Friday, June 29, 2018

Are Trips, Discounts and Special Leadtimes About to Vanish for Modular Home Builders?

This year the economy is booming, labor shortages are everywhere, modular home factories are backed up with work, modular home builders can’t get houses to their customers fast enough and commercial work is flooding into modular factories faster than the babysitter’s boyfriend when the car pulls up.

Even I’ve noticed a change when trying to schedule Seminars, Builder Breakfasts and Roundtables this year. Nobody, it seems, can afford to take a day off to attend one because their business is booming leaving little or no time for education and interaction with others.

In the past modular factories, especially on the East Coast, offered trips and cruises to their top builders and sales people. It was not unusual to enjoy one of these with 100+ others that bought from the same factory.

Remember discounts? Because of the huge number of custom modular factories in the East, when business was slow after the 2008 housing crash, offered bigger and bigger discounts to builders to maintain their loyalty.

And what modular home builder didn’t love hearing that their home was going to pushed into the line a couple weeks early. This is always a good perk reserved for some of the factory’s bigger builders.

Today is different for many modular factories across the US. Business is very good. Not only are their builders doing extremely well right now, commercial business in the form of highrise apartment buildings, townhouse and condo projects, government projects and especially hotels is pouring in.

As I mentioned in an earlier article, builders and factory sales managers are telling me lead times are well into late Fall and in the case of a couple of them, “don’t expect your house this year.”

With this amount of business beating down the doors of most factories you have to figure that at least one or two of those sweet benefits are starting to shrink or even disappear entirely.

Raw material costs are rising forcing just about every modular factory raise their prices to builders quicker and higher than any other period in our industry’s history. Factories can’t continue to see rising costs on one hand and continue to offer discounts as much as 15% with the other. It isn’t good business. Look for discounts to be slashed by many factories in the coming year.

Today, “Special” lead times to favored builders mean their houses will be the first put to the production AFTER the 140 module hotel project is complete. Commercial developers make the factory sign a performance agreement punishing them financially if the project’s modules don’t arrive on time. Builders don’t have that clout so it isn’t hard to understand why a factory is so concerned that commercial projects take precedence. Besides, the slim profit on a commercial hotel deal means everything has to go smoothly and quickly.

The last vestige of buying exclusively from one factory is the ‘Factory Trip.” Will this also go the way of the dinosaur? I doubt it. It is the one place where builders and factory people can spend quality time together eating, drinking, playing golf and share their problems. Let’s hope this never completely goes away.

More changes are coming to the modular housing industry, some good and some not so good for the single family home builder. Look for a couple of new modular factories to pop up in the East building custom homes exclusively for builders.

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