Thursday, February 11, 2021

"Dwindling" is Not Something the Modular Housing Industry Wants to Hear

Five "dwindling" things are converging on our industry that will continue to hurt both the modular home factory and the independent modular home builder.

The only way for an industry to grow stronger is to increase demand for its product. However, the small modular home builder and even its rival, the small site builder, are facing problems they've never faced before; a dwindling market for their product in an exploding demand in housing.

Here are my five areas that are dwindling for the modular home industry.

1. Dwindling Share of Housing Market
First, you only have to look at the new housing numbers each month to realize that a vast majority of all new housing is produced by medium to large tract home builders. I've heard the percentage as high as 85%. Personally, I think that might be a little high but what if it isn't? That doesn't leave much of a share for all the small modular home builders. There is a finite number of houses that they can build every year.

2. Dwindling Number of Custom Modular Home Factories
We have the push for affordable, multifamily, multistory housing that is currently keeping the housing starts bolstered. Modular manufacturers, both residential and commercial, are diving into this market with both feet. This is good. It means that modular is becoming a very accepted way to complete these projects and the amount being produced by factories is growing. Unfortunately, small modular home builders do not have a lot of paths into this market.

They are ill-prepared to deal with commercial codes and restrictions. They also don't have the financial strength to compete for these projects. The bonding alone would probably put some builders on the ropes. So this is a finite market that very few small modular home builders can even attempt to enter.

3. Dwindling Number of Non-Tract Building Lots
Where do most small builders, both site and modular, build homes? Scattered lots. Yes, there may still be some scattered lots within city limits but for the most part, these lots are in rural areas. This presents an opportunity for most small modular home builders.

A lot of people would love to build on their own piece of land in the country, free to wander in their backyards with their kids and dogs, make snow forts in the winter and plant gardens. Today, however, finding a lot to build on is harder than ever. Most developments are closed to outside, independent builders and if a buyer can find a true scattered lot, they may not be able to afford all the impact fees, code restrictions, utility charges and building fees and permits needed before they even put a house on the land. Buyers now face a dwindling choice of lots and that hurts modular home builders.

4. Dwindling Boomer Market
The fourth thing hurting our industry; Boomers and Millennials. There is a finite number of Boomers wanting to build new homes simply because a lot of them are looking to downsize into active retirement communities. Millennials on the other hand really do want to buy homes but their idea of a home is not the small house in a nice neighborhood with the white picket fence and all the maintenance that goes with it. No, they are looking at living in clusters of like-minded Millennials in townhouses and condos. Both of these markets are dwindling markets for the small modular and site builder.

5. Dwindling Number of New Modular Home Builders
The number of people that want to become new home builders is shrinking rapidly and lots of Boomer aged builders are retiring or dying. I've also heard predictions that in just 5 years there could be less than half the number of builders than today and today is no picnic. Buyers will soon have a finite number of new home builders to choose from.

Nationally the number of new home starts by the modular home industry is between 1.5 and 2.0%. 


It's time to look for ways to improve our industry's image and growth even in these 'dwindling' times.

The modular housing industry needs to look at change. 
Change in attitude, change in your personal involvement, change in becoming more open with others, and finally changing your sales and marketing focus.

The only thing you can't do is just sit there and watch your company being squeezed out of business by these "dwindling" problems.

Gary Fleisher, the Modcoach, writes Modcoach News and Modular Home Coach blogs as well as the best site for off-site consultants, Modcoach Connects


Contact Gary at modcoach@gmail.com

1 comment:

Bill Hart said...

I was startled by the dwindling percent the mod market has dropped to that you quoted..1.5 to 2%!...why, well elsewhere such gurus' Meyers and/or Burns are saying:

SFRs (Single Family-RENTALS) have or will shortly represent 3 percent market share! Whow!

Hope youve had time to have scanned copy of my thumb file I sent last week; particully on the tried and true method LHFPR of acquiring solid Builder-Dealers(pgs15-21) But in any even a quick check of course is all too simple.

. Capital really or the lack of it is key of course..The old bankers chant. 3Cs, etc applies..Nothing will sustain and continue to fly withOUT sufficient capital.

The dirt, Gary as we know and the key talent are still purchase able -ables..

Some midsize car dealers, major subs both who have a buck to burn where in my era made into multi millionaires with my olde Inland LHFPR outline, Donnie Ettore, Steve Viale, and infamous (ex-NAHB National Pres) LLoyd Clarke...all were ..not ..builders before...yet became wealthy a prefab builders over 6-8 years...and might have done it with simple mods too.

Capital! Just check franchise apps for a Jim Horton's min requirement vs 2MM for Big Mac!