Wednesday, September 19, 2012

The Fate of Pre-Fab Housing is in Blu Homes' Hands

Before we get started let's discuss the difference between pre-fab housing and modular housing. Plenty has been written about pre-fab homes and just about all the books and articles seem to point to a particular type of home... the modernistic, flat roof and boxy looking home most prevalent on the West Coast.

Modular housing tends to be the homes with more traditional floorplans; ranches, capes and two story homes.  Even though they are found in every state, the vast majority of modular home factories are east of the Mississippi River.

With that said, here is where the fate of "pre-fab" rests with Blu Homes. Recently they were given a $60,000,000 investment from a European investment group for Blu Homes' marketing and sales efforts. Looking at the potential profits that could be generated by Blu Homes leaves one wondering just how many decades it will take for the investors to see any return on their money. You do have to admit that they have been very aggressive when it comes to marketing themselves. I have even given them good press.

If they were to go out of business in the next few years, and I sincerely hope not, what will happen to any other investors looking to make money with pre-fab homes. If the self proclaimed "inventor of pre-fab housing" in the US, Michelle Kaufman, couldn't keep her little factory running, why would anyone think that her designs, which Blu Homes acquired, could sustain an entire industry?

If they lose their $60M investment, why would any other investor even look at modular or pre-fab?

If Blu Homes is even a little successful, it won't be long before the more traditional modular factories begin building pre-fab style homes and at a much lower price to the consumer. If that $60M was earmarked for the sales and marketing efforts of Blu Homes as was reported by the company, wouldn't it have been a better investment to look into working to establish a marketing program for the entire modular and pre-fab industry instead of just one factory that even in it's best year might have a gross profit of a million dollars?

It's just one of those things that makes you go HUH?


Anonymous said...

Pure speculation on my part, but I would guess you might see a lot of retail "stores" selling Blu Homes up and down the west coast. Think Apple store, except you are buying a pre-fab home not an ipad. It is an interesting possibility.

The modular industry is fixated on production efficiency in the plants. We leave sales and marketing in the hands of builders/dealers. Most of whom can't define marketing. Then we stand back and wonder why our sales aren't growing. It will be interesting to see their approach.

It seems like a huge investment that is being made. I hope the money is going to equal parts marketing, manufacturing, and on-site coordination/construction.

I wish them well!

Anonymous said...

Yep, I go huh too! But huh because I can't believe you are putting the future of what these folks describe as prefab. I think there is a big difference in being able to persuade others to invest huge sums of money in a venture that has really yet to prove itself and then going about to provide those investors with a legitimate return on their investment.
And another HUH for the "pre-fab" industry they are touting. Gary, you have been in the industry for a number of years and I am sure you can remember the days when the term "pre-fab" was looked at in not so favorable terms. Yet, when a bunch of architects began dabbling around with modular they either did not like the term or chose to embrace another term and stuck with pre-fab. Yet, the products they have been designing look more like upgraded HUD Code units than modular with their flat roofs, etc. It did not take the HUD Code industry long before they knew they had to achieve the residential look at they quickly moved away from mobile, trailer and HUD to their chosen term of MODULAR. Reckon they will now choose to be a part of this so called "pre-fab movement?"