Warren Buffet’s Exploitative Mobile Home Investment

By CultureBanx Team

  • Warren Buffet’s Clayton Homes has 49% of the manufactured home market

  • In 2015, 72% of black borrowers got their loans from Clayton’s mortgage companies

Warren Buffett’s company Clayton Homes, the biggest mobile home manufacturer in the U.S. has continued to profit from high interest rate loans. The Oracle of Omaha has sold low-income Americans the dream of ownership for nearly 20 years, and his investment company Berkshire Hathaway (BRKB +1.88%) makes money on the loans since they own the company that Clayton urges its buyers to go through. Many of the people buying these homes are minorities and have helped to fuel Clayton’s $13.7 billion mortgage portfolio.

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Why This Matters: Clayton operates the two biggest mobile home lenders, 21st Mortgage Corporation along with Vanderbilt Mortgage. According to The Seattle Times Clayton finances more mobile home loans than any other lender by a factor of more than seven. In 2015, 72% of black borrowers got their loans from Clayton’s Vanderbilt Mortgage and 21st Mortgage, according to FFEI federal data.

They have outsized dominance in the manufactured home market with a 49% share, and where profit margins are greater. Buffet’s Clayton company brought in $765 million in revenue, in 2017.

The majority of mobile-home residents, 23% are between the ages of 18 to 29 and have an average household income of $28,400

Mobile home loans are similar to car loans because they’re typically classified as personal property, instead of real estate. Interest rates can be as high as 13.5% or more, and like a vehicle, lose as much as half its value in three years. These rates make it hard for mobile-home owners to leverage equity from their purchase in order to buy a traditional home.

Situational Awareness: If you’re thinking mobile homes are perhaps only for an older demographic you would be wrong. The majority of mobile-home residents, 23% are between the ages of 18 to 29 and have an average household income of $28,400. If that’s not alarming enough, in 2015, the average sales price for a new manufactured double-wide home was around $110,000.

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