briefcase | invest smarter | Issue #117

Let’s talk about cars. And not in a sad teenager underglow rim spinner way.

This kind of car...

We want to talk about Henry Ford, who revolutionized transportation and, ultimately, how and where we live. At the time, all folks really wanted were faster horses. To which Ford said, "Ney! That's a load of horse puckey! I have a better idea."

Sorry horses! 🐴😭

The advent of the automobile enabled a number of massive social benefits, but a major one was mobility. Another problem it solved was the horse poop issue plaguing major cities.

Sidenotecar: For all you horse poop history buffs, check out the Great Horse Manure Crisis of 1894. It wasn't great, but Henry Ford came in and made the world a bit more stable.

Moving on. With an automobile, you could live farther, travel longer distances, and the days of cramped close-quarter city living were (mostly) over.

But what made Henry Ford’s invention so powerful was the fact that he could not only manufacture automobiles quickly in a factory, but also do so cheaply. The reality is that Ford wasn’t the first to invent cars, it was Mercedes Benz in 1886.

It’s a good lesson from history. You don’t always need to be the first to market. More importantly, you need to execute better than everyone else.

And Ford certainly did that.

Assembly lines have been adopted en mass across all countries and industries, except for one major exception.

Home construction.

But, there are some players out there trying to change this. Companies like Mighty Buildings, Small Living Co, Boxabl, Dvele, Plant Prefabs, and more.

In fact, the market for off-site home manufacturing is growing rapidly, from $16B in 2019 to a projected $21B by 2027.

Why? Construction times are faster, labor and materials are easier to manage, and the carbon footprint of modular construction is much lower.

These are lessons Ford learned over 100 years ago that we are still trying to figure out.

According to government estimates, home construction in a factory setting reduces a build schedule by 30-50%.

According to the Office of Policy Development and Research:

And, in construction, time savings translates into massive $$$ savings. This, in turn, reduces costs to homebuyers of this type of product.

Indeed, it's no wonder that the average factory-built home costs $106,000 in construction costs, versus the $351,000 for site-built homes. Factory-built home construction is the difference between $72 and $140 per square foot in costs to builders.

Henry would surely be proud.

Might Buildings recently raised $70 million in venture capital and is building nationwide. Their goal is to produce 1,000 housing units in 2023. Further, Mighty Buildings is teaming up with a California-based developer to create a planned community of 3D-printed homes in the Coachella Valley.

Most governments are offering incentives for this new type of manufactured home, starting with the White House. Per Bloomberg:

These factory-centric construction companies are reinventing how we build by adopting Henry Ford’s approach to building: In a controlled factory-like setting.

By building, stacking, folding, and shipping in a more controlled environment, these companies will reduce costs, carbon footprints, and make housing more accessible financially to consumers.

So What? Are these homebuilding companies the Henry Ford of real estate? Given our ongoing supply and affordability challenges, we sure hope so. Exposure to some of these companies and building techniques may not be a bad idea.

Alright, that's it for today folks. Time for the briefcase team to take a Ford Siesta.

We revisit banking news, we conclude...