Business is booming and the modular housing industry is stronger than ever with lead times reaching out to almost a year at some factories. However, with rapidly escalating LBM prices and interest rates on new homes declining, we now have everything in place to bring on the perfect storm for our industry.
This perfect storm of events and the pandemic has seen factories losing money because of the rising material replacement costs and jobs going unfilled for over a year.
To nearly everyone’s surprise, employers added a comparatively paltry 266,000 jobs, down drastically from a gain of 770,000 in March, which itself was revised down from an initially much higher figure of 916,000.
What happened last month — and why?
Consumer confidence has surged, and many companies report soaring demand as Americans unleash pent-up desires to travel, eat out, and shop. Sales of new cars and homes are still rising. Yet because the economy is rebounding faster than almost anyone thought it would, many companies were caught flat-footed. Surging consumer demand has caused widespread shortages of parts and raw materials, including lumber.
Now, workers themselves can be added to the list of shortages. Companies are advertising more jobs than they were before the pandemic when the unemployment rate was at a 50-year low of 3.5%. So they clearly want to add workers. Yet hiring stumbled in April because many employers couldn’t attract as many as they needed.
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Nearly 3 million people avoided looking for a job in April because they feared becoming infected by the coronavirus, according to a government survey. About 2 million women have stopped looking for work since the pandemic, likely because of disruptions in schooling and child care. In April, all the net job growth went to men; women as a group lost jobs.
And some businesses complain that a $300-a-week federal unemployment benefit, provided in President Joe Biden’s $1.9 trillion rescue package, has meant that many unemployed people can receive more income from unemployment aid than from their former jobs.
In addition, modular home factories have been left short of material like plywood and lumber because of clogged supply chains and have had to slow production.
When will this end?
Every expert has an opinion when lumber prices will level off and go back down. Some are saying it will happen in July while others are telling our industry leaders it could be next year. The fact of the matter is, it will probably happen sometime between those dates and at least one expert will have randomly predicted it correctly.
Prognosticators are coming out of the woodwork making predictions when this perfect storm will begin slowing down and allow modular housing to once again see hiring, costs and production to begin the return to a somewhat new normal. Maybe they were TV weather forecasters in a previous life.
Let’s just hope we all survive the storm and come out the other side in good shape continuing to grow into a larger part of the new home market.