Safe Harbor Statement

Statements contained in this Form 10-K, 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 this Form 10-K and the Company's 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-K 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.

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 elsewhere herein.

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 invests in debt and equity securities of other REITs and public companies in the manufactured housing sector.

The Company also holds a portfolio of securities of other REITs and public companies in the manufactured housing sector with a fair value of $21,575,072 at December 31, 2008. The Company invests in these securities on margin from time to time when the Company can achieve an adequate yield spread. At December 31, 2008, the Company's portfolio consisted of 15% preferred stocks, 62% common stocks and 23% debentures. The Company's weighted-average yield on the securities portfolio was approximately 11% at December 31, 2008. The REIT 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 from securities and the financing of manufactured home sales, and gain (loss) on securities transactions, net. Total revenues decreased by approximately 6% for the year ended December 31, 2008 as compared to the year ended December 31, 2007. This was primarily due to a decrease in sales of manufactured homes of approximately 25% for the year ended December 31, 2008 as compared to the year ended December 31, 2007.

Rental and related income increased from $23,997,178 for the year ended December 31, 2007 to $25,542,745 for the year ended December 31, 2008, or approximately 6%. This was primarily due to rental increases to residents and an increase in home rental income.

Interest and dividend income increased by approximately $961,000 or 29% in 2008 as compared to 2007. The increase was due mainly to a higher balance of manufactured home notes receivable and to higher invested fund balances of securities.

Loss on securities transactions, net increased from approximately $1,398,000 for the year ended December 31, 2007 to $2,861,000 for the year ended December 31, 2008, or 105%. This was due primarily to an increase in the loss on closed futures contracts and impairment losses. During 2008, the Company recognized approximately $2,548,000 in impairment losses due to the writing down of the carrying value of certain securities which were considered other than temporarily impaired and a loss on closed futures contracts of approximately $304,000. The Company has unrealized losses of approximately $5,671,000 in its securities portfolio as of December 31, 2008. Additional impairment losses may be recognized if the securities market remains at current levels and the financial results of the underlying companies deteriorate. The securities market has recently been driven to inordinately low prices and high yields. We believe this to be the result of indiscriminate selling and not the result of normal pricing considerations. The dividends received from our securities investments continue to meet our expectations and anticipate realizing satisfactory returns. It is our intent to hold these securities long-term. As the credit markets begin to function again, more efficient pricing should return to the securities markets.

Total expenses decreased by approximately 3% for the year ended December 31, 2008 as compared to the year ended December 31, 2007. This was primarily due to decreases in cost of sales of manufactured homes, selling expenses, and general and administrative expenses partially offset by increases in interest expense, community operating expenses and depreciation expense. The increase in interest expense was primarily due to an increase in the balance of mortgages and loans payable.

Income from community operations (defined as rental and related income less community operating expenses) increased from $11,364,136 for the year ended December 31, 2007 to $12,458,786, an increase of approximately $1,095,000 or 10%.

Net income for the year ended December 31, 2008 decreased approximately 42% or $1,106,000 due primarily to an increase in the loss on securities transactions of $1,462,000, a decrease in income from the sales operation of $635,000, an increase in depreciation expense of $414,000 and an increase in interest expense of $786,000 partially offset by an increase in income from community operations of $1,095,000, an increase in interest and dividend income of $961,000 and a decrease in general and administrative expenses of $344,000 for the year

ended December 31, 2008 as compared to the year ended December 31, 2007.
Management is continuing to seek communities for acquisition, but the current acquisition environment is very competitive.

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 rising unemployment rate, 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.

The Company has approximately $3,000,000 in cash, $22,000,000 in REIT securities, and $3,000,000 available on its unsecured line of credit as of December 31, 2008. The Company believes that funds generated from operations and the DRIP, the funds available on the line of credit, together with the ability to finance and refinance its properties will provide sufficient funds to adequately meet its obligations over the next year.

See PART I, Item 1- Business and Item 1A - Risk Factors for a more complete discussion of the economic and industry-wide factors relevant to the Company, the Company's lines of business and principal products and services, and the opportunities, challenges and risks on which the Company is focused.

