Wednesday, March 9, 2011

RETHINKING THE FUTURE OF MODULAR HOMES

It's been quite a roller coaster ride for the modular housing industry over the past decade.  The ride to the top of was exhilarating and the drop made everyone's stomach hurt but now instead of heading back up the next hill, the industry is riding in a car that has just gone on a level ride on the bottom.  When we reach the next hill, will we have enough momentum to make it all the way to the top again?



That's a question I posed to several modular factory owners over the past week.  Their answers, though not optimistic, were enlightening.  In a nutshell, they are rethinking and retooling for a different kind of housing market as the recession starts to ease.

They all said that they were abandoning the true custom home market.  Too many variables, too much engineering, too many hands in the total production, too slow of a turnaround and with the economy is this shape, they were hesitant to sit on major investments in special order products for months while the house is redesigned and redesigned by the customer and their builder.

They are moving instead to the semi-custom market with new emphasis on Energy Star and green building solutions.  But they are being very cautious not to offer all this as standard fare.  It seems the home buyer, though they would like to have a lot of energy saving; green and sustainable products in their homes, aren't willing to pay for it.  

With sprinklers being required in modular homes, the money that would have gone for those options is now being chewed up with fire suppression systems to the tune of $2-5 a sq ft.

So the owners I talked with are working to introduce homes with some flair that are easy to "customize" with  limited optional add-ons, bump-outs and kitchen and bath packages.  They will be moving away from optional items that require long lead times and may not be available before the house is in production.  They also feel that the modular home builder is looking for a quicker and more profitable turnaround with their customers.

This does not mean that the factories are going backwards.  They are finally looking at what the majority of new home owners want and also listening to their builders.  The homes that will be offered by these factories will be well thought out with more of an emphasis on quality and design and less on totally customer designed homes.

There will be factories that low-ball their homes in order to keep the lines flowing by working harder for far less profit, but they have always been with us and will continue to throw mediocre product on the market.  It's just business.

13 comments:

Anonymous said...

Sounds like these factories want to take the approach of the HUD Code manufacturers! Just what people want, more HUDULARS that can be sold through street dealers instead of home builders. I don't see this approach working for the true modular factory that wants true builders.

Coach said...

That's not the impression I got when I talked with the owners. They feel that the expensive custom market is now such a small part of their business that they have to change over to what the builders want and their customers can afford.

Between the tightening mortgages, the high transportation costs and the new government regulations, they have to look at being more competitive with the tract builders and not the architecturally designed homes.

They don't want to build HUD houses and sell of street lots. They want to attract the small builder back to their factories.

Guildcrest Building Corporation said...

My role as factory rep (Ontario, Canada) is to do just that...recruit builders to purchase our product wholesale. The majority of these builders are exactly what you referred to "small builders" doing maybe 10-20 homes a year.

Brian Flook said...

Until the modular business realizes that their customers are home buyers and not home builders, the industry will continue to struggle. Homeowners must be the focus of every manufacturers' marketing strategy. Most small builders (2-5 homes a year) live by the seat of their marketing pants. They have no clue about the complexities of marketing today. You can no longer give your marketing to your wife or the secretary or intern and expect anything but dismal failure and zero ROI. When manufacturers leave the marketing to builders - who get up a 5:30 to eat, meet with subs and get a little work done; then work all day building a house, then do quotes at night - is it any wonder the marketing sucks!

Modular product is far superior to stick in nearly every way except for marketing, sales and service. Modular manufacturers leave the marketing to builders who don't know what they are doing, they leave the sales to builders who are actually not terrible at it, and they leave the service to anyone but themselves it seems. Come on guys, the modular industry should rule the home building kingdom.

Lastly, EnergyStar has no teeth and never has. As a result of the recent and impending specification changes, builders are leaving EnergyStar like rats from a sinking ship. It's not required yet!

That said, building energy efficient homes is the perfect domain of modular builders. They do it best and always have.

It's time the modular industry take a hard look at itself and realize that the model is broken and needs a revamp. With over 25 years of experience marketing new homes, my team and I stand ready to help any modular manufacturer rework his or her business model and be the first to change the rules.

Any takers?

Terry Thon said...

HomeCrafters is the custom manufacturer that does design, build and deliver directly to the Customer.

In the last year customer's want value for their money even more. I always ask "Why do you want to build a custom home in this market?"

I have found that if offered a few energy options such as better windows, blown in foam insulation they may go for it.

I have been emphasizing better design. Like double door entry systems.

We will use different framing at "T Wall Intersections" to allow being insulated better.

HomeCrafters as a part of our process now wraps window openings better, seals doors better.

All studs are to be foamed in the corner next to the OSB.

I think those items help and will help sell the homes.

