Monday, November 23, 2015

Time for a Reality Check for Modular Housing

The past couple of years has seen quite a lot of activity in the world of modular housing with the biggest being the drop in percentage of new single family home construction built by our industry.

Coupled along with that are factories that are either idled or producing less than what they need to be profitable. Many factories have turned their attention to multifamily or commercial modular buildings to make up for the loss of single family home production.

On December 3rd, a large group of factory owners and top management from all over the East Coast will meet for a Round Table in Lewisburg, PA to discuss the current state of our industry and begin planning what steps should be taken by our industry in general to reverse the downward trend and work to improve homebuyers’ perception of modular housing.

NOTE: For more information about this meeting or would like to attend, just EMAIL ME.

Since nobody really has the official crystal ball for modular housing’s future, here are some observations, both good and bad, based on what has happened to our industry since the housing recession of 2008.

Hurricanes, Fires, Floods and other natural disasters:
One of the biggest shots in the arm that ever happened for the East Coast modular industry was a thing called Superstorm Sandy was rocked the Atlantic Ocean coast from NC to MA destroying hundred of thousands of homes.

This one act of Nature brought thousands of new customers to buy modular homes. Some factories were working at full capacity in the beginning of the rebuild but now that has slowed because the low hanging fruit is disappearing, tougher building codes were enacted and local code enforcement officials not familiar modular construction chose to give modular builders a tough time.

The rebuilding of homes after Sandy will really begin to slow down over the next 18 months. This will force many factories to look for business to replace the homes they have been sending to the coastal states.

Waiting for the next natural to boost business is not a business strategy. Preparing to be the leader in helping folks when the next disaster hits is a good business strategy however.

The Aging of the Modular Home Builder:
Yes Virginia, there are some young builders going into the modular home business but for every one that is entering our industry two or three are retiring, giving up or simply passing away.

There is no concerted effort by the modular housing industry to entice and train ‘new to modular’ home builders’ to join modular housing.

Every modular home factory seems to have the same track record. For every 5 new builders they bring on board, 2-3 of them build only one modular home and 1-2 of them build a couple homes before they go back to site building and are never heard from again.

At best, only 20% of ‘new’ modular home builders stay with factory housing after 18 months and that 20% is drawn from a continually shrinking pool of available new home site builders.

There is talk about revitalizing some training programs that used to be available for modular home builders and set crews and that should be one of the topics discussed at the Dec 3rd meeting.

Bippity, Boppity, Boo:
It’s understandable that every modular home factory has embraced social media. There are two main reasons for doing it.

First, it’s FREE! and secondly, it’s FREE!

I have ‘Liked’ just about every modular home factory’s Facebook page and one thing I have observed is the lack of content by most of you. When the factory first puts up their Facebook page there is something published almost every day. After the first week the number of articles and posts drops to 2 or 3 a week. Then you might see something new once a week or even once a month if you’re lucky.

Some factories tried writing a blog and attaching it to their website. Again, a couple of them post an article or two a month but for the rest of you, that part of your marketing program dries up like a prune. No posts on your blog month after month means nobody will look at it again...ever!

There used to be a lot of videos on YouTube about modular home production and the beautiful homes produced by the factories and finished by the builder but now all you find when you search for “modular homes” are a lot of video advertisements for manufactured homes and used homes.

Several factories hired people to promote their homes on social media and a couple of others assigned staff to write posts but again, after the first couple of weeks everything reverted back to the same old thing of fewer and fewer posts.

Some social media people bought “Likes” through Facebook bringing the total to several thousand. The problem with buying Likes is these people don’t buy your homes. Most of them can’t afford to buy a new home or don’t live in you service area or in the US for that matter.

There is no magic spell you can cast to make social media work for your factory. You have to treat it as a fully funded department that has goals to meet. Short of that, forget it.

Fewer to choose from:
Every month we hear about this factory being sold, this one closing, another changing from single family to commercial and others being shuttered until next year’s building cycle.

Modular home builders have to be asking themselves what happens to them if their factory experiences one of these situations. Builder loyalty will be put to the test unlike any time in the past.

Several factories are stepping up their involvement with their builders, working with them on all phases of the building process from lead generation to design through production and service after the sale. They are staying strong and their business is actually growing.

For those factories that are conducting business the same way they did before the housing recession I have only one piece of advice. Look hard at your competition and if one of them is taking market share, especially yours, emulate what they are doing. Everyone likes to follow a winner, especially your builders.

Consolidate Your Efforts:
As I mentioned earlier, there is a Factory Only Round Table for owners and top management on Dec 3rd in Lewisburg, PA.

Modcoach will be hosting it along with the MHBA’s Tom Hardiman. EMAIL ME to learn more.

Tom will be leading this Round Table and together we can finally begin to reverse what has seen our industry go from 5% of all new single family homes to 3% just a couple of years ago to our present 1.5% share.

Don’t sit on the sidelines simply cheering on the home team. You are the home team and it’s about time we all realized it.


Anonymous said...

Can't blame builders from leaving some factories. Builder gets an off line date but that gets pushed back when the factory gets a better order. Builder gets a delivery date and sets everything up only to be told they can't deliver that day. Not because the house wasn't ready but because the trucks were needed to deliver something else. Some factories certainly play favorites and if you are a little builder they will not care about you.

Anonymous said...

the rate will raise as home building activity increases. think booming. modular does well when the economy is hot and no subs are to be found throughout the land.

Anonymous said...

According to realtors and the NAHB the constraints on building ate lots and labor. Modular can't address the lot issues but business should be booming because of the difficulty in finding subcontractor labor in an expanding vigorous housing market with decreasing resale inventory available.

Modular needs to adjust its messages and design to address today's buyer wants and needs. With factory pricing, transport, and fees added to builder profits meeting or exceeding local site construction costs the old tired promises of lower costs and shorter building times (yes, site disturbance may be shorter) are becoming false premises.

Energy efficiency, sustainability, environment concerns are market drivers that need to be incorporated in the messaging.

Unknown said...

The industry needs to spend more time with the people who always want you to not put a modular in their town. On-frame modular homes built to HUD code are passed off as modular, confusing to the general public who does not have a clue about the industry other than they look like trailers going down the road. You read the comments, things have to change, it can be like dealing with a car salesman. Education to builders, inspectors, permit departments in government, anyone involved with deed restrictions think trailer, right off the bat sub-par construction is what they think. I'm retired now but feel the industry has shot itself in the foot by not being a good partner in this business.