Overview

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto included elsewhere herein and in our annual report on Form 10-K for the year ended December 31, 2007.

The Company is a real estate investment trust (REIT). The Company's primary business is the ownership and operation of manufactured home communities - leasing manufactured home spaces on a month-to-month basis to private manufactured home owners. The Company also leases homes to residents and, through its taxable REIT subsidiary, UMH Sales and Finance, Inc. (S&F), sells and finances homes to residents and prospective residents of our communities.
The Company owns twenty-eight communities containing approximately 6,800 sites. These communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee.

The Company also holds a portfolio of securities of other REITs and home manufacturers with a balance of $26,609,765 at September 30, 2008. The Company invests in these securities on margin from time to time when the Company can achieve an adequate yield spread and when suitable acquisitions of real property cannot be found. At September 30, 2008, the Company's portfolio consisted of 12% preferred stocks, 65% common stocks and 23% debentures. The securities portfolio provides the Company with liquidity and additional income until suitable acquisitions of real property are found.

The Company's revenue primarily consists of rental and related income from the operation of its manufactured home communities. Revenues also include sales of manufactured homes, interest and dividend income and gain (loss) on securities transactions, net. Total revenues increased by approximately 3% from $9,971,274 for the quarter ended September 30, 2007 to $10,240,058 for the quarter ended September 30, 2008. Total revenues decreased by approximately 4% from $30,122,640 for the nine months ended September 30, 2007 to $29,014,594 for the nine months ended September 30, 2008. The increase for the quarter was primarily due to an increase in rental and related revenue, interest and dividend income, and gain on securities transactions, net, partially offset by a decrease in sales of manufactured homes. The decrease for the nine months was primarily due to a decrease in sales of manufactured homes and a decrease in the gain (loss) on securities transactions, partially offset by an increase in rental and related income and interest and dividend income. Gain (loss) on securities transactions increased (decreased) by $468,657 and ($623,659), respectively, for the quarter and nine months ended September 30, 2008 as compared to the quarter and nine months ended September 30, 2007. The increase for the quarter was due to a larger loss on open and settled futures contracts during 2007. The decrease for the nine months was primarily due to the write-down of a security which was considered other than temporarily impaired during 2008. Sales of manufactured homes decreased by approximately 22% and 24%, respectively, for the quarter and nine months ended September 30, 2008 as compared to the quarter and nine months ended September 30, 2007. Over the past several years, the availability of liberal lending terms for conventional housing

created a difficult competitive market for sales of manufactured homes. This resulted in a loss of occupancy from approximately 86% in 2005 to approximately 80% currently. Although the conventional home lending environment has returned to more disciplined lending practices, the return to affordability and the recovery of manufactured home communities have been slow. We believe that the decline in consumer confidence, the inability of our customers to sell their current homes, and the turmoil in the financial markets have negatively impacted our home sales.

Total expenses decreased by approximately 8% and increased by approximately 3% for the quarter and nine months, respectively, ended September 30, 2008 as compared to the quarter and nine months ended September 30, 2007. This was primarily due to a decrease in cost of sales of manufactured homes and selling expenses partially offset by an increase in interest expense and depreciation expense. The increase in interest expense was primarily due to an increase in the balance of mortgages and loans payable.

Net income increased by approximately 989% for the quarter ended September 30, 2008 primarily due to the increase in rental and related income, interest and dividend income, gain on securities transactions, net, and a decrease in expenses. Net income decreased by approximately 16% for the nine months ended September 30, 2008. This decrease was due primarily to the write-down of $302,400 of a security which was considered other than temporarily impaired, the loss of $304,088 for the nine months ended September 30, 2008 on settled futures contracts, the increase in interest expense and the decrease in sales of manufactured homes.

See PART I, Item 1 - Business in the Company's 2007 annual report on Form 10-K for a more complete discussion of the economic and industry-wide factors relevant to the Company and the opportunities and challenges, and risks on which the Company is focused.

Changes In Results Of Operations

Rental and related income increased from $6,055,129 for the quarter ended September 30, 2007 to $6,421,211 for the quarter ended September 30, 2008.
Rental and related income increased from $17,808,024 for the nine months ended September 30, 2007 to $19,037,815 for the nine months ended September 30, 2008.
This was primarily due to rent increases to residents and an increase in home rental income. The Company has been raising rental rates by approximately 3% to 6% annually. Occupancy remained relatively stable at approximately 81% at December 31, 2007 and 80% at September 30, 2008. The Company has faced many challenges in filling vacant homesites. The relatively low interest rates and liberal lending environment in 2006 and 2007 made site-built housing more accessible.

Interest and dividend income increased from $724,811 for the quarter ended September 30, 2007 to $1,006,084 for the quarter ended September 30, 2008.
Interest and dividend income increased from $2,289,612 for the nine months ended September 30, 2007 to $3,026,990 for the nine months ended September 30, 2008. This was primarily as a result of an increase in dividend income due to a higher average balance of securities available for sale during 2008. The average balance of securities at September 30, 2008 and 2007 was $25,066,498 and $20,385,225, respectively.

