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    News and Views

    If Labor Shortages Persist, Will Builders Seek Construction Alternatives?

    Kevin Flaherty didn’t have his hopes up. The director of marketing for the modular manufacturer Champion Enterprises, Flaherty expected modest turnouts for the series of seminars on modular construction his company participated in during the International Builders' Show last month, the first one of which was scheduled right after the keynote address by former Disney Co. honcho Michael Eisner.

    To Flaherty’s surprise, that session was standing-room only. And its turnout signaled to Flaherty that more builders who are staring at the prospect of field-labor shortages are at least thinking about whether hooking up with a module supplier might make financial and practical sense under current employment and market conditions. “We think [shortages] are really going to hit the fan in 2014,” if projections about buyer demand and housing starts come to pass, says Flaherty. “So builders need to be ready for it.”

    Neither Troy, Michigan, based Champion nor other producers are kidding themselves that modular construction is suddenly going to break out of its 3% niche of total annual housing starts. But in markets where labor is already expensive, modular might attract some otherwise resistant builders and contractors looking for ways to sustain their production schedules by using sources that can deliver factory-built houses that are 70% or more completed before they are lowered onto jobsite foundations. “In first-ring markets, where there is a lot of tract building, we’ll struggle to have an advantage,” says Dave Endy, co-owner of Stratford Homes in Long Lake, Minn., which produced about 200 homes from its two factories in 2012. “But we recently finished a project in Jackson Hole, Wyo., where we had a huge cost advantage because labor rates there are high.”

    Those rates, in Jackson Hole and many other places, are likely to keep rising if the housing market’s recovery stays on its current upward trajectory. “As the picture has become more optimistic about home building, the need for workers has continued to build,” observes John Courson, president and CEO of the Home Builders Institute (HBI), which provides career training and placement in support of the national home building industry. And builders, he adds, prefer “job-ready workers” at a time when on-the-job training is less financially feasible.

    Supply and demand are colliding because the construction industry has recovered very few of the two million workers it lost since the peak of the last housing boom. There has been some improvement lately, as residential construction jobs in January rose by 2.8% over the same month a year ago, according to the U.S. Bureau of Labor Statistics. And Trulia’s chief economist Jed Kolko blogged recently about how the government undercounts construction employment levels and available jobs. Still, the number of jobsite workers is likely to have a difficult time keeping pace with a housing industry that expects to build around 940,000 new housing units this year and 1.2 million units next year.

    HBI recently surveyed 2,500 builders, of whom 600 responded, and 40% of those respondents said they would hire more subs in 2013. Three-fifths of respondents, however, expressed concern about subs' quality of training and skills in the field. In light of this situation, HBI, which currently has 125 training sites across the country, is attempting to expand its reach by licensing its pre-apprenticeship program—known internally as HBI PACT—and help licensees get a training site up and running in 90 days.

    HBI has 13,000 students, of whom 9,000 are currently in skills training, says Courson. It can train workers in 14 to16 weeks, “but it’s a matter of who’s paying for the training. Is it important enough [for state home-building associations] to be willing to pay for training programs?”

    That’s a question the housing industry must answer soon, as it will need to find a lot more workers quickly or find quicker, simpler ways to build houses if it’s going to realize its production ambitions. That would seem to leave the door open a bit wider for builders to lean toward advanced framing techniques, panelization, and perhaps even factory-made modules.

    A year ago APA-The Engineered Wood Association published its Advanced Framing Construction Guideline, aimed at helping builders construct energy-efficient homes with lower material and labor costs than conventionally framed houses. And in response to ever-changing building codes, APA has been offering builders and contractors simplified instructions to install different construction components to code.

    Bryan Readling, a senior wood specialist at APA’s field division in Davidson, N.C., notes that the 2012 International Energy Conservation Code emphasizes the use of advanced framing to improve the thermal performance of a wall. “But only recently has advanced framing been presented in an understandable way.”

    What experts on the modular side are hoping is that if the construction labor shortage becomes severe, it could reopen a broader conversation with builders and contractors about the overall costs of stick-built versus modular construction. “We try to get builders to look beyond the invoice,” says Champion’s Flaherty. With modular, “you don’t need estimates, you don’t need a purchasing staff, and you don’t need a lot of site supervision.”

