UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549



                            FORM 10-Q
(Mark One)

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

        For the quarterly period ended October 2, 1998 or

[   ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

        For the transition period from _______ to _______
                                
                Commission File Number:  0-21204
                                
                                
                   SOUTHERN ENERGY HOMES, INC.
     (Exact name of registrant as specified in its charter)

   Delaware                                        63-1083246
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                    Identification No.)



Highway 41 North, P.O. Box 390, Addison, Alabama     35540
(Address of principal executive offices)          (Zip Code)

                         (256) 747-8589
      (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant:  (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                       Yes  [X]   No  [  ]

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.


   12,638,590 shares of Common Stock, $.0001 par value, as of
                        November 13, 1998


          SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES


                              INDEX

                                                       Page
PART I    FINANCIAL INFORMATION:

Item 1    Financial Statements

          Consolidated Condensed Balance Sheets,
          October 2, 1998 and January 2, 19              2

          Consolidated Condensed Statements of Operations -
          Thirteen Weeks Ended October 2, 1998 and October
          3, 1997 and Thirty-nine Weeks Ended October 2,
          1998 and October 3, 1997                       3

          Consolidated Condensed Statements of Cash Flows -
          Thirty-nine Weeks Ended October 2, 1998 and
          October 3, 1997                                4

          Notes to Consolidated Condensed Financial
          Statements                                     5

Item 2    Management's Discussion and Analysis of Financial
          Condition and Results of Operations            8

PART II   OTHER INFORMATION                             12

Item 1    Legal Proceedings

Item 5    Other Information

Item 6    Exhibits and Reports on Form 8-K


          SIGNATURES                                   15

I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

          SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
              CONSOLIDATED CONDENSED BALANCE SHEETS
                           (Unaudited)
                                       October 2,       January 2,
                                             1998             1998
                              ASSETS
CURRENT ASSETS:                                      
   Cash and cash equivalents         $ 12,509,000     $ 17,676,000
   Accounts receivable (less                                      
allowance for doubtful accounts of                                
$209,000 and $180,000, respectively)   26,723,000       22,399,000
   Installment contracts receivable                               
   - current                              184,000          165,000
   Inventories                         37,360,000       28,479,000
   Deferred tax benefits                1,821,000        1,816,000
   Prepayments and other                1,373,000        1,134,000
                                       79,970,000       71,669,000
                                                                  
PROPERTY AND EQUIPMENT:                                           
   Property and equipment, at cost     31,110,000       28,982,000
   Less - accumulated depreciation      8,880,000        7,130,000
                                       22,230,000       21,852,000
                                                                  
INTANGIBLES AND OTHER ASSETS                                      
   Installment contracts receivable,                              
   less allowance for credit
   losses of $470,000 and $696,000,                               
   respectively                        10,775,000        9,673,000
   Goodwill                            15,261,000       14,258,000
   Non-compete agreements                 626,000          421,000
   Organization and pre-operating                                 
   costs                                1,097,000          825,000
   Other assets                         5,295,000        4,555,000
                                       33,054,000       29,732,000
                                     $135,254,000     $123,253,000
                                                     
               LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:                                 
   Notes payable                      $ 24,632,000   $$ 15,932,000
   Current maturities of long-term                                
     debt                                  544,000       1,106,000
   Accounts payable                     10,185,000       3,449,000
   Accrued liabilities                  20,483,000      18,279,000
                                        55,844,000      38,766,000
LONG-TERM DEBT                           4,398,000       4,720,000
                                                                  
STOCKHOLDERS' EQUITY:                                             
   Preferred stock, $.0001 par                                    
    value, 1,000,000 shares                                       
    authorized, none outstanding                 -               -
   Common stock, $.0001 par value,                                
    40,000,000 shares authorized,                                 
    15,638,890 issued at October 2,                               
    1998 and 15,572,326 shares                                    
    issued at January 2, 1998                2,000           2,000
   Treasury stock, at cost,                                       
    2,637,800 shares at October 2,                                  
    1998 and 1,122,100 shares at                                  
    January 2, 1998                    (24,090,000)    (10,201,000)
   Capital in excess of par             37,669,000      37,215,000
   Retained earnings                    61,431,000      52,751,000
                                        75,012,000      79,767,000
                                      $135,254,000    $123,253,000

The accompanying notes are an integral part of these consolidated
condensed financial statements.



          SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
         CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                           (Unaudited)
                                
                                
                       Thirteen Weeks Ended      Thirty-nine WeeksEnded
                      October 2,   October 3,   October 2,   October 3,
                           1998         1997         1998         1997
                                                                       
Net  revenues        $82,120,000  $75,737,000 $231,341,000 $231,356,000
                                                                       
Cost of sales         67,751,000   63,642,000  189,010,000  194,840,000
                                                                       
   Gross profit       14,369,000   12,095,000   42,331,000   36,516,000
                                                                       
Operating Expenses:                                                    
 Selling, general                                                      
 and administrative   10,026,000    5,774,000   26,891,000   17,955,000
 Non-recurring                                                         
 charges                       -            -            -    2,146,000
 Amortization of                                                       
 intangibles             154,000      202,000      464,000      636,000
                      10,180,000    5,976,000   27,355,000   20,737,000
                                                                       