Gain (loss) on securities available for sale transactions, net for the three and nine months ended September 30, 2008 and 2007 consisted of the following:

                                     Three Months                Nine Months
                                 2008          2007            2008          2007

Gain (loss) on sale of           $10,043     ($92,117)         $20,994       $263,675
securities, net
Impairment loss                      -0-           -0-       (302,400)            -0-
Loss on settled futures              -0-     (516,264)       (304,088)      (328,167)
contracts
Gain on open futures                 -0-       149,767             -0-        102,657
contracts
Gain (loss) on securities        $10,043    ($458,614)      ($585,494)        $38,165
transactions, net

Gain (loss) on securities transactions, net increased from a loss of ($458,614) for the quarter ended September 30, 2007 to a gain of $10,043 for the quarter ended September 30, 2008 and decreased from a gain of $38,165 for the nine months ended September 30, 2007 to a loss of ($585,494) for the nine months ended September 30, 2008. During the three and nine months ended September 30, 2008, the Company recognized a loss of $-0- and $302,400, respectively, due to the write-down of the carrying value of a security which was considered other than temporarily impaired. The Company also recognized a total loss on settled and open futures contracts of $-0- and ($304,088), respectively. The Company invested in futures contracts of ten-year treasury notes with the objective of reducing the risks of rolling over its fixed-rate mortgages at higher interest rates and reducing the exposure of the preferred equity and debt securities portfolio to interest rate fluctuations. As of May 15, 2008, we settled our position and no longer invest in these contracts.

Community operating expenses decreased from $3,309,579 for the quarter ended September 30, 2007 to $3,190,263 for the quarter ended September 30, 2008. This was primarily due to a decrease in salary expense. Community operating expenses increased from $9,573,986 for the nine months ended September 30, 2007 to $9,768,822 for the nine months ended September 30, 2008. This was primarily due to an increase in utilities and health insurance costs. General and administrative expenses decreased from $904,927 for the quarter ended September 30, 2007 to $864,423 for the quarter ended September 30, 2008. This was primarily due to a decrease in salary expense. General and administrative expenses increased from $2,618,581 for the nine months ended September 30, 2007 to $2,761,851 for the nine months ended September 30, 2008. This was primarily due to an increase in professional fees and state franchise taxes. Interest expense decreased from $1,266,835 for the quarter ended September 30, 2007 to $1,140,359 for the quarter ended September 30, 2008. This was primarily due to the change in the fair value of the Company's interest rate swaps, which decreased interest expense by approximately $52,000 for the quarter ended September 30, 2008, but increased interest expense by approximately $265,000 for the quarter ended September 30, 2007. Interest expense increased from $2,871,880 for the nine months ended September 30, 2007 to $3,527,218 for the nine months ended September 30, 2008. This was primarily due to an increase in the average balance of mortgages and loans payable partially offset by the change in fair value of the Company's interest rate swaps. The change in fair value of the interest rate swaps increased interest expense by approximately $82,000 and $217,000 for the nine months ended September 30, 2008 and 2007, respectively. Cash paid for interest during the quarter ended September 30, 2008 and 2007 amounted to $1,274,216 and $1,108,719, respectively. Cash paid for interest during the nine months ended September 30, 2008 and 2007 amounted to $3,759,720 and

$2,643,885, respectively. Depreciation expense increased from $919,751 for the quarter ended September 30, 2007 to $1,017,213 for the quarter ended September 30, 2008. Depreciation expense increased from $2,695,723 for the nine months ended September 30, 2007 to $3,049,758 for the nine months ended September 30, 2008. This was primarily due to the expansions placed in service in 2007.
Amortization of financing costs remained relatively stable for the quarter and nine months ended September 30, 2008 as compared to the quarter and nine months ended September 30, 2007.

Sales of manufactured homes amounted to $2,788,360 and $3,565,742 for the quarters ended September 30, 2008 and 2007, respectively. Sales of manufactured homes amounted to $7,453,417 and $9,809,790 for the nine months ended September 30, 2008 and 2007, respectively. Cost of sales of manufactured homes amounted to $2,383,739 and $3,026,775 for the quarters ended September 30, 2008 and 2007, respectively. Cost of sales of manufactured homes amounted to $6,288,216 and $8,105,230 for the nine months ended September 30, 2008 and 2007, respectively. Selling expenses amounted to $414,358 and $417,809 for the quarters ended September 30, 2008 and 2007, respectively. Selling expenses amounted to $1,125,535 and $1,335,900 for the nine months ended September 30, 2008 and 2007, respectively. Income from sales operations (defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) amounted to ($9,737), or (0.3%) of total sales, for the quarter ended September 30, 2008, as compared to $121,158, or 3% of total sales, for the quarter ended September 30, 2007. Income from sales operations amounted to $39,666, or 1% of total sales, for the nine months ended September 30, 2008 as compared to $368,660, or 4% of total sales, for the nine months ended September 30, 2007.

