Manufactured Homes in America

While ready-made houses are convenient and affordable, they present a few drawbacks. Also known as prefabricated or prefab houses, ready-made houses are typically assembled in factories before being transported and installed in their respective locations. Prior to the incorporation of the HUD Title 6 Building code in 1976, prefab houses were referred to as “mobile homes”. Commonly produced as single units, prefabs are also modular; laborers install 2 or more units together at designated locations. While these structures do not conform to the building codes of their locality, they must observe federal building codes.

Due to the archaic impressions created by mobile home community dwellings, ready-made houses were viewed as symbols of poverty by real estate markets. Over the years, this notion has become less prominent, with modern prefabs becoming more versatile and comparable to on-site built houses.  Manufactured homes represent between 9% and 11% of housing units in the U.S.  An analysis of common myths, benefits and drawbacks surrounding ready-made homes will help in establishing if they’re right for you.

True or False?

Below is an analysis of tales and fables about ready-made homes that affect consumer preferences;

  • #1: Prefabs are flammable
    • FALSE: Ready-made homes adhere to the same federal building codes as on-site built houses, making them as safe, if not safer, than the latter.
  • #2: They are depreciating assets
    • FALSE: All prefab homes grow in value, albeit at a lower rate than that of on-site built homes. Improvements in design and quality have reduced market bias placed on prefab homes; bias that has negatively affected sales across the U.S.
  • #3: They use too much energy
    • FALSE: Upon adoption of the HUD Title 6 regulations of 1976 and ensuing energy efficiency standards in 1994, all prefab homes were required to meet the same energy efficiency standards as on-site built homes.
  • #4: They all look the same!
    • FALSE: Following improvements in technology, prefab homes now come in a variety of designs and styles; the old identical housing units have been overtaken by newer models.
  • #5: No mortgages for prefabs
    • FALSE: FHA loans are accessible to home owners wishing to invest in prefabs. Similarly, more financial institutions have opened their doors to this type of financing; previous unavailability discouraged buyers from investing in prefab homes.
  • #6: Ready-made homes cost less
    • TRUE: When compared to on-site built houses; on average, the construction costs differ by more than $200,000.
  • #7: Ready-made homes are MUCH faster to setup and install
    • TRUE: Based on size and design, an average prefab home can be built, delivered and installed in under 8 months while an on-site home can take as much as 16 months to construct.

The Drawbacks

Despite great advancements in prefab manufacturing, there are limitations to the modifications that can be made on the homes; it would be easier to tailor-make an on-site home to fit personal design requirements.

Financing for prefab homes is scarce and at higher interest rates when compared to conventional home financing. This is especially true for potential prefab home owners who do not have outright possession of the land that the home will be installed on; they may only qualify for high interest loans and not low rate mortgages.

In view of the negative misconceptions of prefab homes, their resale value is lower than on-site built homes. This, combined with financing limitations, makes selling of prefab homes difficult, time consuming and unrewarding.

Should You Buy The Land, The Home or Both?

The biggest decision affecting whether or not a ready-made home is the best solution is the issue of ownership of the land that the home sits on. Less than 20% of prefab home owners rent both the prefab home and the land while 30% own the home but lease the land and more than 40% own both land and home. Although the value of a good quality prefab on a strategically placed site may match that of a similar on-site built home, having a prefab home on leased land may be complicated; fluctuations in land rents and immobility of modern prefabs makes resale of these homes at a profit, difficult if not impossible. Additionally, cheap financing for prefabs where land ownership is not guaranteed is complicated, with most financiers shying away from mortgages and resorting to high interest loans.

Ready-made or On-site Built?

The decision to build or fabricate can only be made after an in-depth analysis of each option. Depending on the priorities and status of the potential home owner, an on-site built home would be ideal if financing and wait time is not a concern, while a prefab home would be best if the reverse is true. Additionally, for land owners with limited investment expectations and tailor-made requirements, prefab homes are ideal while the reverse is true for on-site built homes.