Park Models Help Cavco Survive MH Dip
With the manufactured housing industry floundering, Phoenix-based Cavco Industries Inc. might be expected to sink as well.
According to a report in the Arizona Republic, Cavco is the seventh-largest manufactured housing producer in the country, and most of its customers live in Arizona, California and New Mexico. But shipments fell 43% in its two major markets, Arizona and California, during the first eight months of the year compared to the same period in 2006.
"It's terrible," company president Joe Stegmayer said about the overall market. "The industry is at its lowest shipping point in about 41 years."
He blames the problem on the easy sub-prime mortgages that lenders gave buyers of site-built homes several years ago, a financing that is now causing severe problems in the housing and financial industries.
Yet despite the problems in the manufactured housing industry, Cavco, the state's largest maker of manufactured homes, not only continues to operate in the black but is looking at expanding.
Stegmayer credits Cavco's staying power to its longevity and diversification, and to its specialty in making recreational park trailers, a type of small manufactured home that made second homes affordable for the past 30 years.
"We're not making nearly as much (money) as last year or the year before, but we're still making profits," Stegmayer said. "Our financial position is very strong. We have no debt."
Company officials say they have continued to increase the quality and appearance of its manufactured homes and just introduced a triple-wide mission-style, Santa Fe model with stucco exterior walls, nine-foot ceilings and a wrap-around porch. Cavco also makes some commercial buildings and recently branched out into manufactured cabins and lodges. Many are being sold to KOA Campgrounds.
But, according to the Arizona Republic, its most important niche is the park model, a 400-square foot manufactured home that is especially dominant in age-restricted plus parks in east Mesa and Apache Junction.
Phil Hammond, who lives in a Cavco park model in Venture Out RV resort in Mesa, said he and his wife moved there a year ago after downsizing from a 3,000-square-foot house with a three-car garage in Oregon. They added a 520-square foot Arizona room, giving them about 1,000 square feet of living space.
They chose Venture Out because residents own their lots and because it has two pools, a hot tub, exercise room, eight tennis courts and other amenities.
"We wanted to be in a park," he said. "We wanted to be in a homeowners association and with all the amenities."
James McCanless, senior analyst with FTN Midwest Securities Corp. in Nashville, said park models really help the Cavco's finances.
"As a result of that niche business, that has allowed them to stay profitable every quarter since going public in 2003 and has allowed them to maintain profitability during a very difficult time for the industry," McCanless said.