Wednesday, February 20, 2013

Two Market Factors Effect Modular Home Production

Economists estimate that home prices will rise 4.7% in 2013 and that’s on top of estimates that home prices climbed 6.4 percent last year. That’s more than an 11% increase in just over a year. With costs rising at modular home factories, how long can some factories continue to not raise their prices and/or offer discounts?

This upward revision to home prices was attributed to three key factors.
  • Momentum - the faster home prices turn, the more people believe they will continue to rise.
  • Depleted used and new inventory.
  • Credit availability.

Another factor that is helping the higher number of housing starts is the rental market.

Over the past few years vacancy rates have plunged and rents have increased in the rental market. But the recovery in the housing market shouldn't prevent the rental market from doing well.

There are a few "cyclical and structural factors" underpinning the rental market.
  • Credit conditions are expected to ease but are still historically tight.
  • The knowledge that home prices can and do fall.
  • Households looking for mobility prefer to rent.
  • Public policy is evolving to consider affordable renting options as well as affordable homeownership."
  • "Aging population supports rentals.
  • Investors have engaged in REO-to-rental programs.

Modular home factory sales reps need to work with their builders to help find and work with local small developers that want to enter the rental market. It’s a huge underdeveloped market for modular builders as a lot of the sales to these developers is made directly through the factory sales staff.

1 comment:

Walter Landry said...

The problem I see in some of the depressed or slow to recover areas is that site built construction prices are still cheaper than modular. About a 10% difference so between the homeowner not wanting to look at the difference in construction quality and energy efficiency plus the low appraisals by lenders it will continue to be tough selling at least in southeastern MA and RI.

Thanks for your blog I check it all the time. Keep up the good work.