Significant Accounting Policies and Estimates

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the Company's consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Significant accounting policies are defined as those that involve significant judgment and potentially could result in materially different results under different assumptions and conditions. Management believes the following critical accounting policies are affected by our more significant judgments and estimates used in the preparation of the Company's consolidated financial statements. For a detailed description of these and other accounting policies, see Note 2 in the notes to the Company's consolidated financial statements included in this Form 10-K.

Real Estate Investments

The Company applies Financial Accounting Standards Board Statement No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets", (Statement 144) to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded.

Investments in non-real estate assets consist primarily of marketable securities. Management individually reviews and evaluates our marketable securities for impairment on an annual basis or when events or circumstances occur. Management considers, among other things, credit aspects of the issuer, amount of decline in fair value over

cost and length of time in a continuous loss position. If a decline in fair value is determined to be other than temporary, an impairment charge is recognized in earnings and the cost basis of the individual security is written down to fair value as the new cost basis.

The Company's securities consist primarily of debt securities and common and preferred stock of other REITs and public companies in the manufactured housing sector. These securities are all publicly-traded and purchased on the open market, through private transactions or through dividend reinvestment plans.
These securities are classified among three categories: Held-to-maturity, trading and available-for-sale. As of December 31, 2008 and 2007, the Company's securities are all classified as available-for-sale and are carried at fair value based upon quoted market prices. Gains or losses on the sale of securities are based on identifiable cost and are accounted for on a trade date basis. Unrealized holding gains and losses are excluded from earnings and reported as a separate component of Shareholders' Equity until realized.

Other

Estimates are used when accounting for the allowance for doubtful accounts for our rents and loans receivable, potentially excess and obsolete inventory and contingent liabilities, among others. These estimates are susceptible to change and actual results could differ from these estimates. The effects of changes in these estimates are recognized in the period they are determined.

Results of Operations

2008 vs. 2007

Rental and related income increased from $23,997,178 for the year ended December 31, 2007 to $25,542,745 for the year ended December 31, 2008, or approximately 6%, primarily due to rental increases to residents and an increase in home rental income. During 2008, the Company was able to obtain average rent increases of approximately 5%.

Occupancy, as well as the ability to increase rental rates, directly affects revenues. The Company's occupancy rate has decreased from 81% in 2007 to 80% in 2008. This decline included 34 expansions sites placed in service in the fourth quarter. The Company continues to evaluate further expansion at selected communities in order to increase the number of available sites, obtain efficiencies and enhance shareholder value. The Company has faced many challenges in filling vacant homesites. Despite selling approximately 180 newer homes into our communities, our occupancy declined by 69 sites. Approximately 250 homes left the communities for various reasons, including demolished as obsolete. Relatively low interest rates have continued to make site-built housing more accessible. Attractive apartment rental deals continue to hinder occupancy advances.

Sales of manufactured homes decreased from $12,672,844 for the year ended December 31, 2007 to $9,560,912 for the year ended December 31, 2008, or 25%.
Cost of sales of manufactured homes decreased from $10,371,404 for the year ended December 31, 2007 to $8,225,464 for the year ended December 31, 2008, or 21%. Selling expenses decreased from $1,712,257 for the year ended December 31, 2007 to $1,381,135 for the year ended December 31, 2008, or 19%. Income from the sales operations (defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) decreased from income of $589,183 for the year ended December 31, 2007 to loss of $45,687 for the year ended December 31, 2008, or 108%. This decrease was primarily due to a decrease in sales. Adverse conditions have existed in the manufactured housing industry and the broader housing market in the U.S. for several years. The turmoil in the economy and the financial markets, the inability of our customers to sell their current homes and the decline in consumer confidence have negatively impacted our sales and our gross profit percentage. The gross profit percentage decreased from 18% for the year ended December 31, 2007 to 14% for the year ended December 31, 2008. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of the communities.

