September 15, 2006
From the desk of Jane Galt:I'm a city dweller, so perhaps I don't understand these things, but I've always wondered why modular homes aren't more popular. They're slightly less customiseable, to be sure. . . but only slightly, and the tradeoff is that they're built to a consistent spec, with walls that are perfectly flat and corners that are actually square, at a lower cost in less than half the time of a custom site built house. The history of human economic progress is, after all, the history of mass production. This Popular Mechanics article sure makes them sound swell . . . so what am I missing, readers?
Posted by Jane Galt at September 15, 2006 12:50 PM | TrackBack | Technorati inbound links"); ?>Cultural snobbery, basically. "You live in a TRAILER?"
You can explain in vain that a modular house is not a trailer, but the association is apparently immovable.
Posted by: Robert on September 15, 2006 12:57 PMAlong with the above, there might be the question of who you live next to. (Not that anyone thinks like that.)
Not to hijack the thread, but:
Has anyone read the NYT article about California's energy usage today? There is a graph that posits that California's per capita electricity usage in 2003 is the lowest in the nation. (Wyoming is the highest. ?!) The trends in the state rankings are weird, to say the least.
Posted by: Klug on September 15, 2006 1:10 PMAlso, most houses aren't built custom on propery already owned by the buyer, they're put up by speculative builders in big subdivisions. I don't know how the economics of it work out, but maybe they can throw up frame after frame for a lot cheaper than a single house. Mass production, don't you know.
Posted by: Rob Lyman on September 15, 2006 1:12 PMI think the financing may also be less attractive for modular. I've read, but have not confirmed, that lenders tend to charge higher interest rates for them than for construction or purchase of conventional "stick-built" houses. (At one point I planned to build a modular, and I still have the engineering plans, but a divorce intervened.)
Posted by: Shelby on September 15, 2006 1:17 PMAre they Miami-Dade County approved?
Down here in south Florida most of our homes are concrete block and tie beam construction. Frame houses do not do well in hurricanes (e.g. Country Walk 1992).
There are mandatory evacuations of mobile home parks whenever a hurricane is coming.
Rick
Posted by: Rick on September 15, 2006 1:18 PMI would think it would be easier to ship raw materials and assemble them on site (with economies of scale from building a bunch of houses at once, as Rob points out), than to ship mostly-assembled houses.
Another consideration is that in many parts of the country, the cost of land dominates the cost of housing. IIRC, building a house on site costs $50-100 per square foot, but where I live (a suburb of Seattle) housing typically costs $200-300 per square foot. If you're paying through the nose for the land either way, it can make sense to pay a bit more for a nicer custom-made house rather than a pre-fab house.
Posted by: Maniakes on September 15, 2006 1:28 PMThere is a difference between modular housing and manufactured housing, and neither one are mobile homes.
Posted by: Rex on September 15, 2006 1:30 PMGo to Levittown LI and see why a lot of people don't like modular homes.
Not saying they're not worthwhile, but a lot of people seem turned off by the sameness.
Posted by: Dave on September 15, 2006 1:38 PMA modular home was built on the next street over by a local company who specializes in modular housing. The majority of the construction is done at the factory by a team of workers who (1) build the frame, (2) install the electrical, plumbing, insulation, etc., and (3) finish the inside and outside walls.
When the proper modules are constructed, a different team assembles the modules at the home site and performs the finishing touches. The home went up in quick order and doesn't look any different from the outside than any other home on the street. As I understand it, modular homes are actually better built and better insulated than most houses.
As with anything in life, there are pros and cons, with the consequent tradeoffs. One pro is that you are not at the mercy of the GC, but instead are dependent only on the company you are dealing with. We had a friend who had a house built, and near the end, couldn't get clear title because the GC hadn't paid the subs, who put liens on the property. They lost that house and some of their money. That's not a concern when having a modular home built.
From the builder's point of view, modular housing takes a larger up front investment, both in time and in money. Many builders start off, and continue until they die, by building one or two houses at a time, selling, them, and then building another one or two, selling them, ad infinitum. That's a safer way to go.
Re Rex's comment, here is a link to a site explaining the differences between modular, manufactured, and site-built homes:
http://homebuying.about.com/cs/modulareducation/a/modularhomes.htm
Dave, manufactured and (especially) modular homes need not look alike. The modular home I designed was essentially original from the ground up.