   Operating income    4,189,000    6,119,000   14,976,000   15,779,000
                                                                       
Interest expense         685,000      416,000    1,848,000    1,010,000
Interest income          253,000      137,000      728,000      208,000
                                                                       
   Income before                                                       
   income taxes        3,757,000    5,840,000   13,856,000   14,977,000
                                                                       
Provision for                                              
income taxes           1,419,000    2,234,000    5,176,000    5,751,000
                                                                       
   Net income        $ 2,338,000  $ 3,606,000  $ 8,680,000 $ 9 ,226,000
                                                              
Net income per                                                         
common share:
Basic                 $     0.18   $     0.25    $    0.63   $     0.61
Diluted               $     0.18   $     0.24    $    0.63   $     0.60
                                                                       
Weighted average                                                       
number of common
shares:
Basic                 13,296,029   14,693,233   13,698,468   15,161,050
Diluted               13,341,276   14,822,184   13,793,985   15,317,807












The accompanying notes are an integral part of these consolidated
financial statements.

             SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
            CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                              (Unaudited)
                                             Thirty-nine Weeks Ended
                                           October 2,     October 3,
                                           1998           1997
Operating activities:                                     
   Net income                              $  8,680,000   $  9,226,000
   Adjustments to reconcile net income to                 
   net cash used in                                       
    Operating activities:                                 
     Gain on sale of installment                      -       (775,000)
contracts                                             -      2,146,000
       Non-recurring charge
       Equity income of joint ventures         (737,000)              -
       Depreciation of property and                       
        equipment                             2,133,000      1,474,000
       Amortization of intangibles              688,000        636,000
       (Credit) for deferred income taxes        (5,000)      (464,000)
       Gain on sale of property and                       
        equipment                               (34,000)             -
       Provision (credit) for doubtful                     
        accounts                                 58,000        (39,000)
       Provision (credit) for credit                      
        losses                                  180,000       (100,000)
       Origination of installment                         
        contracts                            (1,707,000)      (543,000)
       Principal collected on originated                  
        installment contracts                   406,000        482,000
       Change in assets and liabilities,                  
        net of effect from purchase of
        subsidiaries:
         Inventories                         (2,223,000)        98,000
         Accounts receivable                 (4,415,000)   (11,907,000)
         Prepayments and other                 (237,000)      (132,000)
         Other assets                            (3,000)             -
         Accounts payable                     6,736,000      4,252,000
         Accrued liabilities                  2,203,000       (817,000)
                                                          
          Net cash provided by (used in)                  
           operating activities              11,723,000      3,537,000
                                                          
Investing activities:                                     
   Purchase of subsidiary, net of cash                    
    acquired                                 (7,187,000)             -
   Capital expenditures                      (1,821,000)    (4,664,000)
   Investment in joint ventures                       -     (3,511,000)
   Increase in organizational and pre-                     
    operating costs                            (488,000)             -
   Proceeds from sale of property and                     
    equipment                                    34,000              -
                                                          
           Net cash provided by (used in)                 
            investing activities             (9,462,000)    (8,175,000)
                                                          
Financing activities:                                     
     Purchases of treasury stock            (13,889,000)    (8,296,000)
     Net borrowings on notes payable          6,891,000         80,000
     Repayments on long-term debt              (884,000)      (252,000)
     Borrowings on long-term debt                     -      5,633,000
     Proceeds from exercise of stock                      
      options                                   454,000        182,000
     Proceeds from sale of installment  
      contracts                                       -     16,736,000
         Net cash provided by (used in)                 
            financing activities             (7,428,000)    14,083,000
                                                          
Net increase (decrease) in cash and cash                  
 equivalents                                 (5,167,000)     9,445,000
                                                          
Cash and cash equivalents at the                          
 beginning of period                         17,676,000      5,299,000
                                                           
Cash and cash equivalents at the end of                   
 period                                    $ 12,509,000    $14,754,000
Supplemental cash flow information:                       
     Cash paid for interest                 $ 1,882,000      $ 909,000
     Cash paid for income taxes             $ 3,885,000    $ 6,621,000



The accompanying notes are an integral part of these consolidated
condensed financial statements.

          SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                
1.  BASIS OF PRESENTATION:
The consolidated condensed balance sheet as of January 2, 1998,
which has been derived from audited financial statements, and the
unaudited interim consolidated condensed financial statements as
of October 2, 1998, have been prepared by the Company without
audit, but in the opinion of management reflect all adjustments
(which include only normal recurring adjustments) necessary for
the fair presentation of the information set forth therein.
Results of operations for the interim 1998 period is not
necessarily indicative of results expected for the full year.
While certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities
and Exchange Commission, the Company believes that the
disclosures herein are adequate to make the information presented
not misleading.  These financial statements should be read in
conjunction with the audited financial statements and the notes
thereto included in the Company's Annual Report to Stockholders
for the fiscal year ended January 2, 1998.

2.  RECLASSIFICATIONS:
In the second quarter of 1998, the Company reclassified several
accounts.  Prior period amounts have been reclassified to conform
with the 1998 presentation.  There was no effect on net income or
stockholder's equity as a result of these reclassifications.

