The past year has been “the best of times, it was the worst of times”, to quote Charles Dickens, for the modular housing industry. But even he wouldn’t believe what is happening today.
Boardrooms and executive offices of every single modular factory in the US are seeing groups of managers, owners, investors and board members questioning every single thing that is currently happening in their modular factory.
Cell phones are ablaze with sales reps calling their builders and developers telling them this week’s product surcharge. Sometimes it’s a daily call.
Then the factory’s builders have to go to their customers with yet another price increase from the factory and probably even more price increases from set crews, crane operators, local electricians, plumbers and HVAC installers.
At his point, the customer has yet another decision to make. Can they actually afford the house they signed up to build? Will the mortgage company give them more money? Will it ever end? The factory’s developers, whose projects usually take a year or more in the best of times to complete, are being hit with the same price increases but instead of going back to well again for more money, they are threatening lawsuits against the factory.
A side note many builders
All those appliances, heat pumps, and other expensive electronic stuff you’ve been putting into your customer’s homes come with a warranty, which is expected from the manufacturer of those products, but if a master control board goes out on any one of those things, don’t expect to get a replacement quickly. Shortages of microchips could mean replacing those boards could take up to a year. So much for the warranty. And guess who the customer will sue? Whoever installed it.
A new wrinkle
Now I’m hearing several modular factories are beginning to slow down their lines, cutting staff to a bare minimum and refusing to take on any new orders for 3-6 months. That’s new!
It seems that rapidly escalating LBM prices and all those other factors facing the factories have been causing huge dollar losses the first 4 months of this year and the only way to combat it is to slow down production and cut costs.
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When this terrible situation finally begins to correct itself, it will be just about time for the inevitable housing downturn to begin. As I mentioned before, this is quickly becoming the Perfect Storm.
As I watch the news, listen to the experts and talk with consultants, they are still talking about energy and sustainability or new processes and software but almost none of them are talking about what is coming quickly over the hill…
A huge downturn, a major change in housing and consolidation within the modular industry. Not openly discussing it won’t make it go away.
Gary Fleisher
