here are the "HOT" markets for purchasing existing communities and building new communities? What criteria do investors use to identify growing markets? This article will provide insight into how to identify growing markets and an executive summary of the markets for which JLT & Associates prepares annual manufactured home community rent surveys. These "tips" should guide investors and developers to identify quality investment and development opportunities in growing markets.

Identifying Growing Markets - When identifying growing markets, population and employment growth are two key indicators investors and developers look at to prepare a list of potential markets to analyze. This information identifies areas that most likely are experiencing strong economic growth. Job growth and population growth normally go hand in hand. People will migrate to areas where jobs are abundant. The top twenty-five Population Growth Markets from 1990 to 1996 are (minimum 60,000 new residents):

Identifying Growing Markets - When identifying growing markets, population and employment growth are two key indicators investors and developers look at to prepare a list of potential markets to analyze. This information identifies areas that most likely are experiencing strong economic growth. Job growth and population growth normally go hand in hand. People will migrate to areas where jobs are abundant. The top twenty-five Population Growth Markets from July 1997 to July 1998 are (minimum 13,000 new residents):

The top twenty-five Employment Growth Markets from September 1998 to September 1999 are (minimum 20,000 new jobs):

Investors and developers will also gather information on apartment rents, single family home prices and existing manufactured home community rents. This data is used to determine if manufactured homes are an affordable housing alternative. If monthly cost (home payment + homesite rent) to live in a new manufactured home is:

• equal to the monthly cost to live in a Class A or B two bedroom apartment,
• 20% to 30% below the monthly cost to live in a new starter single family home, and
• 20% to 30% below the monthly cost to live in the median priced pre-owned single family home,

Then manufactured homes are typically an affordable housing alternative.

If the findings are positive, investors and developers will determine:

• demand for existing and new homesites,
• if there are additional new communities in the planning process or under construction,
• land availability and costs,
• access to public water and sewer, attitudes of local planning and zoning officials towards manufactured home community expansion and development,
• local crime rates, and
• quality of public school education.

Craig White, Vice President of Acquisitions for CWS Capital Partners comments on some of the criteria his organization evaluates. "With regard to the criteria mentioned above, we use all of that data. We feel that long term job growth, the differential between single family and manufactured home living and difficulty of entry into a market are the strongest factors that are considered in the development of a new community. We like high barrier to entry markets and markets where the cost of single family housing is the highest. Currently, we have greenfield development projects underway in Austin and Denver. With regards to acquiring existing communities, we look at the desirability of the community and its location plus the criteria mentioned above."

Rees Davis, Executive Vice President for Chateau Communities also indicated that Chateau Communities "uses all of the criteria noted above when evaluating the purchase of existing communities and land for development. We focus on the long-term growth of the market and the asset's position relative to comparable competing communities." He further adds, "Better than average job and population growth concurrent with a lack of affordable housing will always be the underlying drivers of a good market. Chateau looks for markets where rents can be increased from 3% to 7% per annum while maintaining high occupancy rates. When evaluating development opportunities, barriers to entry into the market and the existing pipeline of new communities/sites are critical factors we look at. We continue to avoid markets that have low barriers of entry, a lack of economic diversification and a smaller population base."

Snap-shot Look at Various Markets - Annually, we prepare manufactured home community rent surveys for forty-nine (49) markets nationwide. Findings and Observations about each market are presented in Exhibit A.