Want to buy a house? Want maximum value for your dollar? Go modular. As taxes and insurance costs increase in the geographic areas in which “baby boomers” are relocating, the search for high quality, affordable housing is surging. The factory built home industry seems to offer the most promising solution to this search. The industry is rapidly moving to provide the detail and amenities traditionally aligned with site-built homes; consequently, there is every reason to consider a modular home when making a buying decision. Making that decision even easier is Deer Valley Corporation, a rapidly growing company that knows its way around the factory built housing industry and has a stellar reputation as a quality builder.
A Company is Born and Immediately Soars
The company’s operating subsidiary, Deer Valley Homebuilders, Inc. was founded in January, 2004 as a provider of high end, “heavy-built” HUD Code homes. Less than three months later, in March of 2004, the company shipped its first house. One month later Deer Valley was profitable, with a positive cash flow and on its way toward first year sales totaling $16 million. In 2005, sales grew to $35 million and in 2006 sales exceeded $65 million. The company began operations at its current main plant in Guin, Ala., on Jan. 18, 2006, whereupon the operating company, Deer Valley Homebuilders, Inc., was acquired by a public company that was renamed Deer Valley Corporation. Shortly thereafter, in March 2006, Deer Valley opened a second plant in Sulligent, Ala.. The founding shareholders continue to hold shares in the parent company, and they continue to form the nucleus of the management team.
Still strong, despite market woes
Deer Valley’s history of rapid growth is especially impressive when it is measured against recent history of the manufactured housing industry. It is reported that in 2006, the number of delivered houses in the HUD Code segment of the U.S. manufactured housing had shrunk by two thirds in the period from 1998 through 2006. The first quarter of 2007 is said to have been the worse quarter in 40 years for the manufactured housing industry as a whole. This market condition reflects the combined impact of the fall out from the oversupply of site-built homes as well as the trouble in subprime lending. Against this industry background, Deer Valley Corporation’s birth and subsequent growth has been nothing less that remarkable.
Deer Valley’s management believes that much of the housing industry’s future growth will come though the entire housing industry’s increased reliance on modular components for home construction. Based on that premise and the company’s extensive knowledge of the techniques necessary to produce finished drywall products in a production environment, the company made the strategic decision to begin offering a series of modular homes.
Deer Valley Corporation is headquartered in Tampa, Fla., but all production facilities remain in northwestern Alabama. This operational location is ideal to serve the Gulf Coast as it recovers from the damage resulting from the 2005 hurricanes. The company is dedicated to offering high quality homes delivered “with a sense of warmth, friendliness, and personal pride.” The management team has more than 250 years of combined industry experience from various backgrounds including general management, production, sales, customer service, and finance.
“We came into the manufactured housing industry with a different attitude toward housing,” Charles Masters, Deer Valley’s CEO says, adding that “the company has set itself apart from competitors through the enhanced structural integrity of the designs, the quality of the construction and the attention to the aesthetic details of its entire product line.” The company’s focus on enhancements that include oak cabinets, masonry fireplaces, hand-laid tile flooring, and high-grade appliances creates interiors that are often more appealing than site built homes in a similar price category.
Modular to the rescue
In early 2007, Deer Valley began taking its expertise into the modular housing business. The move opens a new market segment and presents the opportunity for introducing much greater architectural freedom for the exterior of the company’s homes than is available in the traditional HUD Code homes. In May of 2007, Deer Valley obtained government agency approval permitting its new series of modular homes to be shipped into Mississippi, Alabama and Louisiana – the three states hardest hit by the infamous 2005 hurricanes. In addition to offering the new product line through its existing dealer network, Deer Valley is actively working with several private and public entities, which are seeking to develop relatively large-scale communities intended to replace a portion of the housing destroyed by Hurricane Katrina and the other storms that ravaged the Gulf Coast in 2005. Many of these communities will include or be comprised entirely of modular homes.
The wisdom of the company’s decision to enter the modular home market was quickly confirmed when Deer Valley announced the receipt of contracts totaling over $7.5 million to provide 150 two- and three-bedroom modular cottages as part of a government funded program that is designed to test and evaluate future disaster recovery housing units. Deer Valley is one of several manufactured housing companies selected to participate in this initial phase of a procurement that will ultimately total several thousand units. All units to be produced under the initial contracts are expected to be delivered before the end of September, 2007.
