Would you be in business today if you had a nickel for every time you heard someone complain that the housing industry is behind the times and resistant to change? Not me-I'd be on my island sipping piña coladas.
Is it true? Here's one way to look at it: Hop in your time machine and travel back to 1958, grab an auto mechanic, and bring him home. Is there a new car on the road he could repair with 1958 skills? Not one. How about a TV repairman? How about appliances, radios, telephones, or furnaces?
There's nothing inherently wrong with that. Stud framing was introduced in the 1830s and caught on partly because it offered exceptional flexibility manufacturing the one product that demands greater customization than literally any other. All th
ings being equal, that's an unbeatable benefit.
But all things are not equal. From demographics to wealth distribution to energy costs, every major trend points to an affordability crisis in the next housing boom. If it happens, it'll force innovation, create new competition, and reshuffle supply chain roles. And it wouldn't be the first time.
Housing has faced three affordability crises in the past century. As a point of reference, the median price of a new home has ranged from 4.5 to 5.5 times median household income since the 1970s. In 1908, it was 10 times income.
Workingmen rented; the well-to-do hired an architect who also served as general contractor. But in the emerging and industrious middle class, a popular alternative was a precut home kit purchased factory-direct from companies like Sears, Roebuck or Aladdin Homes. You'll recognize the sales pitch; the tagline on the cover of Aladdin's 1910 catalog read, "Manufacturers Create Value...Middlemen Add Cost."
The second crisis came in the mid-1940s when 1.6 million GIs returned from World War II. Long Island-based Levitt & Sons became the No. 1 builder in the nation by pioneering the housing tract: acres of identical 1,000-square-foot homes built using assembly-line techniques lifted from automakers. But William Levitt was equally famous for buying materials directly from manufacturers, operating his own prefabrication plants, and even owning his own timberlands and mill.
The Department of Housing and Urban Development was established in 1965 to deal with a third crisis. In 1969, HUD launched a major initiative to boost housing production by underwriting innovative practices, mostly centered around prefab: roof and floor trusses, wall panels, prehung doors and windows, and prebuilt cabinets and stairs. HUD Secretary George Romney predicted in 1970 that two-thirds of all new homes would be factory-built by 1980.
But shoddy World War II-era prefabs had created a strong bias against factory-built construction. Builders, trades, code officials, lenders, and the public all lined up against the initiative and it died in the mid '70s.
Today, prejudice against prefab is all but gone. Just visit www.Dwell.com -modular homes have become a status symbol among GenX buyers, a badge of financial savvy, environmental responsibility, and worldly sophistication. That doesn't mean modular will take over, but check out www.CohenBrothersHomes.com or www.EcoUrbanHomes.com. The industry has made quantum leaps and could become a viable competitor.
Site-built construction is poised for a similar leap, and LBM dealers are in position to play a leading role. Ten years ago, all the talk was of disintermediation. Dealers cemented their place in the channel by adding prefabrication and engineering to their logistics function. Coupled with advances in products and handling equipment, material flows to job sites are far more efficient than they were 20 years ago.
Labor is a different story. Many builders are excellent construction managers. Many aren't, and the numbers show it. Portland, Maine-based Criterium Engineers, one of the leading building inspection firms in North America, finds improperly-installed doors or windows in nearly a quarter of the new homes it inspects. NAHB says the typical new home generates four tons of construction waste. Other studies say the average cycle time to build a single-family home is closer to 200 days than the traditional benchmark of 120. By comparison, it took 410 days to build the Empire State Building in 1931. All 103 stories.
Turnkey is one solution, but the problem is bigger than who builds the shell. Whoever manages the framing needs to manage everyone who affects the structural, thermal, and moisture performance of the shell-not just door and window installers but also insulators, siders, roofers, the HVAC contractor, the plumber, and the electrician.
Most dealers would prefer to stay within their traditional logistics role, and that's understandable. But the materials side of the equation isn't broken. Labor is, and briefcase builders in particular don't want the job of managing it.
Whoever takes that job has a shot at the most secure position in the channel, and maybe an island with free piña coladas.
–Greg Brooks is a former editor of ProSales and an industry speaker and analyst. For more information on Greg's new seminar, "The Next Boom: Four Trends Reshaping the Construction Supply Marketplace," call 502 376 0407 or email [email protected].