COLLEGE STATION – Supply-chain disruptions accelerated sharply, according to the latest Texas Manufactured Housing Survey (TMHS), and conditions are expected to worsen through the first quarter of 2022.
Raw-material prices were largely unchanged in October, but pressure is building upstream and price hikes are expected.
“Material costs calmed for manufacturers during the third quarter allowing them to pause price increases for finished homes,” said Wesley Miller, senior research associate with the Texas Real Estate Research Center at Texas A&M University (TRERC). “That relief appears to be temporary amid surging supply-chain disruptions and rising labor costs.”
Despite supply bottlenecks, manufactured-housing production increased for the fifth consecutive month, and the TMHS production index reached its highest level since February.
Manufacturers expect those gains to continue and should chip away at backlogs that have built up since the start of the COVID-19 pandemic.
“By streamlining product offerings, expanding operations, and staffing up despite a tight labor market, HUD-code manufacturers continue to increase the number of homes they’re building this year,” said Rob Ripperda, vice president of operations for the Texas Manufactured Housing Association. “Supply-chain linked price increases could put downward pressure on demand, but the TMHS respondents are expecting sales to increase over the next six months.”
“Supply chains are being hit from multiple sources at once,” said Dr. Harold Hunt, TRERC research economist. “Ships, trucks, and rail transportation are falling short of needed capacity to clear bottlenecks. Unfortunately, forecasts project shortfalls well into next year.”
On the labor front, manufacturers increased hiring despite fewer prospective employees. While the TMHS labor-supply index stabilized after five consecutive months of decline, manufacturers expect conditions to worsen considerably through the first quarter of 2022.
These obstacles elevated the level of uncertainty surrounding the industry and have pushed plants into higher capital expenditures in attempts to streamline operations.
Despite these challenges, manufacturers managed to increase business activity and expect to do so in coming months. The industry outlook remained favorable, but optimism waned for the first time in at least 16 months.