Friday, November 29, 2019

Question of the Week

Is it getting easier or harder to be a modular home builder than it was 10 years ago?


Builder Bob said...

I've been a modular builder for over 30 years and my answer, it's not harder, just more complicated. Once you've been with a factory for many years you learn how to order and what they want.

On the other hand, the customer has gotten harder to work with and please. Sometimes I would like to bury them under the Superior Wall but so far I've resisted the urge. That could change at any time.

Harris - Finish Werks said...

The build itself has not gotten harder since we've amassed experience w/ more hold down straps, fire sprinklers, blower door testing and other new regs/code requirements. We're mostly on par with site builders now.

As Bob said, the customers have definitely gotten more difficult. There are days I want to bury them under Bob's Superior Walls. Just for the twofer discount.

The biggest challenge of today: BACKLOGS. What was 4 weeks 10 years ago is 12 weeks today. I spoke to 6 factories last week, owners and reps both, and all were 10-12 weeks out, with one at 6, and another out to June. Time is money in construction, and waiting an additional 8 weeks is very costly to the bottom line with lost opportunity and scheduling complications. This loss of momentum even led to the postponement of a large custom home because of the customer's scheduling. Now we fear they may cancel all together. Can we go back with a contract amendment telling locking them down for another year? Uh, no.

To the consultants, mentors, and manufacturers, I offer these:

1. Many economists are now saying a recession is less imminent. The stock market is at record highs and mortgage rates are still at historic lows.

2. Affordable housing is in crisis, and everyone knows this. As long as Americans keep making babies, we will need roofs over our heads. FEMA spent a lot of time/money with MIT researching how IRC/Mod can replace HUD/mobile for disaster recovery, for example. San Francisco/greater CA is pumping vast resources into modular as not A, but THE, viable solution.

3. Offsite construction (w/ emphasis on volumetric/mod) is rapidly becoming recognized as the go-to solution for affordable and MultiFam. This is why Softbank pumped close to a billion$ into prefab. This is why factories in Poland are delivering across the Atlantic. This is why China is banging down our doors to deliver all manner of prefabbed boxes, bathroom pods and fixtures.

4. On the latter point, it's not lost on anyone watching our biz that a lot of VC has been wasted on esoteric/Silicon Valley-type thinkers that are better at dumping cash into Bling at the (significant) expense of actual experience. Eg. Katera, Blu Homes, Excel under prev. ownership. But a huge Japanese bank doesn't invest $850M unless they see at least something going right for our industry.

5. Who's doing it right: Volumetric Building Companies (formerly known as Vaughan Buckley Construction) has a backlog approaching 2 yrs out of a plant in NC whose previous owner couldn't make profitable. VBC is currently considering some automation to boost productivity (I was told the capital costs totally pencil out vs. human labor), and they are already looking at building another plant. OS Factory - I hear they are backlogged out the wazoo... and in a plant that Blu Homes couldn't convert ROI in.

6. Talk to Tom Hardiman of MHBA, whose management company also manages MBI - the commercial association. Multi Family Mod is exploding.

So consider all the above legacy modular factories and consultants. If the current economy is still moving forward, if every media outlet is reporting a crisis in housing Americans, if large and small government agencies and learning institutions are pining for more modular, if some companies are investing in more capacity and profiting, and if multifamily can become a diversification option against a drop in custom single family, WHY ARE ME AND MY PEERS IN SINGLE FAMILY NOW WAITING 3 MONTHS FOR A HOME?

On a happy note, Happy Thanksgiving and Holidays to you and yours!

Anonymous said...

VBC Backlog is for commercial/multi-family with single family slotted in when the volume matches weekly commercial production resulting in delivery delays for single family homes. Although I cheer their success in building their commercial site it makes conversation difficult with single family buyers when deliveries stretch out beyond 15 weeks.

Anonymous said...

BTW production capacity and delivery delays is just as common in the manufactured side of the housing business as many are experiencing final deliveries beyond 15 weeks to 26 weeks depending on manufacturer. This proves the demand and need are there in the market but production capacity is not available and further constrained by many modular factories focus on the commercial/multi-family mass production of similar units.

Anonymous said...

not making excuses,,,but the question of huge back logs must be looked at along with lead times...factories order per in-house orders...order some exotic window, door and anything with a big lead time... and your delivery reflects it.