Terry @homecraftersinc.com

Guildcrest Building Corporation said...

Very accurate summary of small builders as it pertains to their marketing and sales skill set or lack there of....

Convincing Modular Factories to re-direct more than minimal resources to support marketing and/or sales for their builder network?

I'm ready to listen.

SPeterson said...

Brian,
I'm in! Been saying it for years and I am on the enforcement side. The modular manufacturers should be dominating the market, especially in this economy. Doing so now will just create a better image later...and more sales.

Anonymous said...

I agree with the need to scale back from McMansion type thinking. I disagree that this will have any impact on the levels of customization demanded by home buyers. Builders have wanted to reduce customization for years. They have encountered one basic problem. The homeowner who writes the check wants customization at every price point.

I get so frustrated with factory types who believe they can dictate to builders what the market will bear, and yet have absolutely no clue what the homeowner is thinking. Our industry has done this for at least the last ten years. The housing boom covered up our mistakes. The housing bust is showing them in all their glory.

I believe the answer is for the factory types to go back to small business basics: take care of the customer. I disagree with Brian Flook somewhat in that I believe the factory has two customers: the homeowner and the builder. The builder needs a quality home, but also needs help in floor plan design, pricing, sales starategies, and marketing.

Unless the modular companies are willing to get out of the factory and into the world of their customers, they will be doomed to pursuing one flawed strategy after another.

Tim Watson said...

No one can or will be all things to all people. I applaud the "green" affordable approach, which will work, for some. I worked for 4 years for Haven Homes, and assure you that custom modular will survive in some form. Haven is clearly transforming and who knows where they will end up, but someone will fill that void. Westchester, Cardinal, and I'm sure many others are capable of custom, and will continue to fourish. I will not pretend to know where we are headed, I am not Warren Buffett.

I do know that I will push modular where it works, and site build where it does not. Life goes on. Houses will get smalller, and more energy efficient. I think Green labels will fall by the wayside, in favor of green practices, environmentally conscious builders, and energy effiency. Good luck to all in this wild ride.

Anonymous said...

As a vendor to the modular factories, I have been saying for years that the factory owners and the organizations that these manufacturers belong to (MBSA, BSC, etc.) should band together with an advertising campaign to promote the systems built home. A generic "got milk?" type of advertising. So far, to my knowledge, there has not been any such movement.
Brian, SPeterson and Tim are all correct in saying that modular is the way to go. But the general public, by and large, don't know what can be done with modular. First, the builders must be educated to the advantages of modular and then the homeowner will be informed. There will always be "pre fab" stigma in some people's minds, but the truly knowledgable consumer will be able to determine which type of construction best suits them.

Anonymous said...

Even Burger King knew that a customer should be able to have it their way.

A customer should be able to customize their home as long as they are will to pay for the expense.

Offering five homes and telling a customer to pick one is stupid.

If certain plants go semi custom that is great news for the custom home builder. Less competition more profits.

Great article Coach. A lot of good responses.

Brian Flook said...

I will gladly lead the charge to create a national campaign that will bring the process of modular building and the great product to the level of brand awareness and product awareness it deserves.

If you are interested please email me at: bflook@power-marketing.com

It's a great time.

Any takers?

Anonymous said...

As a successful factory rep for 16 years, I have watched the industry go down the spiral path of self destruction. Too many times, the factory looks at the builders requests and completely ignores them because after all, the marketing manager at the plant " knows all" and does not agree with the builder. Problem is that this same marketing manager, as well as the " upper echelon" at the plant do not go out into the field to see what problems the builders are having. They offer nothing to the builder in the form of advertising or marketing other than some handout sheets and a 20 page " marketing manual" ( 20 pages if they are lucky). Whenever we lose a builder, I ask him what the reason for leaving was and they state that they are happy with the rep, happy with the product but just cannot get someone to listen to their problems about marketing. They are not that familiar with marketing and feel that this important aspect of their business is lacking. They say that the company does nothing for them as far as advertising the product or the concept of modular housing. I have repeatedly advised marketing of this and use the fact that for example, the local Ford dealer will run an ad for his market but following that will be an ad run by Ford itself heralding all of the virtues of owning a Ford and the quality of its construction and
that the buyer should run down to his local Ford dealer today to see for himeself! To this I am told,
" we don't do instituional advertising and if the builder wants an ad, then he will just have to run it himself". They then point out that they do a lot of advertising on their factory web site and that should serve the purpose! I guess they are hoping that everyone automatically goes to their web site and the world is one big happy, wonderful family with no problems! When is the last time you saw a TV or print ad from a modular manufacturer or even heard an ad on the radio!
Then they wonder why the builders go from manufacturer to manufacturer!