Posted by: Shelby on September 15, 2006 1:42 PMI don't think that Levittown was built as modular housing. They were great units for the time and place: my uncle bought one for $800 right after WW II. Relatively small by today's standards, one of the reasons they were cheap was they were built on a slab (no basement).
Of course, none of the Levittown houses look alike now, as years of expansions and remodelings (and trees, of which there weren't any before) have given every house a unique look.
Posted by: Rex on September 15, 2006 1:45 PMAlong with the above, there might be the question of who you live next to. (Not that anyone thinks like that.)
This is not a trivial matter, and isn't necessarily because of snobbery. I, for example, am low-maintenance. I need little in the way of fanciness or services with regard to an apartment. So, I'd *love* to live in a really cheap one. However, it would also mean I'm living near a bunch of people who can *only* afford that. Nothing against the poor, it's just that generally such people are slow to grasp such concepts as "human decency" and "respect for neighbors". In my experience, they'll blare loud music, rev their engines really loudly, stomp on the floor if they're above you, block you in when they park, and just do generally irritating things. When you're very sensitive to noise like I am, that can be a problem.
(In case you're about to make a stupid objection: I'm talking *statistically*. There are many wealthier people who do these things -- it's just a lot less.)
So, basically, I'm paying more, to ... er, be with people ... who can pay more. If there were more people like me, a great idea would be for an apartment place to *require* say, $900 a month (very high for this area), and puts, say, half of it in an investment account in my name. That keeps away the people who can't afford that, while essentially returning that money to me later after investment.
Posted by: Person on September 15, 2006 1:47 PMI think it's a vertical integration issue. There's a lot of work involved in building a house other than building a house (eg, obtaining capital and permits); most of the people doing that are also builders, and are dubious (possibly incorrectly?) that the increase in efficiency would cover the risks and loss of profit from subcontracting the biggest part of their business.
Posted by: Mike Earl on September 15, 2006 1:50 PMReputation has a lot to do with the slow acceptance of modular housing as well. When I worked in home construction in the early 80s, most anything from a factory was laughably lame quality-wise. So much so that at the time, there were precious few municipalities that would allow you to build using pre-fab materials.
Ironically enough, the other major issue was that the walls were too straight. If your sub-floor was out of square on a stick-built, it was no big deal to accomodate. Out of square on a pre-fab and you were looking at serious delays and big $$$ to fix.
Today that has changed. As Rex said, modulars are usually better built and insulated than stick builts now. Building inspectors are coming around, albeit ever so slowly. I think that delay is more because of the loss in income tax revenues to the city than in legitmate questions of factory built quality.
The financing is gigantic issue. I do have lenders that will do modular homes, but they dislike them, the loans are messy, and a large premium is charged for the financing of them. Most lenders simply will not write loans on manufactured houses.
My question is, why not? And I have no answer for that.
Posted by: Chris Jones on September 15, 2006 2:51 PMDon't forget zoning laws, building codes and neighborhood covenants. Many localities restrict where you can put something other than a 'stick-built' home.
When my brother had a modular home built he had to do a lot of leg work to get the special permits and exemptions needed to put his house in an extablished neighborhood.
Where I live (Denver metro), there *are* modulars, and some folks have gone to the trouble of making them look like something other than rectangular boxes. But even then you are somewhat limited in terms of overall shape and size because
(1) there are maximum height and width restrictions on what can be safely toted down the highway on the back of a flatbed truck, and
(2) you can only lateraly break apart a house into so many sections before the purpose is defeated, and this dictates the maximum width of a modular section.
Meanwhile, manual labor for stick-built is very cheap because you can hire as many first- and second-gen Mexicans as you wish, and folks are (strangely, IMO) into buying these 4000+ square foot McMansions with enough rambling roof gabling to house an entire migratory flock of geese. (Those are going to be a shingler's nightmare in 10-15 years, or after the first big hailstorm.)
Posted by: anony-mouse on September 15, 2006 3:39 PMI've got a relative who deals with these things. They do pretty well in the South, where people aren't so picky about living in trailers (I don't mean that snidely - I've got relatives I like who live in trailers, and my husband used to live in a trailer) -- a lot of people prefer to own a home, even if it's a trailer on rented land, than rent an apartment. You feel you've got more control.
