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Texas’ manufactured-housing industry pulls back production as sales slide

​COLLEGE STATION – Texas’ housing manufacturers slowed production for the second straight month, according to the latest Texas Manufactured Housing Survey (TMHS), as higher interest rates shocked demand and subdued sales. The slowdown spread through daily operations, prompting plant managers to shrink payrolls and reduce work weeks.

“Manufacturers have been shortening work weeks since May, but August marked the first month of a meaningful payroll contraction,” said Wes Miller, senior research associate for the Texas Real Estate Research Center (TRERC). “These adjustments have taken some pressure off of wages and salaries despite skilled-labor shortages.”

The TMHS labor-cost index decelerated into the single digits for the first time in series history (starting in June 2020), and other supply-side constraints moderated from pandemic peaks.

“Input prices are declining as supply chains continue to improve,” said TRERC Research Economist Dr. Harold Hunt. “Lumber prices are a third of what they were six months ago, and shipping costs are falling. Many economists feel like inflation has peaked, but it’s still a long way back to the 2 percent target that the Federal Reserve is shooting for.”

The manufactured housing industry was cautiously optimistic regarding the supply chain, and some of the smoothing was likely caused by dampened demand across the economy. The price received for finished homes is expected to fall more than input prices over the next six months.

“Across most of the indicators in this month’s survey, the future sentiment is more moderate than current readings,” said Rob Ripperda, vice president of operations for the Texas Manufactured Housing Association. “While everybody downshifted during August, a good share of manufacturers expects to keep running at their current production rates as we head into next year. Retailers reached a point where they needed to lower their order volumes, but they’re still selling homes at historically high levels, just not with the same amount of year-over-year gains.”

While ongoing capital expenditures corroborate the positive outlook in the long run, the rapid shift in demand over the past two months has elevated uncertainty and heightened concerns as the fourth quarter approaches.

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