Interest and dividend income increased from $3,357,524 for the year ended December 31, 2007 to $4,318,512 for the year ended December 31, 2008, or 29%.
The increase was due mainly to a higher balance of manufactured home notes receivable and to higher invested fund balances and yields on securities. The average balance of notes receivable at December 31, 2008 and 2007 was $21,838,734 and $18,865,463, respectively. The

average balance of securities at December 31, 2008 and 2007 was $22,549,152 and $20,715,913. The Company's weighted-average yield on the securities portfolio was approximately 11% and 8% at December 31, 2008 and 2007, respectively.

(Loss) Gain on securities transactions, net consists of the following:

                                                   2008            2007

Gross realized gains                        $    22,379     $   362,626
Gross realized losses                          (30,965)        (98,951)
Net loss on closed futures contracts          (304,088)       (704,509)
Unrealized gain on open futures contracts           -0-          40,781
Impairment loss                             (2,548,130)       (998,324)

Total Loss on Securities Transactions, net ($2,860,804) ($1,398,377)

Loss on securities transactions, net increased from $1,398,377 for the year ended December 31, 2007 to $2,860,804 for the year ended December 31, 2008.
This was due primarily to the write-down of the carrying value of nine securities which were considered other than temporarily impaired. The Company has unrealized losses of $5,671,361 in its securities portfolio as of December 31, 2008. Additional impairment losses may be recognized if the securities market remains at current levels and the financial results of the underlying companies deteriorate. The securities market has recently been driven to inordinately low prices and high yields. We believe this to be the result of indiscriminate selling and not the result of normal pricing considerations. The dividends received from our securities investments continue to meet our expectations. It is our intent to hold these securities long-term and anticipate realizing satisfactory returns. As the credit markets begin to function again, more efficient pricing should return to the securities markets.

Community operating expenses increased from $12,633,042 for the year ended December 31, 2007 to $13,083,959 for the year ended December 31, 2008, or 4%.
This was primarily as a result of expansions completed during 2007 and 2008 and an increase in sewer expense and health insurance.

General and administrative expenses decreased from $3,583,594 for the year ended December 31, 2007 to $3,239,882 for the year ended December 31, 2008, or 10%.
This was primarily as a result of a decrease in income and franchise taxes. The Company is continuing to expand its operations. Total assets have increased from approximately $94,000,000 as of December 31, 2003 to approximately $138,000,000 as of December 31, 2008.

Interest expense increased from $4,171,109 for the year ended December 31, 2007 to $4,957,437 for the year ended December 31, 2008, or 19%. This was primarily as a result of an increase in mortgages payable and the change in fair value of the Company's interest rate swaps. The change in fair value of the Company's interest rate swaps increased interest expense by approximately $327,000 in 2008 and $467,000 in 2007. Additionally, there was an increase in the average balance of our loans payable. The average balance of our loans payable amounted to approximately $20,300,000 and $12,600,000 in 2008 and 2007, respectively.
Interest capitalized on construction in progress amounted to $315,985 and $378,030 for 2008 and 2007, respectively.

Depreciation expense increased from $3,658,236 for the year ended December 31, 2007 to $4,072,570 for the year ended December 31, 2008, or 11%, primarily as a result of the new expansions placed in service in 2007 and 2008.

Amortization of financing costs remained relatively stable for the year ended December 31, 2008 as compared to the year ended December 31, 2007.

Gain on sale of investment property and equipment decreased from $99,318 for the year ended December 31, 2007 to $14,661 for the year ended December 31, 2008, or 85%. This was primarily as a result of the sale of older rental units to existing residents during 2007.

Income from community operations (defined as rental and related income less community operating expenses) increased from $11,364,136 for the year ended December 31, 2007 to $12,458,786, an increase of approximately $1,095,000 or 10%.

2007 vs. 2006

Rental and related income increased from $23,186,485 for the year ended December 31, 2006 to $23,997,178 for the year ended December 31, 2007, or approximately 4%, primarily due to an increase in occupied sites, the acquisition of a new community during 2006 and rental increases to residents. During 2007, the Company was able to obtain average rent increases of approximately 4%.