That said, I believe these structures depreciate far faster than regular homes, and I've never really heard of resales. This may be why banks, etc., don't like to finance these - they're subpar collateral.
Posted by: meep on September 15, 2006 3:43 PMMost cities and towns have building codes and zoning laws that restrict modular housing, most of which are by design.
Another reason, at least where I live in suburban Chicago, is most land in a subdivision is purchased by developers and you have to contract with them to build a new home.
There is also a feeling that modular homes are not as high quality as a "real" home. Though I think zoning and building codes are probably the primary reason.
Posted by: Chris on September 15, 2006 3:47 PMJane,
This is why:
If you're paying through the nose for the land either way, it can make sense to pay a bit more for a nicer custom-made house rather than a pre-fab house.
This is exactly it.
If a quarter acre lot is going to run you $350,000 anyway, then you certainly don't want to pay $90,000 for a 1500 square foot cookie cutter modular home to stick on it. You'll pay $250,000 for a customized 2250 square foot, stick home.
Modular homes are very comfortable (and very popular) in parts of the country where land prices haven't yet gone through the roof. There is still plenty of cheap land out there where you can justify putting up a modular home, but you aren't going to do that within 100 miles of a modern, high paying, high cost, metropolitain, area (like New York City.)
Posted by: Paul on September 15, 2006 4:45 PMWhen we went house-hunting a few years ago, we considered buying a modular that was on about 5 acres of desirable land. It looked like a typical ranch, sat on a full basement, had been customized enough that it was not obviously modular, was well-constructed, and was priced in the same ballpark as stick-built homes with similar acreage. However, we found out that some banks (including ours) are not excited about financing modulars, given their history of not appreciating on par with stick-built homes. Knowing about the appreciation factor (or limitation) was enough to discourage us. Incidentally, the home stayed for sale for considerably longer than other homes in the area, and I don't know whether the owners eventually got their asking price.
Posted by: Kari on September 15, 2006 4:48 PMI should clarify that the issue is not that modulars depreciate (as mobile homes typically do); just that, at least in the part of Kansas we're in, they have a reputation for not keeping up with the values of neighboring stick-built homes.
Posted by: Kari on September 15, 2006 4:52 PMIt is also important to take into consideration the cost of labor ...modular home construction allows offsite work.
Posted by: John Roberts on September 15, 2006 5:31 PMI am surprised no one seems to pay any attention to prefab homes. Like judson mentioned.. go to:
Most modular homes are hideous. Prefab homes have a nice modern appearance. I can't understand why more people are interested in these homes.
Though, I'm sure it's price point.. if you're slapping up modular homes.. it's because it's cheap.. and that's it. So, why spend more on a prefab?
Posted by: eli on September 15, 2006 5:44 PMI see many comments about modular homes losing value instead of gaining value over time. That may be true, but I will wager it is not because modular homes are less durable.
In the two metropolitan areas I bought homes in recently (Hampton Roads and Memphis), the "custom" homes built locally are of poor quality (much lower than modular homes). I would much prefer a quality modular or prefab home over most of the crap built by local contractors.
Posted by: Dr. T on September 15, 2006 5:51 PMOne happy combination of manufactured and "stick-built" is panelized construction. There are no limits to the design. The building panels are constructed in a factory and shipped to the site on flat bed trucks. The panels are then lifted into place on-site and nailed or bolted into place. Construction on-site is much faster and the quality is at least comparable.
Posted by: Ed Reid on September 15, 2006 6:00 PMModular homes don't typically lose value. They just don't go UP in value as fast as stick homes. That is why banks and lending institutions tend to stay away from financing them. They don't build up equity nearly as fast.
Basically, if you can afford to buy a piece of land somewhere, you almost need to save up a majority of the cash to buy a modular home to put on it, if you are going with a modular home. Thus, people who are short on cash, are forced to get a stick home. There is nothing wrong with modular homes. In most cases, the newer ones are built even nicer than stick homes. My wife and I were pricing a 3 piece modular home that had 5 bedrooms, 3 full bathrooms, and just over 3000 square feet of living space. Gorgeous. The total cost would have been just under $100,000.
Yeah, just try finding a brand new, 3000 square foot, 5 bedroom, 3 bath, stick home anywhere in the country for less than $100,000. You wont find it. It doesn't exist (not a new one anyway.)
