Monday, February 13, 2012

MODULAR HOME FACTORY SURVIVAL IN 2012

After talking with quite a few modular home and housing leaders, there seems to be a consensus about 2012.  Hunker down and hope things aren't as bad as 2011!

Even though this might be what these folks are thinking, they sure aren't acting like it's time to run to the bomb shelters.  In fact, according to people at IBS last week, there was a genuine upbeat attitude by those attending the show.  Card readers were humming.

Let's take a look at what modular home factories are probably going to be facing in 2012 that will make it even harder for some of them to stay in business.

Tightening credit.  Not only are new home owners having to go under the microscope to get a loan, the factories will too.  With the number of manufacturers filing bankruptcy, cutting employees, idling factories, merging or simply closing their doors forever, banks and private investors will want even more information than ever before making investments in modular home production.

Vendors are getting tougher.  There was a day that you could string a vendor along for 60-120 days before they were paid.  Today that long term debt could be the noose that hangs a factory and forces it into bankruptcy.  And if the vendor goes bankrupt, the Bankruptcy Judge won't care that you had 120 to pay the vendor, they will begin procedures to get that money to pay the vendor's creditors.

Higher fuel costs.  Have you seen the price of diesel fuel lately?  OUCH!  And these costs must be passed onto the new home buyer which raises the cost of the final product.  Fuel surcharges will continue to be a problem.  Not only the trucks that haul the modules will pay higher fuel prices, so will the escort cars, factory service trucks and sales reps.


Lower new home prices.  In some areas of the nation, new home prices are down another 1-2% over last year.  Couple that with increasing material costs, fuel prices and labor costs and you have modular home builders looking to their factory for help in holding the line.  If factories were able to offer a discount to builders in the past, this might be the last year we see it.

Inspections.  Building to Energy Star specs is tougher this year.  Cost of implementing energy savings into each home will add hundreds of dollars to each home leaving the factory.  On-site inspections are getting tougher is most regions which might not effect the modules leaving the factory but will have an impact on the builders who must follow tougher and tougher guidelines.

Competition.  With fewer homes being produced by the modular industry, the sales departments of every factory will find it harder to recruit new builders and if they can't keep their existing builders happy, they will be left with a dwindling builder base. 


Elimination of marketing.  This is a disturbing sign of the times.  Modular factories believe they cannot support both a sales effort and a true marketing effort.  Marketing is hard to quantify and therefore it is often the part of the sales and marketing effort to be cut first.  Without marketing to bring prospective builders and home buyers to the factory, it just might become a death spiral for all parties.

What a modular home factory does this year could make or break it.  We need to get better at what we do best...market, sell and produce great modular homes for our customers!

12 comments:

Anonymous said...

Factories should offer buyers the option to DIY. Most builders just add cost, have big egos and little else. If a factory cant work direct with a buyer, they will be gone in 18 months.

And if a factory with assets cant get financing, dont expect a builder to have any access to credit. No customer is going to countersign a builder's loan. In 12 months, only the most professional builders, with a deep comitment to their customers will be left. And I think thats a good thing to happen

Thomas Hetherington said...

DIY may sound really cool, but I doubt that the loan committee would feel very comfortable explaining the risk. It is all about meaningful services from building professionals.

Anonymous said...

Anonymous sounds like he works for blu homes. It stupidity to think that home owners can design and complete custom modular homes. After the diy the savings are negligable and the quality sacrifices are severe.

Why would a customer need to counter a builders loan? The builder is not taking the loan. The bank wants to know that the builder is going to complete the job to code and above code. Wishing people,lose their jobs is terrible. The natural occurances of a recession and recovery is part of american capitalism. I hope their is a tonof successes this year for all.

Everything i see in the ny market points toward amgreat year. I hope the positive trend spreads to all.

Anonymous said...

What percent of total cost does the builder take for himself? 5? 10? 20 percent? For those dollars a DIYer can hire a per hour architect to review details and a lawyer to keep subs in line. I really dont think a 'mod builder' provides value as the factory is doing most, if not all, of the heavy lifting. Getting trades to finish up what the factory didnt, isnt that hard.

No one is wishing to put folks out of work, but everyone does expect value for their money. Thats why you shop at Walmart and go to sales at Macys, right?

Bob the Builder said...

Anonymous 7:40. I don't think you fully understand what goes into building and finishing a modular home. Banks are reluctant to finance owner built homes. Subcontractors, vendors and suppliers can smell an owner that is building his or her own house and their prices go up to compensate for possible lawsuits that are sure to come because the buyer didn't understand that there has never been a perfect house built, ever.
Don't forget all the permit procurements, inspections and delays that will require you to leave work to handle.
And if something goes wrong during the process, guess who's the general contractor? You are.
And what happens if someone is injured during construction. Here come the lawsuits.
That little bit of profit that the builder might make on your house is starting to sound OK now.
And a sale price at Macy's still gives you better quality than the junk they sell at Wamart.

Anonymous said...

A lawyer to keep subs in line?? Really? Like to see that work.

I don't know anyone who is financing Owner-GC homes right now. I can get financing for my clients when I am the GC though.

Dave said...

I called the Ford factory and told them I did not need the dealer to vacuum the car and fill the tank and they added no additional value

I cannot understand it, they would not sell me direct

Anonymous said...

Y'all mock the DIY concept, but what does a mod builder make a on a moderate priced home, say, $300,000? Then ask if a BIYer would be foolish not to consider DIYing it(if thats a word).

The comments here by mod builders are reflective of how stick builders talk to mod factories. I think some strategic thinking is due if we want to see mod factories survive this year.

Bruce Stroehman said...

anonymous 9:17. Are you a dumbass by birth or did you become one recently. What builder makes $300,000 on a moderate house? If that were true, I would only have to build one house a year and would take every fourth year off.
You must have voted for Obama because you think that everyone else is making a ton of money and figure you can tax the hell out of them.

Anonymous said...

@Bruce, Perhaps you should read more closely and see that 300G was meant for the cost of a home. If your comments reflect how mod builders act and think, no one will buy anything from you. Your comment only reinforces the idea that modular builders arent worth the trouble as they have trouble reading and thinking.

Bruce said...

you asked what a builder would make on a moderately priced house? then you answered $300,000.
You did not ask what a builder would sell a moderately house for, you asked what he would make and that equals profit, dumbass.

Anonymous said...

Bruce, the commas clearly indicate what was meant.

Your comments , sadly, underscore why the mod industry is in such sad shape.