Friday, February 4, 2011

MODULAR HOUSINGS SMALL MARKET SHARE

Modular housing seems like the answer to all our problems. It is less expensive than traditional site-built construction, of a higher quality, has a lower carbon footprint, is quicker to build, and can produce striking and innovative design.

So why aren't modular factories popping up everywhere to meet the demand?  There seems to be a lot of reasons for it but here are some of the major ones:

Building a modular factory is expensive.  Getting into the modular home building business as a manufacturer is not for the faint of heart.  A new factory starting up needs millions of dollars to invest in machinery, trucks, tools, materials and labor just to open the doors.  Then there are the expenses associated with the continuing operations like sales people, management staff, promotions, bank payments, fixed costs and advertising. 

Builders are naturally resistant to modular housing.  Most of the site builders equate modular homes with double wide homes even if they say they think modular is good for other builders, just not them.  The modular home industry does not have a good program to educate the public, relying instead on the factories to promote themselves through their websites.

Sales Managers and Sales Reps have no formal training on how to talk with builders to encourage them to make the switch to modular housing.  There are educational seminars and consultants that try to show the builder how to sell more homes but I have yet to hear of a single training course on how to get sales reps and factory management to effectively market their product to their customers...the builder and developer.

It's tough for current modular factories to expand.  The logistics of  having several plants has always hindered the housing industry.  Good examples of this are Palm Harbor, Champion Homes, Fleetwood and several others.  It's not like they can make the same product throughout the US like a car company.  Each area of the country has different building needs and a centralized company usually can't effectively keep all the balls in the air at the same time.

Most factories are stagnant in their thought processes.  They continue to do the same thing year after year without the word "change" ever leaving their lips.  The housing market is changing.  For the first time in decades, home ownership in the US is at it's lowest point.  More people are renting than ever before and a lot of modular companies have "changed" to address this growing trend toward townhouse and apartment construction.  But a majority of the factories are still dancing like it's 1999.


Low name recognition.  The next time you're in a crowd of people that don't know you are in the modular housing industry, ask them to name a modular home brand.  If you want to see that deer in headlights look, this is how you get it.  Just about everyone has seen those small signs by the dozens at intersections as you drive around town that tout the new homes in builder's communities.  Where are the modular home signs in our lives?

No one is educating the builder to the benefits of modular housing. There are some factories that put on seminars for local builders to encourage them to become modular builders but after its over, the sales reps that follow up simply do not have the training to keep the builder's enthusiasm up. Nationwide Homes puts up a new home at IBS and contributes a new modular home to Extreme Makeover as did Excel Homes with their Extreme Makeover Baltimore house, but the majority of factories don't do anything to promote their name or try to educate the public.

We have a 3-5% share of the new single family home market in the US and for it to grow to 10%, effectively doubling that share, we have to stop, look and listen to what the home buying consumer wants and needs and then go after them with a vengeance, shouting out the benefits of "Green", "Energy Star" and "Sustainability" in modular housing to everyone.  

We have enough underused capacity to just about carry us to that 10%, we just have to figure out how to change the builders' and the consumers' thoughts of modular housing.

6 comments:

Anonymous said...

Coach. Great list but there are other reasons that modular will never grow beyond it's present levels. The biggest of which is that the owners are getting up there in years and don't want to lose what they have by expanding or spending any money on new things. Look at Roger Lyons. He thought he was the top dog and didn't do anything to change the way he did business and now he's gone along with his factory.

Anonymous said...

Coach:
We will never reach that 10% as long as some of these modular plants keep trying to put their homes on the lots of manufactured homes and trailers. The last builder I talked to about modular homes said that he just saw one at a local trailer lot. When I visited the lot I saw one of our true modulars, built by one of the largest companies, sitting on the site with trailers. When I talked to the salesman he stated that they were signed up to be a rep for the company. Figure out what brainy VP thought up that decision. And they wonder why builders are hesitant to go modular. Years of fighting off the comparison and now some companies are embracing the mixing of the products. Figure that out!

Anonymous said...

As Coach mentioned there are lots of fixed costs for a factory, so factories will try to keep building by selling to multiple channels, and keep their employees working. Street dealers have seen their HUD world start to dry up because of financing, so need mods to sell. They either can't get rid or don't want to get rid of the older HUD sale - quicker and easier. I agree that I would be hard pressed to look at a nice modular on a lot next to a singlewide.

Anonymous said...

Do you think this is regional? The upper midwest, MN, WI seem to be able to sell nicer modulars alongside HUD product, but in other areas, that is a deal killer. Are there other areas where this can be done, or am I just wrong?

Builder Bob said...

I can't speak for the rest of the country but it would tick me off if I see the factory I've been buying from for years suddenly putting their homes on a trailer lot. And then I'm supposed to like it when the dealers promote and sell them like cheap doublewides where I have been pushing the benefits of modular.

Leroy said...

Great point Bob ,as a recent consumer I already knew I wanted to go modular before I ever walked into a builder's office or made a phone call.The first line of screening I did was to ensure that the builder and factory ONLY produced what I was looking for. If you told me you could do your floorplans to meet either building code...automatic failure because I didnt want my home to be built to minimum HUD standards by mistake. Reason number two is I didnt want to deal with a sales staff that could walk into any used car lot tommorow and feel at home. And finally, If you are used to doing finish work on "trailers", I dont care what the goverment says about the nomenclature its still a trailer to the public, then I dont want you to go beyond your expertise and try to learn on MY home!

Coach ,you are absolutely right the Industry needs to do a better job of making the distinction between their product and mobile homes and the first step in that direction would be to not allow their homes to be sold on the same lot with mobile homes.Second step would be to really start pushing the information to the public in more mainstream advertising. I shouldnt have to look as hard as one has to now in order to decipher a true modular company from a mobile home.Heck, if you have to it might be wise to start with Real Estate brokers and offering them an incentive to become more knowledgeable about your product. I actually found a few builders in my area who were willing to pay realtors 3% of the base as commission on a sale...win -win situation.