SecProbe.io

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November 16, 2005

Securities and Exchange Commission
100 F Street NE
Mail Stop 7010
Washington, DC 20549-7010
Attn: Nili Shah

                  RE:      Cavalier Homes, Inc.
                           Form 10-K for Fiscal Year Ended December 31, 2004
                           Filed March 31, 2005
                           Form 10-K/A for Fiscal Year Ended December 31, 2004
                           Filed May 2, 2005
                           Form 10-Q for Quarter Ended April 2, 2005
                           Filed May 12, 2005
                           Form 10-Q for Quarter Ended July 2, 2005
                           Filed August 11, 2005
                           File No. 1-9792

Ladies and Gentlemen:

         We have received comments via facsimile from the staff of the
Securities and Exchange Commission (the "Commission") on August 31, 2005,
relating to the above-referenced filings of Cavalier Homes, Inc. ("Cavalier" or
the "Company"). On October 14, 2005, we responded to all of the Commission's
comments with the exception of items 4 and 5. Additionally, on November 14,
2005, we responded to the Commission's verbal request for the Company's
understanding and application of paragraph 10 of FIN 45. The following
paragraphs set forth our response to items 4 and 5 in the Commission's letter.

Form 10-K for the Fiscal Year Ended December 31, 2004
-----------------------------------------------------

10.  Commitments and Contingencies
----------------------------------
4. We note the Commission's request for information on the Company's
consideration of FIN 46R 4.h (3). It is the Company's belief that it is inherent
in the exclusive dealer arrangements that the Company would not provide greater
than 50% of the equity, subordinated debt and other subordinated financial
support.
<PAGE>

Securites and Exchange Commission
November 16, 2005
Page 2
---------------------

In the typical situation, an exclusive dealer will finance its purchase of
inventory with an independent third party floor plan financial institution. In
addition to the floor plan liability, a dealership would have equity in the
business as well as personal equity, and many dealerships would have other debt
such as for financing of property, plant and equipment, used homes inventory and
real estate to be sold in conjunction with home sales, among other reasons.

Cavalier does not provide any equity or subordinated debt to its independent
exclusive dealers. None of the dealerships' other forms of financing are
provided or guaranteed by Cavalier. The only potential interest that Cavalier
has in the expected losses of an exclusive dealer relates to the repurchase
commitment that Cavalier issues to the third party financial institution, which
is conditioned upon certain credit events of the dealership. However, even if
the full fair value of the repurchase commitment is deemed to be and is included
as a form of subordinated financial support to the dealer, the fair value of
that commitment will never approach 50 percent of the total subordinated
financial support.

The following calculation provides the Company's analysis of the fair value, at
the date of issuance of the repurchase commitment, of only two components of the
dealers' subordinated financial support (namely the floor plan liability, which
is a third party debt and Cavalier's repurchase commitment):
<TABLE>
<CAPTION>
<S>                                                       <C>                             <C>                    <C>
                                                            Lowest                                          Highest Inventory
                                                      Inventory Exclusive Dealer   An Exclusive Dealer      Exclusive Dealer

Fair value of guarantee per floor at inception  (1)         $ 888                         $ 888                    $ 888

Floor plan liability - floors (home sections)                   6                            18                       49

Floor plan liability  - $                               $ 126,000                     $ 378,000              $ 1,029,000

Fair value of repurchase obligation                       $ 5,328                      $ 15,984                 $ 43,512

% of Cavalier's subordinated support to dealer's             4.06%                         4.06%                   4.06%
floor plan liability plus  Cavalier's subordinated
 support

 </TABLE>

(1) As previously communicated in our letter dated October 14, 2005, the Company
estimates the fair value of its manufacturer's inventory repurchase agreements
under the provisions of FIN 45 at inception (the date a home is shipped to
dealers whose floor plan financing includes Cavalier's repurchase commitment).
The fair value of the inventory repurchase agreement has been estimated on a
"pooled dealer" approach based on the creditworthiness of the independent
dealers, as determined by the floor plan institution, and is derived using an
income approach. Specifically, the fair value of the inventory repurchase
agreement is determined by calculating the net present value of the difference
in (a) the interest cost to carry the inventory over the maximum repurchase
liability period at the prevailing floor plan note interest rate and (b) the
interest cost to carry the inventory over the maximum repurchase liability
period at the interest rate of a similar type loan without a manufacturer's
repurchase agreement in force.

