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Thursday, August 2, 2018

Is Clayton Taking a Step Backwards in Home Construction? updated 8-4-18

When you look these new homes being built in Hardin Valley located near Knoxville, TN, it’s hard to believe they are from Clayton Homes. Since 2015, Clayton has acquired seven site building companies across the country to expand their brand beyond prefabricated homes.

Clayton is the largest manufactured housing company in the country with about 50 percent market share. So why move into site-built houses instead of using modular construction?

Check out the size of the dumpster. You don't usually see that on a panelized house site

It is interesting that instead of trying to build custom modular homes Clayton has chosen to build their new homes the old fashioned way. Let’s hope they are at least using panelized walls. But that doesn't seem to be the case when you look at the picture of one of their new site built homes being erected.

You have to wonder why Clayton would site build instead of using a modular approach. The answer could be a simple as Clayton doesn’t really know how to build custom modular homes and doesn’t seem to want to learn. Custom is a completely different animal than the standard ‘house plan’ homes Clayton builds.


In 2016, Clayton acquired Nashville home builder, Goodall Homes. They’re in the process of building more than 220 homes in the Knoxville area, pushing the Clayton brand in East Tennessee beyond it’s well-known manufactured homes.

Their plan is to continue expanding into the site built home market.

While many of the same materials are used to build the manufactured homes and the site-built homes, the main difference is where they are built. Manufactured homes are built in a warehouse and transported to a lot while site-built homes are built on the lot.

The majority of Clayton’s business around the country still comes from their prefabricated homes. This year, Clayton will build an estimated 50,000 manufactured homes compared to 4,000 site-built homes.

Since 2015, Clayton has acquired seven on-site home building companies:

- Chafin Communities (2015 – Atlanta)

- Goodall Homes (2016 – Nashville, Knoxville)

- Summit Homes (2016 – Kansas City)

- Oakwood Homes (2017 – Denver, Colorado Springs, Salt Lake City)

- Harris Doyle Homes (2017 – Birmingham, Auburn)

- Brohn Homes (2018 – Austin)

- Arbor Homes (2018 – Indianapolis)

MODCOACH NOTE:

I put this article on Linkedin and got the following comments. Not in any particular order.

Comments from LinkedIn:

C.J. Spofford
Inventor Shim-pull Installation System for Building Industry It is just a wild guess, but I am willing to bet that they are doing time studies and cost analysis for all methods of construction. If so, they will be able to determine the most efficient and effective way to get from point A to point B which of course will give them many competitive advantages. Would you expect anything less from a Warren Buffett organization?

Gary Fleisher Editor of Modular Home Builder Robert Bulla I agree that if anyone can be successful building tract houses better, it should be Clayton. What I don't understand is why Clayton is using 60 year old technology.

Robert Bulla Sales Manager at Clayton Homes Gary Fleisher my understanding is like Buffett they are buying great companies with great management that continue as they were only now with better resources. Then encourage to find ways to improve and adapt using the core knowledge and economies of scale brought in by Clayton

Ken Krantz
It's more important to find out WHY we do things than what and how we do them. Look out America............here comes more mobile manufactured homes.

Vernon Miller TENNESSEE MODULAR System Built Housing is not mobile homes. Big difference there Ken..

Patricia Russell CEO of Casa Duro Vernon Miller we've engineered our homes to resist 325mph winds, I don't think mobile manufactured homes can match that.

C.J. Spofford Inventor Shim-pull Installation System for Building Industry I believe that you had the answer in your original statement when you mentioned panelized walls. I honestly believe that they will ultimately end up being able to produce all types of structures utilizing the most efficient methods from fully built modules, all the way back to stick-built depending on the opportunity. They will know the most efficient way to complete the task.

Tim Alexander
"Never Lose Power Again" Why lose the opportunity to build a home if you have the capabilities of stick building and the customer won’t have anything to do with modular, go for it. Good for Clayton Holmes.

Gerard McCaughey ENTEKRA - Fully Integrated Off Site Solutions https://youtu.be/tvNyoJkBvkQ via @YouTube‬

Steven Lefler Vice President at Modular Lifestyles, Inc My 2 cents.. I really do not know the why but I would suggest the Original builder had Open "Permit To Build" to finish after CLAYTON made their acquisition. Just Saying

Ken Krantz It's more important to find out WHY we do things than what and how we do them. Clayton builds manufactured homes... Some companies do off site panelization components for homes...........Some companies do off sit modular sections for homes. The one thing they all have in common is...........They are all made with wood and has been done this way for the last 60 years. WHERE IS THE INNOVATION?

Jason Bos Modular & Traditional Construction Professional Seems to be standard operating procedure for CMH/Berkshire. They are very good at vertical integration they have been doing it before Silicon Valley. Everybody knows if you want to put more offsite products in the market you MUST have a developer partner or own a seasoned development company. Great work CMH, keep advancing the industry!

