Wednesday, January 2, 2013

Predicting a Good Year for Modular Home Sales

In case you haven’t noticed…new home construction is making a recovery. Modular home factories are running at their best production numbers in years. It may not be at the levels they once had but it is improving.

There are predictions that 2013 will be a good year now that Washington has passed part of the requirements to fend off fiscal Armageddon. Bush tax breaks are now permanent and home mortgage interest deductions are safe.  

For modular factories and their builders, some parts of the country are going to see good numbers. Man camps, motels, dormitories and public housing will keep the lines churning at both the commercial and home modular factories while Sandy, a reduced used home market inventory and multifamily housing along with the pent up wants and needs of new home buyers that were waiting for the election results will mean more homes for the modular home factories.

Here are my predictions for the housing industry in 2013:
  • Even though will probably never reach the 21M starts of 2005, this year we’ll see 800,000 starts which is what is needed to keep the entire economy on a good upward trend.
  • A good indicator of future business are new home permits, a good stand-alone indication of future home starts. Look for this to climb to over 900,000 for 2013. There are many people getting ready to take the plunge and sign to have a new home built.
  • The Index of Builder Confidence will continue to climb and will be above 45 by the end of the year. We need to see it above 50 but that will have to wait until 2014.
  • Backlogs will grow for modular home factories. Many factories will begin running at full capacity at least for 6 months this year. Just 2 years ago many of them were only running a partial week.
  • Several productive modular home factories will be sold this year. The big names in our industry are looking to expand quickly and can’t wait a year to get on line. Unfortunately, many of the factory owners that want to sell their plants won’t because they have not kept up with sales and marketing and will be lucky to get out with more than their debt covered if they do sell.
  • Investors will return to investing in national home builders. It’s a tough market to crack but a modular factory somewhere will work hard and finally get one or two developments that will offer only modular homes. Once this happens, national home builders like Lennar and Ryland, etc will either enter the modular home building business or finance existing modular factories to expand their production. This one thing alone could move the modular share of the home building market from 3% to 8%. 

Some of these predictions are optimistic but can you imagine what our industry could become if I’m right!

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