Occupancy as well as the ability to increase rental rates directly affects revenues. The Company's occupancy rate has decreased from 82% in 2006 to 81% in 2007. This decline was the result of expansions sites placed in service in the fourth quarter. The Company continues to evaluate further expansion at selected communities in order to increase the number of available sites, obtain efficiencies and enhance shareholder value. The Company has faced many challenges in filling vacant homesites. Despite selling approximately 240 newer homes into our communities, we only had a net increase in occupancy of approximately 60 sites. These homes left the communities for various reasons, including demolished as obsolete. Relatively low interest rates have continued to make site-built housing more accessible. Attractive apartment rental deals continue to hinder occupancy advances.

Sales of manufactured homes decreased from $15,799,748 for the year ended December 31, 2006 to $12,672,844 for the year ended December 31, 2007, or 20%.
Cost of sales of manufactured homes decreased from $12,433,851 for the year ended December 31, 2006 to $10,371,404 for the year ended December 31, 2007, or 17%. Selling expenses decreased from $2,258,746 for the year ended December 31, 2006 to $1,712,257 for the year ended December 31, 2007, or 24%. Income from the sales operations (defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) decreased from $1,107,151 for the year ended December 31, 2005 to $589,183 for the year ended December 31, 2007, or 47%. This decrease was primarily due to a decrease in sales. Sales in 2006 included sales into our expansions at Fairview Manor and Highland Estates, which sold out during 2006. These sales also commanded a higher gross profit percentage. The gross profit percentage decreased from 21.3% for the year ended December 31, 2006 to 18.2% for the year ended December 31, 2007. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of the communities.

Interest and dividend income increased from $3,156,255 for the year ended December 31, 2006 to $3,357,524 for the year ended December 31, 2007, or 6%.
This was primarily as a result of an increase in interest income due to a higher balance of notes receivable. This was partially offset by a decrease in dividend income during 2007.

(Loss) Gain on securities transactions, net consists of the following:

                                                           2007          2006

Gross realized gains                                $   362,626   $ 1,029,759
Gross realized losses                                  (98,951)      (74,048)
Net (loss) gain on closed futures contracts           (704,509)      (29,443)
Unrealized gain (loss) on open futures contracts         40,781       163,828
Impairment loss                                       (998,324)     (823,249)

Total (Loss) Gain on Securities Transactions, net  ($1,398,377)     $ 266,847

(Loss) Gain on securities transactions, net decreased from a gain of $266,847 for the year ended December 31, 2006 to a loss of $1,398,377 for the year ended December 31, 2007. This was due primarily to an increase in the loss on closed futures contracts of $675,066 and to a decrease in gross realized gains of $667,133 as a result of the Company's decision to realize a portion of the unrealized gain in the securities portfolio existing during 2006.

During 2007 and 2006, the Company also recognized a loss of $998,324 and $823,249, respectively, due to write-downs to the carrying value of securities available for sale which were considered other than temporarily impaired.

Community operating expenses increased from $12,274,363 for the year ended December 31, 2006 to $12,633,042 for the year ended December 31, 2007, or 3%.
This was primarily as a result of the acquisition of a new community in 2006.

General and administrative expenses increased from $3,068,275 for the year ended December 31, 2006 to $3,583,594 for the year ended December 31, 2007, or 17%.
This was primarily as a result of an increase in personnel costs and franchise taxes. The Company is continuing to expand its operations. Total assets have increased from approximately $94,000,000 as of December 31, 2003 to approximately $137,000,000 as of December 31, 2007.

Interest expense increased from $3,273,720 for the year ended December 31, 2006 to $4,171,109 for the year ended December 31, 2007, or 27%. This was primarily as a result of an increase in mortgages payable and the change in fair value of the Company's interest rate swaps. The change in fair value of the Company's interest rate swaps increased interest expense by approximately $467,000 in 2007 and $68,000 in 2006. Additionally, there was an increase in the average balance of our loans payable. The average balance of our loans payable amounted to approximately $12,600,000 and $7,900,000 in 2007 and 2006, respectively. . . .