    Using 2011 data from NAHB as well as proprietary information from his own clientele, Fred Hallahan of Hallahan Associates, a Baltimore-based consulting and market-research firm that tracks modular housing trends, estimates that for a 2,300-square-foot house priced at $300,000, modular’s hard construction and on-site costs total, on average, $77.40 per square foot, or roughly equivalent to the U.S. median for a comparable stick-built house.

    But as Hallahan also points out, stick-built costs range from $73.10 per square foot in the South (where labor is relatively inexpensive, and most residential foundations are slabs, which aren’t conducive to the modular fabrication process); to $102.70 per square foot in the Northeast (where labor is more expensive and the building season is shorter). “Not surprisingly, the Northeast region has the highest modular market share, consistently approaching 6% of regional home building activity,” states Hallahan.

    Bill Murray, general manager and executive vice president of HandCrafted Homes, a modular manufacturer in Henderson, N.C., says the differential in price between modular and stick-built “has sure tightened” as subcontractor labor has gotten scarcer and more expensive.

    HandCrafted, which delivered more than 110 homes in 2012, has hard costs that average $45 per square foot (including delivery, taxes, and foundation setting), and it’s delivering a house to a jobsite 70% to 80% completed. From the time his company gets an order to when the customer moves in ranges from 60 to 90 days. When Builder interviewed Murray in December, his company had just completed a 3,200-square-foot house along the Carolina coast that, from foundation set to certificate of occupancy, took 48 days to finish.

    Another modular manufacturer, Southern Structures in Ocala, Fla., which has been producing modules since 1978, also hands over a completed house to a buyer within 90 days of an order. Southern’s hard costs, says owner Jerry Stump, range from $55 to $70 per square foot, plus an additional $10 to $15 per foot for delivery, setting, and completion in the field.

    When asked why modular has so few takers among builders and home buyers, despite what’s going on in the labor market, Stump explains “there are still too many people building ‘HUDular’ houses,” and the stigma associated with cheaper manufactured and mobile homes continues to rub off on modular products.

    Nevertheless, Stump expects his company’s production, at seven houses in 2012, to double this year. Champion’s Flaherty doesn’t think the cost advantages of modular will become indisputably apparent to most builders until 2014. But commercial contractors are already seeing the light. “Our commercial business has exploded,” says Flaherty, noting that his company expects to supply modules for six hotels in 2013, and 12 in 2014.

    John Caulfield is senior editor for Builder magazine.

    TimberStrong Offers the Best Deck Panel Options for the Environmentally Conscious Consumer

    Compared to traditional decking and installation, TimberStrong Deck Panels are an environmentally friendly alternative. Designed for easy installation, TimberStrong Deck Panels save money by reducing the amount of time and the number of laborers required to complete a job. The number of tools, vehicles, and heavy machinery required to complete a job is also reduced, consequently impact on environmentally sensitive habitats is minimized. TimberStrong Panels are designed with longevity and durability in mind, limiting the need for disturbing fragile habitats and improving environmental stewardship.

    TimberStrong, Inc., is capable of panelizing almost any natural or composite lumber, making TimberStrong Panels the best deck panel solution when it comes to decking material options. If you have a preferred sustainable decking material or would like to purchase your decking from your favorite "green" company, TimberStrong can probably panelize their lumber. Unsure where to start? TimberStrong partners with NyloBoard.

    NyloBoard offers a truly innovative product. The company prides itself on offering a sustainable, versatile, yet, environmentally friendly alternative to traditional building products. NyloBoard lumber is made from recycled carpet fiber bonded with VOC free resin. The U.S. Environmental Protection Agency reports that more than five billion pounds of carpet is dumped into the nation’s landfills annually. Unfortunately, carpet fibers do not break down over time. NyloBoard is resistant to water damage, mildew, and termite infestation. Both NyloBoard and GeoDeck offer limited warranties on their products. Maintenance is minimal.

    Bailey Wood Products

    Bailey Wood Products

    To better serve the needs of our customers we, have partnered with Bailey Wood Products of Kempton, PA, to supply us with various wood species such as Ipe, Jatoba, etc. Bailey Wood Products has been serving customers for 82 years and has an impeccable reputation for providing quality products. To learn more about Bailey Wood Products feel free to visit their web site at

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