But people still want the stick homes. The demand for them is there, while the demand for the modulars homes isn't. This invaribly drives down the overall value of modular homes. It is falsely perceived by the free market, that modular homes are "less than" stick homes, and therefore, they do not increase in price as fast as stick homes. The demand just isn't there.
So, the equity isn't there.
Posted by: Paul on September 15, 2006 6:58 PMMost new stick-built homes use factory-built roof trusses. That is where the fixtures which make pre-fabs "too accurate" really pay off. I cannot imagine a lender or developer having a problem with this. I'll bet almost nobody produces window and door frames on site any more.
Posted by: triticale on September 15, 2006 7:22 PMModular homes are fine, its modular nieghbors that are a problem. One modular home desposited on your 100 acre spread of Oregon pines and rolling hillsides is a wonderfuly thing. But stack 100 of them right next to each other with nearly no zoning laws in Florida scrubland and you have another thing altogether.
To be honest, most "modular" homes are better described as "prefabricated" homes, which nowadays almost every home is in one way or another.
The Levittown houses indeed were ordinary construction, in other words not modular.
While the great majority of the houses have been extensively modified over the decades, you'll still see some that are in what obviously must be their original state. Not necessarily run-down, just not changed too much.
Levittown remains a desirable community. Depending of course on the amount of modifications, the houses today sell for upwards of $250 - 300K. One disadvantage is that property taxes are exhorbitant even by Long Island standards, running in the high four digits per year.
Jane
You have mistaken the true utility of housing - it is not (mostly) to provide shelter from the elements it is to signal to the world your status and aspirations. Hence 10 bedroom , greek column porches, french shutters and other un-needed common features of McMansions. Modular housing sends completely the wrong signal, henced is shunned except by those who cannot afford anything more. It is the same with cars - who needs anything more than a 1 litre engine with a basic plastic body to provide their transportation needs? In both cases the obvious or admitted utility is actually only a small part of the actual utility. The housing and car industries are really fashion industries, only a lot of the people working in them don't realise that.
The distinctions that your readers are reporting are very critical. Modular homes,as an alternative to trailers, still carry all of the problems of foundation tie-ins and stability that have led financers and local building code managers to shy away from them. Prefabricated homes, of the kind that Sears used to sell, carry today the problem that building inspectors still want to be satisfied about the quality of installation of anything covered up. So most areas want specific certifications to cover such areas,which can take time and money. Component fabrication has become the best avallable alternative, even in commercial construction. Trusses and windows/doors are the most obvious components used,but the manufacturers will sell almost any element as a component,if transportation to the site can be easily arranged.
And that's a key issue. Modulars are used most often these days for temporary classrooms on existing school sites. But getting them to the site and having the site prepared for utility hookups can be very costly,particularly if any lifting equipment has to be brought in to set them.
The production volume/quality of labor issue is another factor. Quality labor is not cheap anywhere these days, and getting the factory quality standards met means that the factory has to invest in labor and qa/qc programs. And the factory has to continuously generate orders to keep the workforce team employed,which has reduced the number of firms willing to start up in the first place.There's a huge cash requirement upfront to compete with the existing stick-built industry.
The classic manufactured home disaster story is the Lustron story. Lustron was a post-WWII manufacturing venture, intended like the Tucker to take advantage of the wartime metal working skills and the availability of cheap factory space. The firm offered homes based on steel panels faced with enamel, reducing maintenance and upkeep. Unfortunately they could never generate the mass of orders necessary to sustain production,in the face of severe opposition from the local building industry and the timber/forestry folks,and ran out of cash. A few demonstration homes and a few neighborhoods were created, but a good idea could never get traction.
Posted by: fxm on September 16, 2006 9:45 AMOn a related note, what's holding back modular plug-and-play auto body repair? About once a year I scrape the edge of a painted fender in the garage, and it can't be paint-touched-up, two huge metal units have to be replaced and hand-paint-blowered and baked, and paid for at about $1000!
These legacy industries are ripe for change.
Posted by: dilys on September 16, 2006 10:19 AMdylis, Lileks just ran into the issue you are asking about. The issue is that unless the panel was sprayed from the same batch of paint, the color won't match. Replacement panels are increasingly available, as are weld patches for common rust spots on popular older cars. Unless we go back to "any color you want as long as it is black" the artful respray will remain necessary.
