How the Government Screwed Up the RV Market

In writing a short piece for the fifth anniversary of Hurricane Katrina, I ended up learning a bit about the market for recreational vehicles — campers, mobile homes, trailers, etc. And I ended up hearing about one of the very unintended consequences of Hurricane Katrina: The government kind of screwed up the American market for RVs.

The Recreational Vehicle Industry Association and a few dealers explained it to me this way. Through the 2000s, the market for RVs boomed, due to the economic good times and successful advertising campaigns targeted at younger buyers. By 2006, manufacturers were shipping 390,000 units per year to dealerships — a decent proxy for new-RV sales.

But RV sales are highly sensitive to high gas prices and recessions: RVs are generally a luxury item, not a necessity, and sales require good credit conditions because RVs can be quite expensive. (Apparently motorhome sales are a bit different: During downturns, some buyers that might have purchased a house will instead purchase a motorhome — though nice motorhomes cost more than small houses in many areas.) In 2007, manufacturers started producing far fewer vehicles, and sales of new RVs have plummeted more than 60 percent since the start of the recession.

The RV market is also unusual in that well-built American RVs tend to last for years, meaning that there is a vigorous resale market. (Your average RV will go through a number of owners, and a typical RV user might hang on to her camper for 20 years before deciding to buy a new or newer used one.) That means that while there are millions of RVs in circulation, relatively few new ones are manufactured per year.

Suddenly, in 2005, near the top of the RV production market for the decade, the government purchased approximately 145,000 RVs — meaning that rather than producing 3.7 percent more RVs in 2005 than in 2004, manufacturers actually made 43 percent more.

Soon after, the market for RVs seized up due to the recession. And soon after, the government started moving New Orleans residents out of the trailers and into permanent housing. In 2009, the government sold off more than 90,000s of those RVs — flooding certain sectors of the resale market and driving down prices during the worst of the RV recession. Needless to say, dealers aren’t particularly happy about that.