3.  INVENTORIES:
Inventories are valued at first-in, first-out ("FIFO") cost,
which is not in excess of market.  An analysis of inventories
follows:

                                         October 2,      January 2,
                                               1998            1998
                                                    
                                                                   
                     Raw materials       $11,580,000    $  9,498,000
                     Work in progress      1,107,000       1,089,000
                     Finished goods       24,673,000      17,892,000
                                         $37,360,000     $28,479,000

4.  NET INCOME PER SHARE:

                                          Shares          
                                        Available         
                           Net          to Common       Earning
                         Income       Shareholders     Per Share
                                                                                
   Thirteen Weeks                                            
   Ended
   October 2, 1998                                           
     Basic              $2,338,000    13,296,029         $0.18
     Dilutive effect                                
     of options issued           -        45,247            -
      Diluted           $2,338,000    13,341,276         $0.18
                                                        
   October 3, 1997                                       
     Basic              $3,606,000    14,693,233         $0.25
     Dilutive effect                                
     of options issued           -       128,951         (0.01)
      Diluted           $3,606,000    14,822,184         $0.24
                                                     
   Thirty-Nine Weeks                                             
   Ended
   October 2, 1998                                               
     Basic              $8,680,000   13,698,468          $0.63
     Dilutive effect                                     
     of options issued           -       95,517             -
     Diluted            $8,680,000    13,793,985         $0.63
                                                             
   October 2, 1997                                           
     Basic              $9,226,000   15,161,050          $0.61
     Dilutive effect                                     
     of options issued           -      156,757          (0.01)
     Diluted            $9,226,000   15,317,807          $0.60
                                                             

5.  PENDING ACCOUNTING PRONOUNCEMENTS:
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-5, Reporting
on the Costs of Start-Up Activities, which is effective for
fiscal years beginning after December 15, 1998.  This SOP
provides guidance on the financial reporting of start-up costs
and organization costs and generally requires such costs to be
expensed as incurred.  Initial application of this SOP will
require previously deferred costs to be expensed and such change
will be reported as the cumulative effect of a change in
accounting principle.

6.  BUSINESS COMBINATIONS:
During 1998, the Company completed the following acquisitions (in
millions):

                         Fair                     
                       Value of                      Purchase Price
                        Assets     Intangibles  Liabilities    Consideration
                       Acquired      Recorded     Assumed           Given
  Date      Seller                                       
                                                                       
February  U.S. Homes                                                   
1998      of Savannah      $0.8        $0.0       $0.8             $0.0
April     Rainbow                                                      
1998      Homes, Inc.       3.5         1.6        0.0              5.1
May  1998 Hospitality                                                  
          Housing                                                      
          Outlet Inc.                                                  
          and                                                          
          Foothills                                                    
          Housing,                                               
          Inc.              0.8         0.1        0.7              0.2
July 1998 Cedar Creek                                                  
          Homes, LLC        0.3         0.1          -              0.4
July 1998 Ken & Tina                                                   
          Earp              0.2           -          -              0.2
September Family                                                       
1998      Housing,                                                     
          Inc.              0.6         0.1          -              0.7
September Baw, Inc.                                                    
1998                        0.6           -          -              0.6
                           $6.8        $1.9       $1.5             $7.2

The above acquisitions resulted in the purchase of 15 retail
sales centers.  All acquisitions were accounted for under the
purchase method of accounting; thus the consolidated condensed
financial statements for the interim period reflect the
operations of the businesses acquired from the dates of
acquisition.  Aggregate consideration given for all acquisitions
during 1998 consisted of approximately $7.2 million in cash and
liabilities assumed amounted to $1.5 million.  Total intangibles
recorded consisted of $0.3 million in non-compete agreements and
$1.6 million in goodwill.  The Company amortizes goodwill over 30
years and non-competes over the life of the agreements which are
generally 4 to 10 years.

7.  REPURCHASE AGREEMENTS:
It is customary practice for companies in the manufactured home
industry to enter into repurchase agreements with financial
institutions which provide financing to independent dealers.
Generally, the agreements provide for the repurchase of the
manufactured homes from the financing institution in the event of
repossession upon an independent dealer's default.  The Company's
contingent liability under such agreements is approximately $85.0
million as of October 2, 1998.  Losses experienced under these
agreements have not been significant and, in the opinion of
management, any future losses under these agreements should not
have a material effect on the accompanying financial statements.

8.  LEGAL PROCEEDINGS:
The Company has entered into a contract with Gesellschoft fur
Bauen Und Wohnen Hannover MbH ("GBH"), a German housing
authority, which provided for the construction of two modular
home projects.       GBH has informed the Company that it has
chosen a local company to complete the second project. GBH
originally indicated that the first project was completed
satisfactorily, but subsequently asserted warranty claims against
the Company.  GBH also claims the Company is responsible for its
additional costs on the second project.  The Company claims GBH
is withholding monies due it from the first project and disputes
its liability for the warranty claims on the first project and
the extra costs on the second project.  GBH attempted on March
26, 1997 to draw on a Company letter of credit but an Alabama
state court issued a temporary restraining order enjoining
payment on the letter of credit.  In January, 1998, the Alabama
Supreme Court, without ruling on the merits of whether GBH was
committing fraud by drawing on the letter of credit, issued an
opinion allowing GBH to draw on the letter of credit.  GBH
promptly drew on the Company's letter of credit in the amount of
$580,000.  There has not been any discovery or decision on the
merits of the underlying transaction and whether the Company has
a valid claim to recover the money paid under the letter of
credit.  After payment of the letter of credit, other than
potential warranty claims, management believes there is no other
material exposure to the Company with regard to GBH.  At this
time there is no activity of any kind by GBH to assert any claims
against the Company.