<PAGE>

Securties and Exchange Commission
November 16, 2005
Page 3
-------------------------------

By the nature of the repurchase commitment, as demonstrated in the calculation
above, it is virtually impossible for Cavalier to provide more than 50% of the
equity, subordinated debt and other subordinated financial support of any of its
exclusive dealers when considering the floor plan liability alone (that is, even
without considering other forms of subordinated financial support that are
provided to the dealership by parties unrelated to Cavalier).

We would like to clarify that Cavalier does not guarantee the full amount of the
dealership's third party debt, nor does Cavalier provide its exclusive
dealerships with any right to cause Cavalier to repurchase the inventory
financed by the floor plan lender. Instead, the repurchase commitment is a
contractual arrangement with the third party lender under which the Company is
obligated, only upon default by the dealer, to repurchase the financed homes at
a declining price (predetermined based on a schedule) based upon the Company's
original invoice date and price. The floor plan lender must be able to return
the home, in new condition, to Cavalier for resale in order for Cavalier to be
obligated to perform under the repurchase agreement. The Company's exposure is
limited to the difference between the declining price at which Cavalier may have
to repurchase the home and the price at which the Company is able to resell the
home. The repurchase commitment only extends to homes that remain unsold and
subject to the third party financer's secured interest at the time of default.
That is, Cavalier is not obligated to pay off an exclusive dealer's floor plan
debt if the dealer sells a home but does not use the proceeds from the sale to
pay off the related floor plan debt. Thus, while Cavalier's obligation may be
triggered by a credit event (default) of the dealer, its actual obligation is
merely to repurchase any unsold homes securing the third party debt, to the
extent the homes are in new condition; Cavalier does not become obligated for
the debt balance itself.

We note the Commission's request related to the Company's financing of certain
homes sold to the retail customers of the Company's dealers. The Company
finances less than 10% of the homes sold by its exclusive dealers. While there
may be some commonality in the dealerships to which inventory is sold and for
whose customers the Company's finance subsidiary provides retail financing, the
two activities are otherwise independent and unrelated.

From Cavalier's perspective, the dealership is the end-user/customer with
respect to inventory. Once inventory is purchased by a dealer, Cavalier has no
further involvement with its disposition (except in the case of a requirement to
repurchase in the event of default). The Company also provides financing to a
separate class of customers--retail customers purchasing land, homes and other
improvements from dealers. Such financing may pertain to the purchase of
Cavalier's products or those of other manufacturers. That is, the Company's
finance subsidiary finances homes sold by its dealers, including its exclusive
dealers, and from dealers that sell other manufacturers' products. Additionally,
Cavalier funds home loans other than for manufactured housing. The Company
bundles most of these loans and sells them to a third party finance company, but
does not retain the servicing function on sold loans. No retail customers,
including those of the Company's exclusive dealers are required to obtain
financing from Cavalier. Based on these facts, the Company does not consider
this financing to be a variable interest as defined by FIN 46R.

<PAGE>

Securties and Exchange Commission
November 16, 2005
Page 4
---------------------

We note the Commission's request regarding the date at which the Company
evaluated its exclusive dealer arrangements pursuant to FIN 46R. Paragraph 6 of
FIN 46R states the following:

         An entity subject to this Interpretation is called a variable interest
         entity. The investments or other interests that will absorb portions of
         a variable interest entity's expected losses or receive portions of the
         entity's expected residual returns are called variable interests. The
         initial determination of whether an entity is a variable interest
         entity shall be made on the date at which an enterprise becomes
         involved with the entity. That determination shall be based on the
         circumstances on that date including future changes that are required
         in existing governing documents and existing contractual arrangements.
         An enterprise is not required to determine whether an entity with which
         it is involved is a variable interest entity if it is apparent that the
         enterprise's interest would not be a significant variable interest and
         if the enterprise, its related parties, and its de facto agents (as
         described in paragraph 16) did not participate significantly in the
         design or redesign of the entity.

