Modularity, another benefit of mobile homes
Capital markets are a form of neural network, and as such, they respond very rapidly and cleverly to shocks. So while command-and-control systems like the Federal Emergency Management Agency (FEMA), National Guard, various state governments, and relief agencies seek to cope with the aftereffects of Hurricane Katrina, the market is already betting that not only will the rebuilt New Orleans look vastly different from the former Big Easy, there will also be a role for the underappreciated mobile home, as this Birmingham News article (via Knowledgplex) illustrates:
Shares of Alabama-based mobile home makers rose Wednesday, as disaster crews in the Southeast face the prospect of housing thousands of people whose dwellings were destroyed by Hurricane Katrina.
After previous storms, the Federal Emergency Management Agency bought thousands of manufactured homes, as the industry prefers to call the prefabricated units. Wednesday, shares of Addison-based Cavalier Homes Inc. soared 20.8% to $5.92. Southern Energy Homes Inc., also based in Addison, climbed 5.5% to $6.20.
I have previously written in praise of double-wides as a form of affordable housing, but they have another advantage: they can be built in one place,
Built on an assembly line …
And trucked to another:
Both Cavalier and Southern Energy are based in a Winston County town about an hour north of Birmingham. It’s a six-hour truck trip to New Orleans, mostly on interstate highways.
If you can’t bring the location to the housing, bring the housing to the location
Portability and rapid delivery makes them very useful after a disaster:
Manufactured housing makers can produce hundreds of single-wide units a week for use as emergency dwellings. It’s a fast, no-frills option that gets people indoors quickly and is increasingly preferred by federal planners, who bought thousands of them last year after Hurricanes Charley and Ivan hit the Southeast.
Modularity also has another advantage: you can ramp up capacity quickly:
Last year, Southern Energy made 400 homes for a subcontractor who manages emergency housing for FEMA. Cavalier got a contract for 800 to 1,000 homes.
“I don’t expect to hear anything soon,” said Mike Murphy, Cavalier’s finance chief. “But we can handle it. Last year, we made 1,023 homes from September through mid-November.”
Shares of manufactured housing companies across the country rose Wednesday. Both Cavalier Homes and Southern Energy Homes far surpassed their 90-day average daily trading volumes. Cavalier had traded about 20,000 shares a day and Wednesday passed 600,000 an hour before the stock market closed.
That’s roughly a 350-fold increase in volume!
Southern Energy had traded about 14,000 shares a day and reached 260,000 at 2:30 p.m.
Expectation of disaster orders “is what it has to be based on,” but there are no facts yet to support the idea, Murphy said. One unknown in the equation is how many homes FEMA has left over from earlier storms, Stariha said.
However many homes FEMA has, in the face of Katrina, FEMA will need more. As the Manufactured Housing Institute reports:
August 31, 2005 — MHI and various state manufactured housing associations have been contacted by the Federal Emergency Management Agency about immediate housing needs in the wake of Hurricane Katrina. The relief efforts are the #1 priority of the Federal Government right now. The President has instructed HUD Secretary Jackson to help house the victims. Over a million people are expected to be homeless.
MHI is coordinating response efforts with FEMA and HUD and we have information for you. Yes, in addition to RV and park models, they are looking for manufactured homes. They would consider modulars that are immediately available.
With billions of dollars’ worth of insurance policies kicking in, and a wired America watching, we are about to see just how astonishingly quickly and effectively construction and financial markets can respond to a large-scale tragedy.
