Discussion Forum Topic:

Construction, Interrupted?
Original Comment:
By some accounts, our country seems to have hit the peak in terms of coronavirus cases in most areas. The modular construction industry is more fortunate than many other industries in that many of our factories were deemed essential and allowed to remain open (or reopen after a brief shutdown). But the reality is that it may be another month or so before we can even START to get back to normal (whatever that means).

As you know, the construction process involves many key participants (perhaps too many) and the manufacturer is just one of those players. We checked in with some of our contacts to see how they are navigating this new path.

One supplier stated that they were currently running at a reduced rate because about half of their customers are not working. Those that are working are doing so at a reduced rate. Additionally, about half of their employees are on furlough and their sales staff is on a stay at home requirement.

Another supplier echoed those comments and said they were operating with about two-thirds of their staff and have been deemed as an “essential business.” But unfortunately, most of their customers (residential builders) have been closed.

According to Tom Coronato of Citizen Bank, “We are in a time of historic low rates, and now is a great time to refinance or buy a new home. We are still getting daily pre-qualification activity for folks looking to build and buy new homes all over the country, which is a good sign of the pent-up demand once this crisis breaks. There seems to be a lot of sidelined folks waiting to spend money on homes for the land they own. There is also an uptick in calls for mortgage forbearance and that information can be found on many bank websites, including ours. That may be one reason we have also seen many competitors already exit the construction lending arena.” Coronato continued, “There is a slowdown in the processes as we adapt to the changing environment for things like face to face closing, and appraisal entries.”

Code officials are also having to navigate a new path during this crisis. The International Code Council recently sent an email to all members providing a new series of free webinars related to COVID-19 and building safety. Covering topics such as virtual inspections, online codes access, and digital training, these webinars are aimed at helping code officials navigate the new virtual work environment.

According to one builder in the northeast, “The governor's shutdown order has definitely had an impact on our business, suppliers are running slower than normal, some of our subs have shut down and we can only have one worker on any job site at a given time, so we're definitely not making the progress we normally would. And our entire office staff is working from home now.

Thankfully we had four homes in the final punch list stages so we're getting those wrapped up, but we expected to start several others this month that we've been delayed on. Sales have also understandably slowed, but so far only one deal that we expected has died and we're still in discussion with many prospects. We have 5-6 modular homes on order that have been delayed due to shutdowns. We'll get through this but won't do as much business this year as we expected. We did apply and were approved for the SBA PPP but haven't received funding yet. We also applied for EIDL 2-3 weeks ago but haven't had any response yet.”

The good news is that the construction industry is full of experienced and savvy veterans who have navigated challenges and downturns in the past. Real estate is still a safe bet and interest rates are at historic lows. This may be the biggest challenge yet, but we will get through it.
Started on April 14, 2020 by Tom Hardiman
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