Texas housing manufacturers bullish heading into 2024

COLLEGE STATION, Tex. (Texas Real Estate Research Center) – Texas manufactured housing activity ended the year on a positive note with nine consecutive months of production increases, according to the December Texas Manufactured Housing Survey (TMHS). Backlogs decreased for the second straight month, and the industry is well positioned for a springtime surge in activity.

“The fourth quarter marked the first time that Texas’ aggregate inventory appears to have risen since the end of 2022, indicating that the seasonal pattern of inventory buildup by retailers from the fall through February could be normalizing,” said Rob Ripperda, vice president of operations for the Texas Manufactured Housing Association. “Nobody would call 2023 a good year for manufactured home production when looking at total shipments, but manufacturers weathered the storm brought on by interest-rate hikes and are entering 2024 with backlogs of around six to seven weeks.”

Although the TMHS new-orders index fell for the second straight month, the six-month sales expectations measure reached a record high heading into 2024.

“Retail sales have reliably jumped higher in March for the past decade, and a rise in production has coincided with that seasonal increase in demand,” said Ripperda.

In addition to stimulating sales volume, lower interest rates will result in upward price pressure.

“Prices received for finished homes have declined rather steadily over the past 18 months,” according to Wes Miller, senior research associate at the Texas Real Estate Research Center (TRERC). “Lower rates will loosen budget constraints and spur demand for housing. On the supply side, housing manufacturers are confident that the cost of raw materials and labor will increase during the first half of 2024, applying additional upward pressure on prices.”

The health of supply chains could play an important role in determining production and prices.

“Last month, supply chain costs were low and relatively stable, and the primary concern was drought-related constraints at the Panama Canal,” according to Harold Hunt, Ph.D., TRERC research economist. “In the last 30 days, however, attacks on shipping in the Red Sea have sent spot container rates soaring. The Shanghai Containerized Freight Index (SCFI), a key spot rate indicator for the shipping industry, rose 40 percent in the last week alone.”

Manufactured-housing supply chains have exhibited signs of volatility over the past eight months after recovering from COVID-19-related disruptions, but TMHS respondents expect disruptions to dissipate despite geopolitical strife.

“Although costs are currently climbing, total imports to Houston rose almost 30 percent in December from the November level based on data from logistics provider Descartes,” said Hunt.

Geopolitical headwinds and domestic election-year concerns weighed on the TMHS uncertainty index but failed to curb respondents’ optimistic outlook for the first half of 2024.​​​​​​​