Monday, May 17, 2021

Modular Home Builders Give Frank Opinions of Rising Costs and Other Things

We’ve been hearing from a lot of construction industry experts lately talk about lumber prices, the rising costs of new homes, the lasting effects of COVID-19 on our industry and even the shortage of skilled labor in the off-site and modular factories but what have we heard from actual modular new home builders? Well, I decided to ask them…



I contacted modular new home builders across the country and many replied with what they are encountering 'in the trenches' of this unprecedented housing market.


I’ll start off with an experienced modular builder in the Midwest who told me:

“I thought things were bad last year but this year is much worse. Besides constant price increases from the factory, I am now dealing with ridiculous lead times. I have stopped quoting because it is a waste of my time. If these 2 issues don’t get resolved soon I may have to close up shop.”

I posed several questions to the modular builders.


How are you working with your customers about the ever-rising material costs?

From an East Coast builder:

“I have numerous homes under contract and sold with a contract note that if pricing increases it will be passed onto the homeowner. up to 5%-NO customer will sign for any more than that and rightfully so-so how do we the builder get any type of protection-we don’t-each job is like playing craps at the casino to see how the profit will turn out will be a roll of the dice.”

From a New England builder:

“Consumers aren't happy about prices, but they read the news and get it.  First-time buyers have been priced out of new construction, but move-up buyers are getting record prices for the sale of their current home and are moving forward. We also do some stick building, and we're pricing those jobs using an allowance for materials.  Consumers pay whatever our actual cost ends up being.  They understand that we can't get a fixed quote for materials, so if they want to build this year that's the way it is.”

From a MidAtlantic modular builder:

“Prices are climbing out of control, and some materials are in short supply, yet we're getting more inquiries for new homes and signing more contracts every month at a record pace.  2021 will shatter all records for us.  We've never dreamed of being this busy.”

From a Coastal modular builder:

“Well, who would have seen the massive increases in almost every piece of material that goes into a house?  Customers don’t want to pay, suppliers are not helping and we as the builders are stuck in the middle.  The home demand is at an all-time high, which is great, but going under contract and building the home when you think you are going to make $X amount of profit only to see it take a huge haircut even prior to putting a stick in the ground is quite frustrating and disappointing.”

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Have the Modular factories been a help to you since this started?

From another New England Builder:

“I don't understand why lumber prices are so high - I know many loggers and mill operators and they're not getting much higher prices than in past years.  Yet OSB has gone from $9/sheet last spring to $61 last week.  So who's making the money? Most of the factories we work with are implementing monthly and some are sending us weekly surcharges.”

From a New England builder:

“I just learned my factory is about to switch exterior sheathing to Thermoply and making their builders who already signed a contract with them and their client either switch or pay a MASSIVE premium to use OSB. I can’t switch to another factory as I would be put at the end of their production schedule.”

From another New England modular builder:

“I just heard from my factory sales rep that he is no longer working there. Told me any home contract he would have brought in can’t be put to the line for 9 months and that’s when he will see his commission. Said he is going to work at Home Depot for more money than he made last year.”

From a Midwest modular builder:

“When I call for a quote, they seemed to be as confused as I am. The sales manager doesn’t seem to be able to keep up with what management has decided about pricing for that day and sends mixed messages to his reps. Sounds like the Biden administration.”

What other things are happening to your business during this crazy home building season?

From a Coastal modular builder:

“In “normal” times the modular industry is looked at as the orphan of the building industry from municipalities but that got worse with COVID-19. The permit process, inspections, etc. have truly been a nightmare.  AND on top of all of this being 20x’s harder COVID has been used as an “excuse” for every delay, or issue they come across.  In fact, I have found throughout the construction industry from factories, customers, vendors, suppliers, municipalities COVID now is the excuse to EVERYTHING. I don’t want to minimize the severity of what has transpired and the effects it has had on life as we know it but when you hear it used as an excuse for problems that were always present and not caused by COVID I get quite frustrated.”

From a MidAtlantic modular builder:

“It is, unfortunately, the builder that has to make the decision of passing on the increases to the client from the factory or eat it to save my name. Honestly, my rule of thumb is this. When the factory gives me an increase how do I feel about it? Do I see the justification or not? If I do, I pass it onto the client, but if I don't, I don't. Right now there are a lot more ‘I don't’.” 

From a Southern modular builder:

“What a shit show the last year has been, to say the least, for this industry.”

From a New York modular builder:

"Gary, I have been on conference calls with other builders from my factories and the building associations I belong to where they talk about what is happening to pricing, scheduling, transportation and other problems our industry is facing but you are the only one that has actually asked me what is happening to my business. Thank you for asking what I’m doing to survive the best selling season I’ve ever had.”


Gary Fleisher is the Managing Director and contributor to the Modcoach Network and its affiliated blogs.

2 comments:

  1. Thanks Gary - another very insightful article

    ReplyDelete
  2. Read this article then opened my inbox to ANOTHER price increase. Very difficult to close deals, buyer's look at me like I'm a crook when I can't "gurantee" their price.
    Anyway, I need to call my customers under contract and tell them prices just went up $8.95/SF...wish me luck!

    ReplyDelete