The Company has been named, along with several other manufactured
housing companies, as a defendant in a class action lawsuit filed
in Kentucky in September 1998, claiming wrongful conduct,
fraudulent misrepresentation and that manufactured housing units
are unsafe and/or dangerous for residential use.  The amount of
the damages has not been specified.  The Company believes the
claims are without merit and plans to vigorously defend itself
against these claims.  However, the outcome of the litigation can
not be predicted and such outcome could have a material adverse
effect on the Company.

The Company is a party to various other legal proceedings
incidental to its business.  The majority of these legal
proceedings relate to employment matters or product warranty
liability claims for which management believes adequate reserves
are maintained.  In the opinion of management, after consultation
with legal counsel, the ultimate liability, if any, with respect
to these proceedings will not materially affect the financial
position or results of operations of the Company however, the
ultimate resolution of these matters, which could occur within
one year, could result in excess of the amounts reserved.

9. TREASURY STOCK REPURCHASE:
In October 1998, the Company extended its stock repurchase
program for an additional twelve months and increased the number
of shares eligible for purchase from 3,000,000 to 4,000,000.
From the inception of the program to November 13, 1998, the
Company has repurchased 3,000,300 shares at a cost of
$26,282,000, or an average cost of  $8.76 per share.  The Company
paid for these purchases out of available cash.

Item 2.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
Thirty-nine weeks and thirteen weeks ended October 2, 1998 as
compared with thirty-nine and thirteen weeks ended October 3,
1997.

Net Revenues
Total net revenues (gross sales less volume discounts, returns
and allowances plus finance revenues) for the thirty-nine weeks
ended October 2, 1998 were $231.3 million, as compared with
$231.4 million in the prior year period.  For the thirteen weeks
ended October 2, 1998, total net revenues  were $82.1 million, up
8.4% from $75.7 million for the comparable period a year ago.

Net revenues from the wholesale sale of manufactured homes were
$173.1 million for the thirty-nine weeks ended October 2, 1998,
as compared to $194.3 million for the prior year period, which
represented a decrease of 10.9%. The decrease in total
manufacturing revenue was primarily attributable to a decrease in
the number of homes sold.  Total homes shipped in the thirty-nine
weeks ended October 2, 1998 was 6,786, down 6.4%, from the
comparable prior year.  The decrease in homes sold in the thirty-
nine weeks ended October 2, 1998 was attributable to decreases in
demand for manufactured homes at the wholesale level and to the
closing of the Company's Pennsylvania facility in the fall of
1997. For the thirteen weeks ended October 2, 1998, manufactured
housing segment revenues were $60.2 million, a decrease of 3.5%
from revenues of $62.4 million for the prior year period.  The
decrease in total manufacturing revenue was primarily
attributable to a decrease in the average wholesale price per
home. Total homes shipped in the thirteen weeks ended October 2,
1998 were 2,343, up .1%, from the comparable prior year.  The
average wholesale price per home for the thirty-nine and thirteen
weeks ended October 2, 1998 was $27,408 and $27,525,
respectively, up .4% and down 1.5%, respectively, from the
average of $27,301 and $27,931 for the comparable prior year
periods.

Net revenues from the retail sale of manufactured homes were
$57.3 million for the thirty-nine weeks ended October 2, 1998, as
compared to $35.7 million for the prior year period, which
represented an increase of 60.5%.  For the thirteen weeks ended
October 2, 1998, retail revenues were $21.6 million, an increase
of 68.8% from revenues of $12.8 million for the prior year
period.  Total retail homes sold in the thirty-nine and thirteen
weeks ended October 2, 1998 amounted to 1,681 and 643,
respectively, up 66.4% and 61.2% respectively, from the number of
homes sold in the comparable prior year periods.  The increase in
retail revenues and retail homes sold was attributable to an
increase in the total number of retail centers from 12 in each of
the comparable prior year periods to a total of 34 at October 2,
1998.

Revenues from the Company's retail finance subsidiary were
$858,000 and $290,000, respectively, for the thirty-nine and
thirteen weeks ended October 2, 1998, as compared with revenues
of $1.4 million and $463,000 for the comparable prior year
periods.  The decreases were attributable to the decreased
lending activity by the Company's wholly owned subsidiary, Wenco
Finance, Inc. ("Wenco Finance").  Wenco Finance originated and
serviced consumer loans primarily for homes manufactured by the
Company.  In February 1997, the Company formed a joint venture
with 21st Century Mortgage Corporation ("21st Century").  The
joint venture, Wenco 21, continues to offer consumer financing
for homes manufactured by the Company as well as for other homes
sold through its retail centers and independent dealers.  In
light of the shift in consumer finance activities to Wenco 21,
Wenco Finance has limited its loan origination activities to
previously repossessed homes.

