Friday, March 16, 2018

Has Customization Gone Too Far in Modular Housing?

When you look back on the history of the modular housing industry you find that the earliest homes built to IRC standards were simple ranches, capes and 2 story models. If you were a builder you presented your new home buyer with the factory’s plan book which usually had between 30 and 100 different but strikingly similar dimensions and layouts.

Before 2000 very few modular home factories allowed their builders to veer far from the plans in the ‘book’. You could add a couple of feet to the width and length as well as changing the roof pitch from 5/12 to 7/12 in a ranch or 2 story and from 9/12 to 12/12 in a cape. Houses fit neatly into 2 modules for a ranch and cape to 4 modules for a 2 story.

After 2000 a new breed of modular home builders came into the market, the site builder that switched to modular. Buyers were beginning to ask, no demand, changes to the factory’s basic plans and management was more than happy to meet those demands.

Buyers asked for tray problem. 9’0 problem. Hip roofs...problem. 20’ wide marriage wall openings...problem. The list of wants and desires kept growing and factories kept saying “no problem.”

Modular builders began testing the limits of what their factory could do. A buyer wants a wall of windows at one of the lifts points, another wants a 10’ ceiling and yet another wants to add an apartment into their home with totally separate utilities. Factory engineering departments and their CAD operators were more than happy to be creative in designing a plan to meet the builder’s demands.

When business hit the recession in 2008 the factories were scrambling for orders from builders who were also looking for new home buyers in order to stay in business for just one more year.

With mortgages at a premium it seemed like only the Boomers had the resources to build new homes but they wanted features and options that were being shown to them on the Internet through YouTube, Facebook and at Builder’s Shows where site builders who were used to customization ruled the fairway.

By 2010 these wonderful new options along with all sorts of ‘Green’, ‘Sustainable’ and ‘Energy’ options were no longer the things of wishes and dreams but became necessities and demanded options.

Many modular home factories moved away from plan books, especially by those serving the highly custom Mid-Atlantic and New England markets. The message brought back from the factory sales rep to management was that nobody builds from the plan book anyway so why push it.

It’s hard for a sales rep to tell a builder that buys 2-3 homes a month from them that the factory won’t do a hip roof. Instead he/she brings the buyer’s plan, usually drawn on an inexpensive CAD program purchased for $29.95, to the factory and says they will lose the order if the builder can’t give the buyer a hip roof. Or a dutch clip or an oblong turret roof or a triple reverse shadow line something or other.

Now the factory management is faced with a problem of turning away work from a good builder knowing that they will probably shop it around to other factories that will agree to try building it or simply give in and try to do it themselves.

I was walking through a factory a couple of years ago when I came across the A and B boxes of a house without a ceiling. When I asked what was going on the owner told me that they now build 2 story homes with 10’ ceilings with the ceiling actually being part of the joist system of the C and D boxes.

He told me that he charges less than $2,000 for this option and I decided right on the spot that if I built another home it would be with his factory because I couldn’t that done in site building as a $2,000 option.

Tile work was a ‘no-no’ in the house just 20 years except as a backsplash in the kitchen and above the bathroom sink. Today extensive tile work is done on the production line in mere hours compared to what would take a tile setter a week to do in the field.

Recently I’ve written about a growing concern about the quality of the product the builder receives from the factory. One builder told me every house was like Christmas as he unwraps module after module and is greeted with a surprise in each box. That’s not how modular housing is supposed to be.

Factories must think that flitch plates and 16” LVL’s can solve just about any structural problem they encounter as more and more of them are being used. Twenty years ago I never had an ‘offset’ roof line option or the ability to order installed custom finished oak staircases on my factory’s order form.

Let’s pretend we’re a fly on the wall when the sales rep comes into the Sales Manager’s office with a demand from their builder for something that has never been done by them before.

After arguing for a few minutes the SM concedes that they just may lose a big builder if they say they can’t do it. Then engineering is brought into the discussion as if it is going to happen and it’s up to them to design it.

Engineering works on it with the help of the third party inspectors who will have to sign off on it in order to get it approved for the state where it is needed. Hours are spent designing it, figuring out how to do it and then being reviewed by the third party.

In just about any other industry in the world the process of working on a special order item doesn’t involve so many ‘outside’ people’s input as much as IRC modular housing does. Bottlenecks and regulations can kill a lot of time and use up a lot of money getting an OK to build it.

