Builder now assembles modular homes to survive
During the housing boom, Howard Kipnes, president of Cedar Knolls, a residential builder in Ronkonkoma, would purchase land on speculation and build homes when he got a buyer's contract.
That business model took a hit with the Great Recession and the housing bust that still holds Long Island in its grip. The number of permits for construction of single-family homes on Long Island fell to 90 in November, compared to 160 in November 2007, according to statistics from the U.S. Census Bureau provided by the New York State Builders Association in Albany.
To stay in business, Kipnes had to find a new approach, one that would reduce the demands on his finances and shrink the time it would take to build homes.
"It was pretty much adapt and survive," said Kipnes, who sold off all the land he owned about four years ago.
Economy forces changes
It's not uncommon these days for businesses to have to adjust to a radically different environment.
"The economy has forced some companies to have to re-evaluate what they do and retool their businesses for the growth opportunities ahead," said Thomas Shinick. He is a professor of entrepreneurship and small business at Adelphi University in Garden City and president of Corporate Development Partners, a Merrick business advisory. "The companies that are doing well today are studying the market and anticipating new trends."
For Kipnes, buying land on spec and building single-family homes over many months would no longer work in a time of plunging demand, tight financing and falling prices.
The solution he came up with: building modular homes on clients' property, and doing more renovation work.
In New York, modular homes have been on the rise, with 421 shipped in the third quarter of 2011 compared to 338 in the year-earlier period, according to the National Modular Housing Council. Long Island statistics were unavailable.
Part of the appeal is price: Modulars tend to cost 5 percent to 10 percent less to construct than traditional homes.
But an even bigger appeal, Kipnes said, is how quickly they can be constructed, as they come in pre-assembled pieces. Depending on size, they take about half the time to complete: typically three to six months, compared to six to 12 for traditional homes.
About two years ago, Kipnes created an alliance with Westchester Modular Homes in Wingdale, N.Y., which manufactures custom-designed, factory-built homes that are sent to Long Island for Kipnes to assemble.
And recently, he said, he landed a $480,000 Small Business Administration loan to renovate an 8,000-square-foot facility in Ronkonkoma as a showroom for his modular and renovation work. He's sharing the space with two other family-related businesses.
The new showroom has a 46-inch, flat-panel monitor that homeowners can view as they design their modular home with a representative from Westchester Modular.
"The showroom will showcase our capabilities and increase sales dramatically," Kipnes said. The alliance with Westchester also helps him tap into the company's national marketing reach.
"We didn't want it to stretch out over a long period of time," said Jean, 48. The home will take about three months from start to finish, she said.
More proposals for sales
Still, buyers are very cautious, said Kipnes. He's been getting more inquiries for modular work over the past year, he said, and has more than 30 proposals he hopes will turn into sales.
He's building his fifth modular home right now and expects to deliver another one shortly. About 75 percent of his $400,000-plus revenue comes from modular builds; the other 25 percent is from renovations.
"We're optimistic that with the new year and with interest rates where they are and a little more buyer confidence," Kipnes said, "we'll start to see" an improving housing market.