ChrisA asks who needs more than a 1 liter engine. The 1.6 liter 4-valve in my station wagon has to go into high-consumption mode to maintain the speed limit (let alone keep up with traffic) on some of the hills around here.
Posted by: triticale on September 16, 2006 10:54 AMfxm -
In addition to those Lustron houses made out of enamel-faced steel panels, there also were a small number (IINM porcelain in an experimental program in the late 1940's/early 1950's. Apparently it made for a highly satisfactory building material but just wasn't cost-effective. I knew of one some years back, in Hamden, Connecticut, though I don't know if it's still there.
Around here (rural Michigan), most of the new construction is modulars. Lots are cheap (except for lakeshore locations), most people don't have money to spend on showy houses, and those who do will likely spend it on a lakeshore lot and a boat instead.
Also, windstorms are not much of a factor - and I'm not convinced that modulars are more susceptible anymore. The worst storm in 15 years around here destroyed just one building, and it was site-built and housed the local distributor for a brand of roofing and siding materials for site-built homes! Modular homes survived winds that stripped that building down to a concrete pad and a few frame pieces, and blew all the torn-off pieces and their entire stock across the road. The second-most damaged building was the new high school that got hit by most of those pieces.
By the way, Levittown was site-built, but with factory methods. Instead of moving houses down the assembly line, they moved the assembly line down the street. That made for structurally good housing, but very little variety (at least until the owners paid off their mortgages and had the money to build additions). A modular home subdivision will have considerably more variety inside the houses, although much of it doesn't show because the requirements of trailering the house down the road make it hard to vary the low-roofed rectangular box theme.
Posted by: markm on September 16, 2006 11:57 AMMy comment of 11:56 AM got butchered somehow. What I meant to say is that about 25 houses nationwide were built out of porcelain in an experimental program.
Posted by: Peter on September 16, 2006 11:59 AMAll of the bases have been covered (and we've seen some interesting advocates for modular homes), but no one has identified what are the biggest things. Firstly, as always seems to happen in serious econ discussions, there's the agency costs. It's hard enough to manage the differences between 50 states, handling issues with every single locality... yikes. Just look at the NYC construction market: people specialise in certain parts of Manhattan, and get hard looks when branching out of the neighbourhood, never mind the borough! Take that across the country. Dangerous.
This parochialism isn't (all) stupid or corrupt (though lots is, and being an old golfing buddy of the city clerk's cousin is highly useful everywhere and hard to do for a large company that does little repeat business in any one location). The critical aspects of a house are very different between regions, and managing these differences in selling to customers would be very hard. The critical issues of a house in NYC (or Westchester) are different from those in Maine (more snow, absolutely need a basement), Phoenix (dry, hot, insects), LA (earthquakes, fires, Mediterranean, coolish and damp winters), Seattle (RAIN, cool), Miami (cockroaches the size of dogs, alligators, hurricanes, termites, damp, hot), Omaha (twisters, suicidally flat horizon), Fairbanks (cccccccold, grizzly bears, dark 9 months of the year, snow, ccccccold), and Maui (mudslides, typhoons, hula girls, poi). City officials know this and want to ensure that everyone truly gets what's important for a house in their location. So the market is much, much, much smaller than it appears to be (and that's before you get to aesthetic preferences).
The other key thing is transport restrictions and costs. Moving something bulky is HARD and EXPENSIVE, and usually slow. Roof trusses aren't that much bulkier than regular beams, and as long as something is essentially one dimensional it can be scaled up quite a bit and still be moveable. Panelization makes things hard, and modularisation gets you quickly into trouble. So you've now doubled your aesthetic problems, which were already severe to begin with.
So off-site houses are fairly plain, uniform, and restricted, rightly viewed with suspicion by building officials, and have to deal with a mosntrously fractured market. Sounds like a crappy business. But wait, there's more! It's dramatically more capital intensive than traditional house construction firms and it's trying to break into an industry that is one of the most notorious for cheap startups (a few hammers and a credit card and you're a contractor, add a bigger slab of debt and you're a developer). The few competitors for ease of startup are the law, management consulting, accounting, stock broking, and private investment management (hedge, private equity, vc...).
