Tuesday, January 3, 2012

NEW RENTAL HOUSING MARKET HEATS UP


With U.S. unemployment at a lofty 8.6 percent, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the U.S. housing industry.

The percentage of Americans who own their home dropped from a peak of 69.2 percent in late 2004 to a 13-year low of 65.9 percent in the second quarter. It edged up to 66.3 percent in the third quarter of this year.

On the flip side, the percentage of rental properties that are empty fell to 9.8 percent in the third quarter from 10.3 percent a year earlier.  Rents are rising, vacancies are falling and the current rental supply is limited.

Groundbreaking for new housing jumped 9.3% in November to the highest level in almost 2 years.  These gains however were almost all in the multifamily housing segment.  Groundbreaking for housing with 5 or more units were up over 30% in October and are twice the level of the year-ago level.

The modular home factory has a built-in advantage over stick builders when it comes to getting this business.  Developers want to save money and need to save construction time.  The quicker they can get renters into their buildings, the faster they can get a return on their investment.

With the factory’s design and engineering staff already in place and a factory sitting with less than stellar production levels, why more modular factories aren’t ferreting out these developers is a mystery to me.  Most of these developers are creatures of habit and tend to build the same way they always have.  Why should they look for something new?

We have to find them, explain the enormous amount of money they are leaving on the table when they are forced to pay for Architects, designers, hundreds of on-site workers and the removal of job waste.  Modular construction is the key.

A modular home factory project in Boston

5 comments:

Randy said...

ModCoach...more than happy to comment on this post. Everything you say is accurate and this is what I have been preaching to developers for 30 years. There are 2 issues which are hard to get over. First....as many have told me...show me a comparable of site vs mod and let me see where the numbers really shake out....there is no such study that I have found. Second....right now it is all about "how much" subs and GCs are giving away their services in a a way that a factory cannot compete with. Furthermore there are urban legends a plenty in which a developer says " so and so got his project done for $x all in" Now that number is not verifiable nor is it reality but once it hits the streets it is difficult to pull it back.
I would like others in the industry to share on this blog what they are using to overcome these 2 primary objections.

Anonymous said...

Dear Randy,

As the saying goes if you want something done... How hard could it be to interview a modular builder and ask about the finishing and site costs.

In regard to GC and sub giving there services away this makes no sense. Everyone has overhead, insurance, labor etc.. The finishing costs of site labor and site work is the same for modular construction or site built. The modular advantage is having a lower cost of manufacturing and labor in the plant as well as shorter contruction time.

Anonymous said...

Randy,

The cold hard truth is that the developers have no way to measure the difference if they have never built with modular construction before. They won't trust your figures.
Coach has had several great articles about multifamily production including one of the best videos I have ever seen comparing the time and cost advantages.
Maybe he can put up a link in the article to this video.
I also agree with Anonymous about GC's and Subs working for low wages. The days of illegals and untrained labor working on big projects is coming to an end. The remaining GCs and Subs will be real business people who can't afford to cut their prices to the bone and stay in business.

Coach said...

Anonymous,

I think this is the article you were referring to about a video. I put the link in this article.

Randy said...

Well Anon 1 and 2 let me reply by saying that 1. I work for a factory and have access to numbers up the kazoo. 2. subs in site built ARE indeed charging way less and either not paying their taxes on time...lower quality labor or down right desperate business working for the cash to get from this week to the next. Now then do I think it sustainable....no of course not, but as long as a site builder/developer tags me with the mythical "I can build all in for $100/ft for multi-family, the factory story does not resonate at all. The business you get are the savvy developers who understand that the speed does in fact impact the IRR. This from a guy who is in this every single day for many many years.