Clayton Homes
The largest manufactured homebuilder in the United States, acquired by Berkshire Hathaway in 2003 for $1.7 billion, known for conservative lending practices during the housing crisis.
Clayton Homes
Clayton Homes is the largest manufactured homebuilder in the United States, operating in all 50 states. Berkshire Hathaway acquired Clayton in 2003 for approximately $1.7 billion. Clayton is notable for its conservative lending practices during the 2008 financial crisis, where its borrowers performed far better than the broader mortgage market.
Overview
Clayton Homes dominates the manufactured housing industry:
| Metric | Value |
|---|---|
| Acquired | 2003 |
| Purchase Price | $1.7 billion |
| CEO | Kevin Clayton |
| Market Share | ~34% of manufactured homes |
| Headquarters | Maryville, Tennessee |
Why Clayton Matters
Scale and Market Position
Clayton is the clear leader in manufactured homes:
- Produces ~27,000+ homes per year
- Accounts for about one-third of the industry
- operates in all 50 states through hundreds of retailers
The Lending Lesson
Clayton's mortgage business proved a crucial case study in the 2008 crisis:
Despite serving borrowers with lower credit scores (median FICO 644 vs. national 723):
- Clayton's foreclosure rate was 3.0-3.6%
- Industry-wide conventional mortgage foreclosures were far higher
Why Clayton Borrowers Performed Better:
- Full documentation — Income was verified
- Realistic payments — Borrowers could afford the monthly payment
- No "teaser" rates — No exotic loan structures
- No refinancing依赖 — No assumption borrowers would refi
"Our borrowers simply looked at how full-bore mortgage payments would compare with their actual — not hoped-for — income and then decided whether they could live with that commitment."
Business Model
Home Building
Clayton builds manufactured homes:
- Single-wide and double-wide units
- Modular homes
- Sold through independent retailers
Lending Operations
Clayton's finance arm provides:
- Mortgages to buyers
- Careful underwriting standards
- Securitization of loans
Loan Performance
| Year | Delinquency Rate | Notes |
|---|---|---|
| 2004 | 2.9% | Pre-crisis baseline |
| 2006 | 2.9% | Stable |
| 2008 | 3.6% | Slight increase during crisis |
| Industry | Much higher | Conventional mortgages |
No purchaser of Clayton-originated securitized mortgages ever lost a dime of principal or interest.
Why It Fits the Moat Concept
| Moat Type | Clayton Evidence |
|---|---|
| Scale | 34% market share, national presence |
| Distribution | Hundreds of independent retailers |
| Lending Moat | Conservative practices, loyal customers |
| Operational Expertise | Manufacturing efficiency |
Buffett's Take on Housing Crisis
Buffett used Clayton's experience to illustrate what went wrong in conventional housing:
- Easy credit — No documentation, low down payments
- Assumption of appreciation — "House prices will always rise"
- Refinancing as strategy — Hoping to refi, not repay
- Predatory practices — "Borrowers who shouldn't have borrowed"
Clayton did none of these, and their borrowers weathered the crisis.
Leadership
Kevin Clayton
Kevin Clayton was CEO of Clayton Homes after Berkshire's acquisition:
- Led through the housing crisis
- Maintained conservative lending standards
- Emphasized the importance of underwriting discipline
Related
- warren-buffett — Who acquired it
- berkshire-hathaway — Parent company
- moat — Lending moat analysis
- margin-of-safety — Conservative underwriting as margin of safety