Gross Profit
Gross profit consists of net revenues less the cost of sales,
which includes labor, materials, and overhead. Gross profit for
the thirty-nine weeks ended October 2, 1998 increased to $42.3
million, or 18.3% of net revenues, from $36.5 million, or 15.8%
of net revenues, in the prior year period.  For the thirteen
weeks ended October 2, 1998 gross profit was $14.4 million, or
17.5% of net revenues, as compared with $12.1 million, or 16.0%
of net revenues in the prior year period.  The increases in gross
profit percentages are attributable to increased sales from the
Company's retail segment, which have a higher gross margin than
sales to independent dealers, and to higher gross margins on
wholesale sales attributable in part to favorable raw material
prices.

Selling, General and Administrative Expenses
Selling, general and administrative expenses include primarily
sales commissions, advertising expenses, freight costs, salaries
for support personnel, administrative compensation, insurance
costs, and professional fees. Selling, general and administrative
expenses were $26.9 million, or 11.6% of net revenues, during the
thirty-nine weeks ended October 2, 1998, as compared with $18.0
million, or 7.8% of net revenues, for the same period of the
prior year.  For the thirteen weeks ended October 2, 1998,
selling, general and administrative expenses were $10.0 million,
or 12.2% of net revenues, as compared with $5.8 million, or 7.6%
of net revenues, for the same period of the prior year.  The
increase in selling, general and administrative expenses was
attributable primarily to the higher level of selling expenses
generally associated with the Company's retail operation, general
salary increases and the addition of new employees who were hired
in order to staff retail operations.

Non-Recurring Charge
During the second quarter of 1997, the Company recorded a $2.1
million non-recurring charge in connection with its decision to
close its manufactured housing facility located in Pennsylvania.
The decision was based primarily on changes in local market
conditions and operating results of the facility.  The impact of
the facility on the operating income of the Company was
immaterial during the thirty-nine weeks ended October 3, 1997.

Interest Expense
Interest expense for the thirty-nine weeks ended October 2, 1998
was $1.8 million, as compared with $1.0 million in the prior year
period.  For the thirteen weeks ended October 2, 1998, interest
expense was $685,000, as compared with $416,000 in the prior year
period.  The increase in interest expense in the current year
periods was a result of increased notes payable associated with
the floor plan financing of the Company's retail inventory.

Interest Income
Interest income for the thirty-nine weeks ended October 2, 1998
was $728,000, as compared with $208,000 in the comparable prior
year period.  For the thirteen weeks ended October 2, 1998,
interest income was $253,000, as compared with $137,000 in the
prior year period.  The increase in interest income in the
current year periods reflects higher average cash and cash
equivalent balances.

Provision for Income Taxes
Income taxes are provided for based on the tax effect of revenue
and expense transactions included in the determination of pre-tax
book income.  Income tax expense for the thirty-nine weeks ended
October 2, 1998 was $5.2 million, or an effective tax rate of
37.4%, as compared with $5.8 million, or an effective tax rate
38.4% in the prior year period.  For the thirteen weeks ended
October 2, 1998, income tax expense was $1.4 million, or an
effective tax rate of 37.8%, as compared with $2.2 million, or an
effective tax rate of 38.3% in the prior year periods.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows
During the thirty-nine weeks ended October 2, 1998, the Company's
cash provided by operations was approximately $11.7 million.
Cash was provided by net income of $8.7 million and increased
accounts payable and accrued liabilities totaling $8.9 million.
These amounts were partially offset by cash used in operations,
which included increased accounts receivable, prepayments and
other, and inventory totaling $6.9 million and a decrease in
originations of installment contracts of $1.7 million.  Other
cash flows included purchases of subsidiaries for $7.2 million,
capital expenditures of $1.8 million, increased organizational
and pre-operating expenses of $488,000, purchase of treasury
stock of $13.9 million, increased borrowings on notes payable of
$6.9 million, repayments of long-term debt of $884,000 and
proceeds from exercise of stock options of $455,000.
During the thirty-nine weeks ended October 3, 1997, the Company's
cash provided by operations was approximately $3.5 million.  Cash
used by operations included increased accounts receivable,
prepayments and other, and inventory totaling $11.9 million, a
decrease in accrued liabilities of $817,000, and originations of
installment contracts of $543,000.  These amounts were partially
offset by net income, after a $2.1 million non-recurring charge,
of $9.2 million and increased accounts payable of $4.3 million.
In addition to cash provided by operating activities, other
significant cash flows included capital expenditures of $4.7
million, investment in joint ventures totaling $3.5 million, long
term borrowings of $5.6 million, proceeds from the sale of
installment contracts of $16.7 million and purchase of treasury
stock of $8.3 million.

At October 2, 1998, the Company's net working capital was $24.1
million, including $12.5 million in cash and cash equivalents, as
compared with $32.9 million at January 2, 1998, including $17.7
million in cash and cash equivalents.  The decrease in net
working capital was primarily a result of a decrease in cash and
cash equivalents of $5.2 million, and increased accrued
liabilities of $2.1million, partially offset by decreased notes
payable of approximately $8.7 million, increased accounts payable
of $6.7 million, increased accounts receivable of $4.4 million,
and increased inventories of $8.8 million.  The Company also has
a $25.0 million unsecured line of credit which is renewable
annually and bears interest at the London Interbank Offered Rate
("LIBOR") plus 1.5%.  The Company's ability to draw upon this
line of credit is dependent upon meeting certain financial ratios
and covenants.  The Company has $7,000,000 in borrowings
outstanding under this line at October 2, 1998.

