real increase in several years.

  6. September 25th, 2003 at 14:01 | #6

    The relative unpopularity of “trailer” living in Australia reflects (and/or causes) an illiquid market in the resale of trailer homes. In the US, my understanding is that these are commonly bought and sold in situ; this is not the case in Australia. Given that such resales would place the trailer-park landowner is an immensely powerful bargaining position (absent the trailer-owner having a long-term, assignable lease), I’d speculate that this might mean that trailer-owning tenants may get some kind of consumer protection (not the case in Oz)

    A related difference is that caravans used for long-term living in Australia are generally unplumbed, while US-style “trailers” are plumbed. This obviously changes the dynamics of the asset’s resale รถ for an unplumbed caravan, the land tenure (if any) is of much less import.

    Finally, caravan parks in Australia are definitely a declining breed. Those close to beaches are being bought out for their land value, in order to build expensive, quasi-retirement homes for baby boomers. Meanwhile, no new caravan parks seem to be have been built on the fringes of the main cities for decades (again, in contrast to US trailer parks).

  7. Zizka
    September 27th, 2003 at 16:04 | #7

    There’s a whole folk demographic in the US: “Trailer trash”. It means white people, usually sort of countryish even if they live near or in a city, who can’t afford a “real home” and often are somewhat migratory. It’s not a compliment.

  8. Tristan Jones
    September 29th, 2003 at 01:11 | #8

    There is a strong cultural aspect to mobile homes in the USA, mobile homes are the direct descendants of the log cabin of frontier times. In one area of the United States, The Upper South Lob Cabin’s were the main form of housing in frontier times and nowadays that part of the country has by far the most mobile homes, as people from the upper southern states have moved in other US states this love of mobile homes spread into regions where such homes were previously unheard of.

Comments are closed.