We acknowledge that the guidance above requires determination of whether an
entity is a variable interest entity at the date of initial involvement by an
enterprise. The Company's analysis of the fair value in the preceding table was
made at the date of issuance of the repurchase commitment which
is the point at which the fair value is the highest, as fair value declines over
the term of the commitment period. Based on the nature of the exclusive dealer
arrangement and the estimated fair value of Cavalier's guarantee relative to the
dealers' total
subordinated financial support, the Company would not provide more than 50% of
the equity, subordinated debt and other subordinated financial support,
regardless of the time period of the calculation. Further, the nature of the
relationship between the repurchase commitment and the outstanding third party
debt is such that, in virtually all cases, the ratio of the fair value of the
commitment to the total subordinated financial support of a given dealer is will
be at some amount less than 50 percent. Futher since the exclusive dealers'
population changes frequently; through dealers converting from or to the
non-exclusive program it is not meaningful for the Company to evaluate whether
an entity is a variable interest entity at the date of initial involvement.
Pursuant to this guidance, Cavalier does not
believe that the exclusive dealers doing business with the Company are required
to be evaluated to determine if they are variable interest entities because none
of the four characteristics in paragraph 4. h. exists with respect to these
exclusive dealers.

5. We note the Commission's request for information on the Company's
consideration of FIN 46R 4.h (2). That paragraph indicates that the business
scope exception is not met if, "the entity is designed so that substantially all
of its activities either "involve" or "are conducted on behalf of" the reporting
enterprise or its related parties. While, the Company provides the exclusive
dealerships with the new homes they purchase for resale, that inventory is
purchased outright, and once sold to the dealer, the Company has no further
involvement with the operations of the dealership, including pricing strategies,
marketing efforts, management and financing decisions, among other things.
Therefore we would not conclude that the dealership conducts those activities on
behalf of the Company.
<PAGE>

Securties and Exchange Commission
November 16, 2005
Page 5
---------------------

We acknowledge that the dealerships' purchase of inventory "involves" the
Company; however, procurement is only one example of activities that, under the
definition in EITF 98-3, would be necessary for a business to continue normal
operations and sustain a revenue stream. A business consists of (a) inputs, (b)
processes applied to those inputs, and (c) resulting outputs that are used to
generate revenues. Included in inputs are long-lived assets, including
intangible assets, or rights to the use of long-lived assets, intellectual
property, the ability to obtain access to necessary materials or rights, and
employees. Processes are the existence of systems, standards, protocols,
conventions, and rules that act to define the processes necessary for normal,
self-sustaining operations, such as (i) strategic management processes, (ii)
operational processes, and (iii) resource management processes. Output is the
ability to obtain access to the customers that purchase the outputs of the set.

The integrated set of activities conducted at each exclusive dealership
necessary to continue normal dealer operations and sustain a revenue stream
would encompass, among others, procurement, sales, marketing, administration of
personnel, accounting and payroll, billing and collecting, real estate and
strategic management. Cavalier has no involvement in the activities of its
exclusive dealers of the type identified above other than its role as a supplier
of product. The inventory is purchased outright (title transfers to the dealer),
and once inventory is purchased from Cavalier, the Company has no continuing
involvement with the dealer's inventory (except in the case of the exercise by
the third party lender of the repurchase commitment, which typically would not
represent the normal business operations for which the dealership was designed).
Cavalier does not participate in the ongoing activities or maintain control of
any of a dealer's operations. Because of Cavalier's lack of involvement in the
remaining activities of the exclusive dealers, substantially all of the dealers'
activities do not involve and are not conducted on behalf of Cavalier.

We also note that, while the exclusive dealer arrangement limits the dealership
to new home sales of Cavalier product only, the exclusive dealers also generate
used home sales from trade-ins, repossessions placed with them by finance
companies and wholesale purchases of distressed inventory from other businesses,
which may be new or used products. Dealers also may generate revenue from other
sources, including fees and brokerage commissions on finance and insurance
products, service contracts, and real estate sales. Those activities do not
involve, nor are they conducted on behalf of, Cavalier. Cavali