Substantially all of the Company's dealers finance their
purchases through "floor-plan" arrangements under which a
financial institution provides the dealer with a loan for the
purchase price of the home and maintains a security interest in
the home as collateral.  In connection with a floor-plan
agreement, the financial institution which provides the
independent dealer financing customarily requires the Company to
enter into a separate repurchase agreement with the financial
institution under which the Company is obligated, upon default by
the dealer, to repurchase the homes at the Company's original
invoice price plus certain administrative and shipping expenses
less any principal payments made by the independent dealer.  At
October 2, 1998, the Company's contingent repurchase liability
under floor-plan financing arrangements was approximately $85.0
million.  While homes that have been repurchased by the Company
under floor-plan financing arrangements are usually sold to other
dealers and losses experienced to date under these arrangements
have been insignificant, no assurance can be given that the
Company will be able to sell to other dealers homes which it may
be obligated to repurchase in the future under such floor-plan
financing arrangements or that the Company will not suffer losses
with respect to, and as a consequence of, those arrangements.

Expansion
In April 1998, the Company acquired substantially all of the
assets of a manufactured housing retailer in Kentucky and West
Virginia at a purchase price of approximately $5.1 million.  In
May 1998, the Company acquired substantially all of the assets of
a manufactured housing retailer in South Carolina at a purchase
price of approximately $200,000.  In July 1998, the Company
acquired substantially all the assets of a manufactured housing
retailer in Kentucky at a purchase price of approximately
$460,000.  Also in July 1998, the Company acquired property in
Kentucky at a purchase price of  $220,000.  In September 1998,
the Company acquired substantially all the assets of two
manufactured housing retailers one in Tennessee and one in
Georgia at a purchase price of approximately $1.3 million.  In
the foregoing acquisitions, the Company assumed liabilities of
$1.5 million. See Note 6 of Notes to the Consolidated Financial
Statements.

Capital Expenditures
In October 1998, the Company approved the expenditure of $3.3
million to upgrade the Company's software programs and operating
systems.  The Company anticipates it will fund these expenditures
through a combination of equipment leasing and available cash.

Inflation
The Company believes that the relatively moderate rate of
inflation over the past few years has not had a significant
impact on its sales or profitability.  The Company has in the
past been able to pass on most of the increases in its costs by
increasing selling prices, although there can be no assurance
that the Company will be able to do so in the future.



Year 2000 Compliance
Many currently installed computer systems and software products
are coded to accept only two-digits entries in the date code
field and cannot distinguish dates after the year 2000.  These
date code fields will need to distinguish "Year 2000" dates from
earlier dates and, as a result, many companies' software and
computer systems may need to be upgraded or replaced in order to
comply with such "Year 2000" requirements.  Although the Company
is currently working to resolve the potential impact of the Year
2000 issue on the computerized systems it utilizes internally,
and with regard to its products and customers, at this time, the
Companies systems are not Year 2000 compliant.

Beginning in the fourth Quarter of 1998, the Company will
commence replacement of its current information technology system
with a new system.  The replacement, which is expected to be
completed in mid-calendar year 1999, is required to meet current
and future needs of the Company's business as well as to make
more efficient various administrative and operating functions.
Because the Company did not undertake this replacement for
reasons of Year 2000 compliance, the costs of this conversion
have not been identified as Year 2000 compliance costs.  The
current upgrading of the Company's software programs and
operating systems will cost approximately $3.3 million.  Although
the Company has not yet determined how it will fund the systems
upgrade, the Company anticipates it will fund such expenditures
through a combination of equipment leasing and available cash.
The Company believes that these new programs and systems will be
Year 2000 compliant.

The failure of the Company to make its systems Year 2000
compliant  in a timely manner will have a material adverse effect
on the Company.

The Company relies upon various vendors, utility companies,
telecommunications service companies, delivery service companies
and other service providers, which are outside of the Company's
control.  The failure of such service providers to make their
systems Year 2000 compliant could have a material adverse effect
on the Company's financial condition and results of operations.
The Company has not yet determined the extent to which the
computer systems of such service providers are Year 2000
compliant, if at all.  The failure of the Company's vendors to
make their systems Year 2000 compliant in a timely manner will
have a material adverse effect on the Company.


"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995    Forward-looking statements in this report,
including without limitation, statements relating to the adequacy
of the Company's resources, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995.  Investors are cautioned that such forward-looking
statements involve risks and uncertainties, including without
limitation: the cyclical and seasonal nature of housing markets;
the availability of financing for prospective purchasers of the
Company's homes; the amount of capital that the Company may
commit to its Wenco 21 joint venture to make available consumer
loans; the performance of the loans held by the Company's finance
subsidiary; the availability and pricing of raw materials; the
concentration of the Company's business in certain regional
markets; the Company's ability to execute and manage its
expansion plans; the availability of labor to implement those
plans; the highly competitive nature of the manufactured housing
industry; Federal, state and local regulation of the Company's
business; the Company's contingent repurchase liabilities with
respect to dealer financing; the Company's reliance on
independent dealers; the failure of the Company or its vendors to
make their systems Year 2000 compliant in a timely manner; and
other risks indicated from time to time in the Company's filings
with the Securities and Exchange Commission.