To take things personal (and more into the aesthetic), look at the PM house. You quickly understand that it's 3 trailers side by side, each of which has its own load bearing walls. No knocking out walls in the future, and the house feels very different inside (trailerish) than it looks like from outside. So it's not shocking that these appreciate less than other similar houses. As we routinely see, markets get prices right and understand the deep unspoken needs and desires of people, not just the simple parts that people quickly articulate and try to solve with mass solutions.
Posted by: hey on September 16, 2006 1:36 PMThe worst storm in 15 years around here destroyed just one building, and it was site-built and housed the local distributor for a brand of roofing and siding materials for site-built homes!
In a word, the roof. If the roof can be lifted, the rest of the house will be down for the count in short order unless the storm breaks. Factors affecting whether the roof can be lifted include roof type, building height, orientation with respect to the prevailing storm winds, proper compliance with applicable codes, etc.
Posted by: anony-mouse on September 16, 2006 11:55 PMAs with anything, cheap brings down everything.
Also, how "modular" homes are taxes can be an issue. Here, "mobile homes" are under 6% sales tax, payable upon purchase.
My fiancee is OK with living in a "mobile home" - as long as it's a Palm Harbor. Which are _very_ nice.
Cheaper ones use "trailer" doors/plumbing, etc. The big HW stores will carry what you'll need, smaller hardware stores might, or often, won't. So doing your own work can be more problematic.
What I found staggering - the salesguy showing us the PH Homes (which are better-built than the new homes around here), mentioned only in passing, that for ~$20-25k, they can pour a slab, and make it a "real" house.
Me: and you're not trumpeting this from the highest towers? So, for the cost of the sales tax, I can get a house that's easier to finance, resell, and don't have to pay up front?
Him: Yeah, um, is that a good deal?
Me: *boggle*
A 5-bedroom PH with a _extremely_ well designed and large kitchen - top of the line appliances, that in floor plan makes the "stick built" plans look like they were drawn by drunken architechs... would be a shade over $120k if built on a slab. Or, less than 100k less than the far-inferior "stick built".
Our real estate agent is aghast, that we're considering one. (You could probably say "of course", too.)
Of course, if I get one, I'm tossing it on at least 15 acres. Small, I know, but it'll (barely) be enough.
Posted by: Unix-Jedi on September 17, 2006 2:20 AMUnix-Jedi,
Umm. No, on one important point. Trailers or manufactured homes (not modular or pre-fab) have no resale value, as in none whatsoever. You'd better be happy with it, because you cannot ever get out of a trailer what you put into it up front, be it from PH or anyone else. They depreciate just like cars do, even if they're on a slab. Start looking at the secondary market and you'll find out real quick.
Umm, hey, you make a lot of good points, but what's up with calling roof trusses "essentially one-dimensional"? If that's all they were, there wouldn't be any such thing as prefab roof trusses! Because dimensional lumber is already that...
Posted by: Kirk Parker on September 17, 2006 8:26 PMI really don't understand the lack of appeal either. From what I saw when I was in the market 2 years ago new "custom" built homes these days look just as cookie cutter as the prefab or modulars.
What I also don't understand is why wood is still the predominate framing material. Personally I prefer steel.
Posted by: asiequana on September 18, 2006 4:04 PMWhat I also don't understand is why wood is still the predominate framing material. Personally I prefer steel.
Seriously? Steel means screws. This is ridiculously more time consuming for custom home.
And I think Hey has it right.
The housing market is fractured and building a modular home that could fit any site in any location and corrospound to any building codes and concerns is a bear.
Snobbery doesn't work by magic. People are snobbish about a product because it is inferior (even if in miniscule and seemingly unimportant ways) not simply less expensive. Nylon hose overtook silk hose almost instantly.
Posted by: Karl Smih on September 18, 2006 10:21 PMDrywall is an older example of a prefab component replacing a labor-intensive component.
I wonder if higher labor costs would lead to more prefab stuff. The last couple places I've lived, construction workers appeared to be entirely Spanish speaking, with the boss being the second-generation immigrant who also speaks English. If the labor costs on-site went up, would the bigger advantage in having most of the labor done somewhere else (maybe Mexico or China) overcome the added cost of shipping and the loss in future market value?
Posted by: albatross on September 21, 2006 11:10 AM