Robert Bulla Sales Manager at Clayton Homes Clayton like our parent Berkshire buys great companies and implements policies that consistently looks for ways to increase efficiency and scale. You will see continued improvement as these opportunities are realized.

Andrew Crosby Developing Houses Building Futures Is it simply more profitable for them this way?

Jason Reints Sales Manager - Building Automation (RANDEK Prefab, Panelised & Modular Building manufacturing equipment) From memory they have said it's an expansion strategy

KEITH HADDING Consultant at South Bay Developers I don't agree, I see them grabbing larger shares of the market however quality and efficiency seem to escape them. Warren made a good move in gathering the largest share of manufactured homes which support his lender programs and vice versa. But it's not how good it is, it's how big and what do they lend other forms or streams of income.

Rich Foreman
Owner at Titanium Tiny Homes & RJF Transport Being a contracted Transport Co for Berkshire and Clayton Homes Nationwide,The manufacturing aspect of things cannot facilitate the demand of their product. This above in my opinion is another affordable solution to keep sales over passing them onto the next Competitor. They've been offering these type homes in target area states for quite some time. They've many crews working. Not much W. Buffett does will be a failure or make a decision that will be here and gone in a day with the Elite Management,Marketing,Sales,Warranty,Customer Service,And Real Estate world. they possess. Top notch employees.Also Their market and quality,pricing differs from most manufacturers.Were proud to say were an affiliate an honored to work aside this Company on a daily basis. Just good wholesome,down to earth professional staff on every level, everywhere we go.Ive always said,"Buffet took Vows to the business world",Hell be successful til death do him apart.

Gerard McCaughey ENTEKRA - Fully Integrated Off Site Solutions It’s really very simple:https://youtu.be/tvNyoJkBvkQ via @YouTube‬

Kevin Oakley Marketing Strategy & Execution Expert They will most certainly go all in on modular when the next market turn hits OR customer can no longer tell a difference... whichever comes first.

Ken Krantz It's more important to find out WHY we do things than what and how we do them. The decision to do this must have been made in a corporate board meeting.

Gary Fleisher Editor of Modular Home Builder Gerard McCaughey, you should get them to look at your FIOSS system. They obviously could use it.

Gary Fleisher Editor of Modular Home Builder If a modular home factory in a small town in central PA can turn out custom homes of this quality I simply don't understand why one of the largest factory built manufacturers in the world wouldn't do it for all their IRC communities. http://www.modularhomecoach.com/2018/08/another-stunning-example-of-custom.html

James King General Manager at Clayton Homes With Clayton Homes producing its own building materials in house including lumber and windows, without excessive overhead and middlemen, now available to these site builders, cost advantages are substantial versus traditional material procurement. As well, the Clayton homes focus on ways to maximize efficiency and reduce waste will pair with lower material cost to offer a distinct advantage for traditional site builders under the Clayton umbrella.

Pamela Bell Innovation in New Zealand's built environment. They also said it is about 'cross-pollination' and taking learnings from each side (site-based and offsite) to create construction innovations... They are a polished operation - it will be interesting to watch what they learn.

Patricia Russell CEO of Casa Duro I think the time will come soon that the cost to build woodframe construction will far exceed modular and it will be more an artisanal sector of construction. This is just my opinion based on my research of this market sector.

5 comments:

Barry J said...

Coach, is this a joke? It really looks like a stick built house and I mean stick by stick built. Clayton must think they have to learn custom home building from the way we used to build houses.

Anonymous said...

Clayton has looked at trying to add modular to some of the site built companies they have acquired. Also, investigated doing a combination modular and site built for the same house; just not there yet.
one problem they might have is a lack of modular capacity.

bill hart said...

One thing is for sure..Mr Buffett is in it for the long term..read his corporate operational philosophy!

If you have, you know he will not make the same mistakes Totoda made and have to retrench and then later have to costly regroup and then years later as a Toyota..


Gentlemen, giants have staying power..youll recall Coach saying as much!

Jeff said...

Build what works for that envirement and cost. Great forward thinking company. The combination of stick and modular makes Clayton
Unstoppable. Having owned and operated a modular factory there were many constraints to our building abilities, site and factory. Never limit your market. Great job Mr Buffet!

Anonymous said...

Coach,

With Clayton’s roughly 50% market share in the manufactured/modular housing channel, they would appear to be somewhat hamstrung in their ability to make additional acquisitions in this channel due to antitrust issues. Clayton’s business at their existing plants is extremely good right now with very strong order files. Converting existing HUD or modular facilities might not be the best short or long-term option, at least right now. Acquiring regional site-built home builders is probably the quickest way to continued growth without additional scrutiny from the DOJ. I have no doubt that Clayton is working on using their expertise in the manufactured housing channel to bring greater efficiencies to the site-built model. They are still relative newcomers to the market.