                   PART II - OTHER INFORMATION
                                
Item 1.   Legal Proceedings
The Company has entered into a contract with Gesellschoft fur
Bauen Und Wohnen Hannover MbH ("GBH"), a German housing
authority, which provided for the construction of two modular
home projects.       GBH has informed the Company that it has
chosen a local company to complete the second project. GBH
originally indicated that the first project was completed
satisfactorily, but subsequently asserted warranty claims against
the Company.  GBH also claims the Company is responsible for its
additional costs on the second project.  The Company claims GBH
is withholding monies due it from the first project and disputes
its liability for the warranty claims on the first project and
the extra costs on the second project.  GBH attempted on March
26, 1997 to draw on a Company letter of credit but an Alabama
state court issued a temporary restraining order enjoining
payment on the letter of credit.  In January, 1998, the Alabama
Supreme Court, without ruling on the merits of whether GBH was
committing fraud by drawing on the letter of credit, issued an
opinion allowing GBH to draw on the letter of credit.  GBH
promptly drew on the Company's letter of credit in the amount of
$580,000.  There has not been any discovery or decision on the
merits of the underlying transaction and whether the Company has
a valid claim to recover the money paid under the letter of
credit.  After payment of the letter of credit, other than
potential warranty claims, management believes there is no other
material exposure to the Company with regard to GBH.  At this
time there is no activity of any kind by GBH to assert any claims
against the Company.

The Company has been named, along with several other manufactured
housing companies, as a defendant in a class action lawsuit filed
in Kentucky in September 1998, claiming wrongful conduct,
fraudulent misrepresentation and that manufactured housing units
are unsafe and/or dangerous for residential use.  The amount of
the damages has not been specified.  The Company believes the
claims are without merit and plans to vigorously defend itself
against these claims.  However, the outcome of the litigation can
not be predicted and such outcome could have a material adverse
effect on the Company.

The Company is a party to various other legal proceedings
incidental to its business.  The majority of these legal
proceedings relate to employment matters or product warranty
liability claims for which management believes adequate reserves
are maintained.  In the opinion of management, after consultation
with legal counsel, the ultimate liability, if any, with respect
to these proceedings will not materially affect the financial
position or results of operations of the Company: however, the
ultimate resolution of these matters, which could occur within
one year, could result in excess of the amounts reserved.


Item 5.   Other Information
In October 1998, the Company extended its stock repurchase
program for an additional twelve months and increased the number
of shares eligible for purchase from 3,000,000 to 4,000,000.
From the inception of the program to November 13, 1998, the
Company has repurchased 3,000,300 shares at a cost of
$26,282,000, or an average cost of  $8.76 per share.  The Company
paid for these purchases out of available cash.

