Sunday, April 10, 2016

Modular Housing Continues to Evolve

Back in 2000 I became a sales rep for Champion in their Claysburg, PA factory after being involved in site building as a General Contractor for many years.
At first my job centered around HUD homes and selling them to street dealers. Needless to say it was not at all what I had expected after site building huge custom homes. But that was the job and I did my best.
Champion’s Clayburg plant also had a line of homes they were introducing called Genesis, a real IRC code, wood frame home that was to be sold to site builders. The Sales Manager asked if I wanted to switch from HUD to modular and I jumped at the chance. My love of modular began that day.
Then something happened that forced me to abandon ship. The Genesis line of modular homes was being adapted by Champion’s Redman Homes for HUD street dealers and the writing was on the wall that the Genesis line was going to change and not for the better.
I left to join Bloomsburg, PA based Design Homes, a true custom modular home factory. Now my love of modular housing was in full bloom.
Fast forward to 2016 and the modular housing industry appears to be evolving again. The housing recession that began in 2008 forced many factories to close their doors forever. Modular housing’s share of the new home market also slipped from about 6% to less than 3% during this time.
For many of the modular factories that were able to survive the recession, the solution to survival became manufacturing commercial and multifamily projects along with building custom homes.

In the past year another evolution has begun and this one may not play nice with modular home factories. It started small with Clayton buying G&I Homes in New York and taking over all their locations.
The Three C’s (Clayton, Champion and Cavco) all have a presence in the New England, East Coast and Upper Midwest regions but recent rumors have them looking to buy modular home factories in these areas and converting them to more cookie cutter modular home factories where custom is out and only stock plans with modifications will be built.

One exception to this on the East Coast is Cavco’s Nationwide Homes in Martinsville, VA that has always done custom modular and probably will continue doing so.
This in itself could be good news for the modular housing industry. They are pros at marketing and if they jump into buying modular factories and continuing to manufacture only modular, there will be more effort put into adding both builders and dealers to their sales efforts. Our 3% could climb.
Modular will get their national marketing programs but it will not be targeting the same folks that the custom modular factories want. It will target the Uncle Si market that Clayton made famous. Real custom modular homes will not be encouraged and the custom builder market will have to find other factories to build their homes.

Rumors have been flying the past few weeks that one of the Big C’s is making a concerted effort to buy modular factories in this market. If it happens, it will it change the modular industry as we know it. I’m sure the acquired factories will be more profitable simply because of economies of scale and the discouragement of custom homes. A lot of the design and engineering work could be shifted to a more central location and upper and mid-level management might be replaced with people familiar with what the Big C company wants.
If this happens, and I have no doubt it is on the drawing boards of the Big C’s, it could actually be a good thing for the custom modular builder. I’m sure that some of the displaced management will begin their own factories serving the custom builder. The established factories will begin going after all the displaced custom builders to add to their fold and with the MHBA’s new marketing program about to launch, they will become a stronger and more organized force in the new housing market.
Whether you consider Champion, Clayton or Cavco buying east coast modular factories a good thing or a bad thing, the fact of the matter is that it is going to happen.


insider said...

Coach, it is about to happen. A major modular factory is being sold to a big C company and it will shake the modular housing industry to its core.

Anonymous said...

Rumors are flying about Champion Homes closing a big deal on Friday. Can anyone verify this. I won't mention the factory they are buying but I get my homes from them and this is a big deal for me. Has any other builder gotten a straight answer from them yet?