Liquidity and Capital Resources

The Company's principal liquidity demands have historically been, and are expected to continue to be, distributions to the Company's stockholders, acquisitions, capital improvements, development and expansions of properties, debt service, purchases of manufactured home inventory, investment in debt and equity securities of other REITs and payments of expenses relating to real estate operations. The Company's ability to generate cash adequate to meet these demands is dependent primarily on income from its real estate investments and securities portfolio, the sale of real estate investments and securities, refinancing of mortgage debt, leveraging of real estate investments, availability of bank borrowings, proceeds from the DRIP, and access to the capital markets.

Net cash provided by operating activities increased from net cash used by operating activities of $69,659 for the nine months ended September 30, 2007 to net cash provided by operating activities of $6,746,619 for the nine months ended September 30, 2008. This increase was primarily due to a decrease in inventory of manufactured homes and a smaller increase in notes and other receivables. The Company received, including dividends reinvested of $932,850, new capital of $1,934,581 through its Dividend Reinvestment and Stock Purchase Plan (DRIP). The Company sold and wrote-down $688,005, at cost, and purchased $6,070,875 of securities of other real estate investment trusts. Mortgages payable increased by $2,791,520 and loans payable increased by $6,604,989. The Company refinanced its D&R Village and Waterfalls Village mortgages for $8,700,000, took down $5,000,000 of its new $10,000,000

revolving line of credit and paid off the existing mortgages and paid down our margin loans. The Company extended its mortgages on Cranberry Village and Forest Park Village to November 1, 2008, and subsequently extended them to December 31, 2008. On October 17, 2008, the Company received a commitment letter from Sun National Bank to refinance these mortgages. The Company also extended its unsecured line of credit with Bank of America to November 30, 2008, and subsequently, received a commitment from Bank of America to further extend this line to November 30, 2009.

The Company believes that funds generated from operations together with the financing and refinancing of its properties will be sufficient to meet its needs over the next several years.

Funds From Operations

Funds from Operations (FFO) is defined as net income excluding gains (or losses) from sales of depreciable assets, plus depreciation. FFO should be considered as a supplemental measure of operating performance used by real estate investment trust (REITs). FFO excludes historical cost depreciation as an expense and may facilitate the comparison of REITs which have different cost bases. The items excluded from FFO are significant components in understanding and assessing the Company's financial performance. FFO (1) does not represent cash flow from operations as defined by generally accepted accounting principles; (2) should not be considered as an alternative to net income as a measure of operating performance or to cash flows from operating, investing and financing activities; and (3) is not an alternative to cash flow as a measure of liquidity. FFO, as calculated by the Company, may not be comparable to similarly entitled measures reported by other REITs.

The Company's FFO for the three and nine months ended September 30, 2008 and 2007 is calculated as follows:

                            Three Months                Nine months
                          2008         2007         2008          2007

Net Income             $1,201,017     $110,239   $2,407,051     $2,875,807
Gain on Sales of          (9,684)     (23,236)     (30,042)       (89,760)
  Depreciable Assets
Depreciation Expense    1,017,213      919,751    3,049,758      2,695,723

FFO                    $2,208,546   $1,006,754   $5,426,767     $5,481,770

The following are the cash flows provided by (used in) operating, investing and financing activities for the nine months ended September 30, 2008 and 2007:

2008 2007

Operating Activities $6,746,619 ($69,659) Investing Activities (11,168,975) (13,583,091) Financing Activities 4,506,587 12,817,683

Safe Harbor Statement

Statements contained in this Form 10-Q, including the documents that are incorporated by reference, that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Also, when we use any of the words "anticipate," "assume," "believe," "estimate," "expect," "intend," or similar expressions, we are making forward-looking statements. These forward-looking statements are not guaranteed. They reflect the Company's current views with respect to future events and finance performance, but are based upon current assumptions regarding the Company's operations, future results and prospects, and are subject to many uncertainties and factors, some of which are beyond our control, relating to the Company's operations and business environment which could cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements.

Such factors include, but are not limited to, the following: changes in the real estate market and general economic climate; increased competition in the geographic areas in which the Company owns and operates manufactured housing communities; changes in government laws and regulations affecting manufactured housing communities; the ability of the Company to continue to identify, negotiate and acquire manufactured housing communities and/or vacant land which may be developed into manufactured housing communities on terms favorable to the Company; the ability to maintain rental rates and occupancy levels; competitive market forces; changes in market rates of interest; our ability to repay debt financing obligations; our ability to comply with certain debt covenants; continued ability to access the debt or equity markets; the availability of other debt and equity financing alternatives; the loss of any member of our management team; our ability to maintain internal controls and processes to ensure all transactions are accounted for properly, all relevant disclosures and filings are timely made in accordance with all rules and regulations, and any potential fraud or embezzlement is thwarted or detected; changes in federal or state tax rules or regulations that could have adverse tax consequences; our ability to qualify as a real estate investment trust for federal income tax purposes; the ability of manufactured home buyers to obtain financing; the level of repossessions by manufactured home lenders; and those risks and uncertainties referenced under the heading "Risk Factors" contained in the Company's Form 10-K and other filings with the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, as events described or implied in such statements may not occur. The forward-looking statements contained in this Form 10-Q speak only as of the date hereof and the

Company expressly disclaims any obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.