If the option is to get past the state code people, the third party may ask them what they want and since it something that needs researched, it could take a while before the state and the third party work out the final details that will get it approved.
By now the production department has looked at it and decided how it will get built on the production line. Maybe one or two people from the production line will sit down with them and figure out a sequence of events in order to make it happen.

The time and money already spent is ignored when the option is ready for costing to the builder. It is done almost on a “how much do you think we should charge for this?” basis. That cost usually has nothing to do with the amount time, talent and money that has already been exerted in figuring out how to do it.

Then comes the moment of truth. Presented with the cost, will the buyer say yes or no? If yes, will the factory ever be able to recover their cost and can this ‘one-off’ design that has never been done before reach the builder exactly the way everyone has envisioned?

Or the customer could simply so “No” and all that time and money preparing for it was a total waste.

I wish there was an easy way to tell a builder ‘no’ and have them understand that it just might be a nightmare when it reaches the buyer’s lot. But that could mean that the builder goes to another factory that says “yes, we can do that” and then the major problems that could arise fall on the shoulders of the other factory. Nobody is a winner in this scenario.

Being a modular home factory doing custom ‘bleeding edge’ work is really not for everyone. Maybe it’s time to let those factories that want to do this continue to do it and those that don’t want to ride the sharp cutting edge continue to do the custom work that they have perfected over the years.

But there will always be that customer that walks through the modular home builder’s door and asks “Can you build this for me? I saw it on YouTube.”


Anonymous said...

Porsche offers custom paint colors. They’ll review the request under a (paid for) feasibility study. And issue a response in 18 to 24 months. Maybe our industry should take a page. It’s our bar to raise.

Anonymous said...

Great article on why our industry is self destructing

Anthony said...

If it can be done stick there is no reason it cannot be done “modularly”. What do we all always say- “building modular is just another method of home construction-we just build a large portion off site”. So if this is true as we all say it is there should be no reason we cannot build fully custom homes if planned and built properly. If the modular industry is going to jump to the next level ALL involved in the process must be willing to get there and turning away designs for they are “too custom” is not going to move us there. Let’s move forward not backwards...

Anonymous said...

Anthony, we can build anything sent to us. That is not the problem. The factory may have to charge you such a huge amount of money to do it or break the house into so many smaller boxes that your customer won’t want to pay for all the engineering required plus the cost of production or the massive amount of freight. Major special requests from your customer will probably require us to ask for quite a large non-refundable deposit just to cover all the design and engineering costs before we can begin deciding what to charge.
Coach is right when he says that a factory will charge for the option or design alone and not for all the time that was spent on figuring out how to actually do it. Builders have little patience and want the cost of this unusual design quickly because that’s what builders have come to expect from us.
Without naming our factory look for us to begin taking a second and maybe a third look at a builder’s request before we decide if we really have the time and just as importantly if we have the skills to do it without problems discovered in the field and having repairs being made at the jobsite.

Unknown said...
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Unknown said...

This problem isn't just an off-site problem, this is a "home building" problem. Even us stick guys are getting hammered with all kinds of one offs and design changes to already priced floor plans and options lists. The problem has arisen because the public has very little idea on what anything costs. All they know is that they are spending $xxx,xxx and that's a lot of money, and a lot more than our home 10 years ago, so for that much more I should get what I want. The average price of homes are increasing at a substantial rate, and the costs of building are now so high (land, materials, regulations, etc.) that it is very hard being profitable building entry level or lower costs homes. Because of this, many builders have moved into the higher priced/better margin market that is highly competitive right now and feel they can't say "no" as they can't produce enough value to the home buyer in saying "no".

As you stated in the article, many of these changes are undervalued and under priced so as a builder it's very hard to show why you can provide a better value without the special request, as your competitor prices these types of changes so low (either on purpose or out of negligence) that the price difference isn't a barrier to the home buyer so why shouldn't I as a buyer get what I want....

Doug Stimpson said...

More often than not the plant is not involved in pricing modifications so the additional costs fall short of what they should actually be. Get those involved that know what the impact of changes actually are.

Josh Margulies said...

Modular construction has its applications. We’ve all built high end stuff and know that when you have control of finish materials, you can build a nice shack. Fancy gingerbread and nice tubs.

But, principles of production being what they are; there is a point where you’ve no business using the technology of modular if it is not economically feasible to do so.

If it is too small or too goofy or too unique or the idea of modular just “sounds” appealing, invariably the analysis shows the numbers do not work.

I was taught early on that “modular is not all things to all people.” I do not think that is a dated statement. I think it is a classic assessment.