Alex Pettee, CFA
Manufactured Housing REITs: Find Shelter Amid Volatility
Powered by the macroeconomic tailwinds associated with the affordable housing shortage, Manufactured Housing REITs were the best-performing real estate sector of the past decade, and it wasn't particularly close.
The sector produced cumulative returns that nearly doubled the next closest REIT sector. MH REITs outperformed the REIT average for a remarkable seventh straight year in 2019, surging nearly 50%.
The most affordable housing option in most markets, regulatory impediments to housing supply growth have supported sector-leading NOI growth for MH REITs, which has averaged more than 6% since 2015.
Beyond the sector-leading internal growth, external growth through acquisitions and site expansions provide an added boost. While competition has heated up, these REITs command a superior cost of capital.
Trading at the loftiest valuations in the REIT sector, investors will continue to demand perfection but haven't been let down in quite some time. Low supply and strong, demographic-driven demand for housing continue to provide a compelling backdrop.