Item 6.   Exhibits and Reports on Form 8-K
     (a)  Exhibits
     The following Exhibits are incorporated herein by reference.
       3.1 Certificate of incorporation of the Company, as amended
           (filed as Exhibit 3.1 to the Registration Statement on Form S-3,
            Registration No. 333-32933.)
       3.2  By-Laws of the Company. (Filed as Exhibit 3.2 to the
            Registration Statement on Form S-1, Registration No. 33-57420.)
       4.1  Specimen of Stock Certificate. (Filed as Exhibit 4.1 to the
            Registration Statement on Form S-1, Registration No. 33-57420.)
       4.2  Southern Development Council, Inc. Promissory Note.  (Filed
            as Exhibit 4.10 to the Registration Statement on Form S-1,
            Registration No. 33-57420.)
       4.3  Stockholders' Agreement, dated as of June 8, 1989  (Filed as
            Exhibit 4.12 to the Registration Statement on Form S-1,
            Registration No. 33-57420.)
       4.4  Form of First Amendment to Stockholders' Agreement, dated as
            of January 13, 1993.  (Filed as Exhibit 4.13 to the Registration
            Statement on Form S-1, Registration No. 33-57420.)
       10.1 Employment Agreement with Wendell L. Batchelor, dated as of
            June 8, 1989.  (Filed as Exhibit 10.1 to the Registration
            Statement on Form S-1, Registration No. 33-57420.)
       10.2 Employment Agreement with Keith Brown, dated as of June 8,
            1989.  (Filed as Exhibit 10.2 to the Registration Statement on
            Form S-1, Registration No. 33-57420.)
       10.3 Employment Agreement with Johnny R. Long, dated as of June
            8, 1989.  (Filed as Exhibit 10.3 to the Registration Statement on
            Form S-1, Registration No. 33-57420.)
       10.4 Southern Energy Homes, Inc. 1993 Stock Option Plan. (Filed 
            as Exhibit 10.4 to the Registration Statement on Form S-1,
            Registration No. 33-57420.)
       10.5 Form of Southern Energy Homes, Inc. 401(k) Retirement Plan.    
            (Filed as Exhibit 10.5 to the Registration Statement on Form S-1,
            Registration No. 33-57420.)
       10.6 Management Agreement, effective as of June 8, 1989, by and
            between Lee Capital Holdings and Southern Energy Homes, Inc. 
            (Filed as Exhibit 10.14 to the Registration Statement on Form S-
            1, Registration No. 33-57420.) 
       10.7 Southern Development Council, Inc. Loan Commitment
            Agreement. Filed as Exhibit 10.15 to the Registration Statement
            on Form S-1, Registration No. 33-57420.)
       10.8 Lease Agreement by and between Hillard Brannon and Southern
            Energy Homes, Inc., dated July 30, 1992. (Filed as Exhibit 10.16
            to the Registration Statement on Form S-1, Registration No. 33-
            57420.)
       10.9 Lease Agreement by and between Hillard Brannon and Southern
            Energy Homes, Inc., dated November 16, 1989. (Filed as Exhibit
            10.17 to the Registration Statement on Form S-1, Registration No.
            33-57420.)
      10.10 Lease Agreement by and between Robert Lowell Burdick,
            Nina Burdick Vono, Carolyn Burdick Hunsaker, Jean Burdick Hall,
            Mildred Burdick Marmont and Lane Burdick Adams as Landlord, and
            Southern Energy Homes, Inc., dated as of November 20, 1985.
            (Filed as Exhibit 10.23 to the Registration Statement on Form S-
            1, Registration No. 33-57420.)
      10.11 Agreement and Plan of Merger of Southern Energy Homes,
            Inc., a Delaware corporation, and Southern Energy Homes, Inc., an
            Alabama corporation, dated as of January 15, 1993. (Filed as
            Exhibit 10.25 to the Registration Statement on Form S-1,
            Registration No. 33-57420.) 
      10.12 Certificate of Merger Merging of Southern Energy Homes,
            Inc., an Alabama corporation, with and into Southern Energy
            Homes, Inc., a Delaware corporation, dated as of January 19,
            1993. (Filed as Exhibit 10.26 to the Registration Statement on
            Form S-1, Registration No. 33-57420.)
      10.13 Assignment of Lease and Rights dated June 29, 1993
            between B.B.H.L.P Partnership and Southern Energy Homes, Inc.
            (Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for
            the quarter ended July 2, 1993, File No. 0-21204.)
      10.14 Lease Agreement dated as of June 1, 1984 between the
            Industrial Development Board of the town of Addison, Alabama and
            B.B.H.L.P Partnership. (Filed as Exhibit 10.2 to the Quarterly
            Report on Form 10-Q for the quarter ended July 2, 1993, File No.
            0-21204.)
      10.15 Agreement Of Lease and Rights dated June 19, 1993
            between B.B.H.L.P and Southern Energy Homes, Inc. (Filed as
            Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter
            ended July 2, 1993, File No. 0-21204.)
      10.16 Lease Agreement dated as of December 1,1986 between the
            Industrial Development Board of the town of Addison, Alabama and
            B.B.H.L.P Partnership. (Filed as Exhibit 10.4 to the Quarterly
            Report on Form 10-Q for the quarter ended July 2, 1993, File No.
            0-21204.)
      10.17 Letter Agreement dated May 18, 1993 and Master Note
            dated May 19, 1993 between the Company and AmSouth Bank, N.A.
            (Filed as Exhibit 10.27 to the Registration Statement on Form S-
            1, Registration No. 33-68954.)
      10.18 Deed of Real Estate dated August 5, 1993 relating to
            the Company's Plant No. 2 in Addison, Alabama. (Filed as Exhibit
            10.27 to the Registration Statement on Form S-1, Registration No.
            33-68954.)
      10.19 Deed of Real Estate dated July 30, 1993 relating to the
            Company's manufacturing facility in Fort Worth, Texas. (Filed as
            Exhibit 10.27 to the Registration Statement on Form S-1,
            Registration No. 33-68954.)
      10.20 Southern Energy Homes, Inc.1996 Option Plan for Non-
            employee Directors. (Filed as Exhibit 10.20 to the Company's
            Annual Report on Form 10-K for the year ended December 29, 1995.)
      10.21 Agreement and Plan of Reorganization of Southern Energy
            Homes, Inc. a Delaware Corporation, and SE Management, Inc. an
            Alabama Corporation, dated November 22, 1996.  
      10.22 Amended and Restated Employment Agreement with Wendell
            L. Batchelor, dated as of June 14, 1996.
      10.23 Amended and Restated Employment Agreement with Keith W.
            Brown, dated as of June 14, 1996.
      10.24 Asset Purchase Agreement, dated as of December 3, 1997,
            by and among the Registrant, A&G, Inc. and the sole stockholder
            of A&G, Inc. (Filed as Exhibit 10.24 to the Company's Annual
            Report on Form 10-K for the year ended January 2, 1998.)
      10.25 Asset Purchase Agreement, dated as of April    3, 1998,
            by and among Southern Energy S. C. Retail Corp., Rainbow Homes,
            Inc. and the sole stockholder of Rainbow Homes, Inc.
      27    Financial Data Schedule.
      
     (b)  Reports on Form 8-K      None


                           SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.






                                   SOUTHERN ENERGY HOMES, INC.


Date: November 13, 1998       By:   /s/ Wendell L. Batchelor
                              Wendell L. Batchelor, Chairman, President
                              and Chief Executive Officer



Date: November 13, 1998       By:   /s/ Keith W. Brown
                              Keith W. Brown, Executive Vice President,
                              Chief Financial Officer, Treasurer and
                              Secretary