Moving the market
Indeed, Deer Valley is right on the mark in its emphasis on modular and manufactured housing. According to NeighborWorks America, a substantial share of the growth in low-income homeownership evidenced in the 1990s was driven by buyers of manufactured homes. “An increasing share of the people served by community development organizations are opting to live in housing that was built off-site, in a factory, most of it to national HUD-codes.” Moreover, the factory-built housing industry has come a long way from its origins producing mobile trailers as an offshoot of the automobile industry. Changes in designs and construction techniques in the last 10 years, a movement towards higher-quality units, and the increase in units being titled as real estate, are positive developments. Deer Valley has been a clear leader in this evolution towards sturdy, aesthetically pleasing HUD manufactured homes. The shift to modular is a relatively simple natural step for this innovative company.
In fact, there is a range of benefits inherent in manufactured/ modular housing, (the two are the same in that they are both built in a factory – except the Department of Housing and Urban Development (HUD) has attached stringent requirements on what it terms manufactured homes. “HUD Code” manufactured homes are built on a permanently attached steel chassis; modular homes are frequently removed from their frames on-site and reattached to site built foundations.) Masters explains: “Most modular homes will be shipped on specially designed metal frames or ‘carriers.’ After arriving at a home site, the carriers and the homes will be separated, and a crane will be used to set the house the on a foundation or a slab. The carrier will then be returned to the manufacturer for reuse. The slab or foundation-mounted modular home is virtually indistinguishable from a house built on site with the same floor plan.” Masters further comments, “The cottage units that Deer Valley is building under contract, are somewhat unique in that they meet both HUD Code and modular specifications. After arriving at the home site, the cottages can be left on the frames in the fashion of a HUD Code manufactured home, or the frame can be removed for slab or foundation mounting as a modular home depending on the desire of owner.”
The growth of the modular construction industry has been spurred by homeowners’ prudent desires to save time, money and resources. Once the home’s design is finalized, a semi-custom modular house can often be constructed in one week or less in a factory, shipped and set on a prepared foundation in less than a week. From initial inquiry to finished house, the process can often be completed in a matter of weeks. The process for construction of the same house built on site will normally take several months or even a year to complete.
Because the “modules” that make up a modular house are constructed in the protected environment of a factory and closed up before the building materials are exposed to rain, snow and extremes in temperature, they are less affected by the elements. There also are few weather delays during the construction phase because the outdoor work on the house is minimal. Factory-built modular homes are precision-engineered: quality control is high, cuts are more precise, and there is little wasted material. Also, modular building companies buy materials in larger quantities than traditional builders do, bringing down costs, and factories often are located in areas of the country where labor is more plentiful and often less costly. Interestingly, modular building is also a viable option if you’re thinking of putting an addition onto your existing home.
The difference in traditional HUD Code homes and modular is primarily one of architectural freedom, according to Masters. HUD Code homes are usually simple rectangles where as modular homes can have essentially the same architectural “foot print” and external appearance as any site-built home. With this architectural freedom come a range of other buildings that can be fabricated following the modular model, including multi-story apartment buildings, rehabilitation facilities, schools and banks. Explains Masters, “We’re watching a gradual shift in the single family and multifamily residential construction industry toward modular.” This trend is also evident in low rise commercial buildings.
While the company’s backlog is still below the level that it was at this time in 2006, the seasonal increase in activity at its 110 authorized retail dealer locations has definitely had a positive effect on second quarter sales. The introduction of modular products, and the company’s move to build modular cottages under multiunit contracts is expected to bolster the back log and enhance sales and profits for the remainder of 2007.
Deer Valley’s management team is planning to grow the company by seeking new modular sales outlets and through potential merger or acquisition of companies which will extend either its geographic presence or range of product offerings. The company’s recent expansion of its product line to include a variety of modular housing units, its reputation for high quality housing products, and its location near the storm-damaged Gulf Coast are all factors that combine to create a superb marketing opportunity for Deer Valley. No doubt many future homebuyers will be heading home to a Deer Valley modular in the future.