A Primer on Factory-Built Housing
Claus and Kathy are preparing to pull up stakes and start a new life in Florida.
Married for 30 years, they’d like their fresh start to begin with their first custom-built home.
There was a time when folks who wanted a brand new custom residence had only one option: Find a contractor and wait six months to a year — or more — to have it built.
But these days, consumers are discovering that new technology, materials and other innovations have created a factory-built alternative that offers the same quality for a fraction of the time and money it takes to construct a site-built home.
That’s what Claus and Kathy discovered when they started visiting retailers and toured a variety of factory-built homes.
Thrifty and conservation-minded, the couple’s interest was first piqued by the promise of financial savings and energy efficiency. But it was the surprising aesthetics and durability that made factory-built a serious contender for their next home.
“We mainly want a house where the floorplan can be slightly altered, and of course, will increase in value,” says Kathy.
The question became, what type of factory-built home would best meet their needs?
Mobile, Manufactured, Modular: What’s the Difference?
Although many people use these terms interchangeably, the only thing they really have in common is beginning life in a factory.
Mobile homes — the sometimes flimsy trailers of bygone years, before construction and safety standards took root — are an artifact of the past and have not been produced since June 15, 1976, when federal standards governed by the U.S. Department of Housing and Urban Development ushered in the era of HUD Code manufactured homes.
Today’s manufactured homes, with performance-based standards that can meet or exceed those of traditional site-built housing, are constructed at the factory and trucked in one or more completed sections to the site where they are to be installed.
Modulars, on the other hand, are shipped in sections known as modules and assembled on site, subject to international residential or building codes that are tweaked to conform to the local codes of their final destination.
“The real key in factory-built housing is it’s built in a controlled environment,” says Mike Wnek, vice president of New Business Development for Jacobsen Homes.
There are no delays for inclement weather and no waiting for an inspector to show up so construction can move on to the next phase; inspectors are routinely on hand on the factory floor.
Cost, Financing and Other Considerations
Manufactured homes can cost half as much as a comparable site-built home, while modulars offer about 25 percent savings over site-built.
The bigger price tag on modulars is largely due to the greater cost of on-site assembly, which also tends to take a bit longer than the rapid installation time for a manufactured home.
Nonetheless, both types of factory homes are move-in ready in a fraction of the time required for a site-built home; and both can be financed with a traditional mortgage, although modulars may sometimes qualify for better terms.
This has been one of the biggest advantages modulars have had over the years, says Jay Hamilton, executive director of the Georgia Manufactured Housing Association.
The banking industry historically has viewed modular housing as permanent, versus manufactured homes, which they view as temporary — an inaccurate artifact from the old mobile home/trailer days, Hamilton says.
“When the HUD Code was developed in the 70s, we were dealing with a lot of veterans coming back to this country, looking for work, and homes that could be moved.”
So, the HUD Code manufactured homes were designed with a chassis system that the home could be transported with.
The home — chassis and all — was then installed on pillars or a masonry structure that made it easier to move, later on.
But as manufactured homes have gotten bigger and nicer, more than 70 percent are never moved from their original site, and are being
placed on permanent foundations, Hamilton says.
But banks don’t necessarily see it that way.
“You can take the same floor plans and offer them different ways,” Hamilton says. “A retailer using the same builder can offer the HUD-code version for, say, $80,000, and the modular for $91,000, and a lot of people will choose the modular because they get better financial terms.”
Still, HUD-code manufactured homes have certain advantages that modulars don’t.
For one thing, manufactured homes have the option of financing with a chattel (home-only) loan. These generally have a higher interest rate than a mortgage, but also have fewer closing costs, and allow buyers to finance the home without encumbering the property it occupies with a lien.
Despite the higher interest rate, chattel loans are often more affordable, with lower monthly payments than a traditional mortgage. The amount borrowed is less, because land is not part of the equation.
You can finance a $70,000 home without taking out a $150,000 loan for land, plus the home. This also gives buyers the flexibility of selling the home later on, if they want to buy or build another on the land.
And the home-only loans on manufactured housing don’t always require the same kind of an appraisal or other mortgage expenses, so chattel loan closing costs might be $500, compared to several thousand dollars for a land/home loan.
“When you talk about not financing $5,000 or $6,000 in closing costs — that’s huge,” says Hamilton.
Modulars also are subject to standard real estate taxes, which, like a conventional house can run thousands of dollars more per year, while most manufactured homes — subject to state regulations — are taxed as personal property.
Architecture and aesthetics
Interiors for today’s residential style manufactured homes and modulars, both are comparable to site-built homes, with tall flat or vaulted ceilings, open floor plans, finished drywall and upgrades limited only by a prospective homeowner’s budget and imagination.
The original HUD code for manufactured homes was created to ensure a safe, durable residence that would stand up to North American climates — at an entry level price point.
Manufactured homes come in two styles; residential ones that mirror the conventional-home look, as well as entry level homes that have less costly interior finishes, but still meet all of the safety and construction standards mandated by federal law.
Some of the differences between the two factory-built products can be found in the structure, itself.
The international codes that apply to modular homes require slightly heavier gauge lumber for sidewalls, rafters and floor joists, as well as roofs that would carry snow loads in the Swiss Alps.
Consumers who want heavier gauge lumber in a manufactured home can order 2×6 instead of 2×4 sidewalls, along with many other custom upgrades that exceed the basic HUD code.
Some manufactured home producers offer these features in all of their residential products.
In later years, the HUD code allowed for three- and four-section manufactured homes, giving birth to triple-wides and quad-wides that allowed for more creative exteriors.
Porches, decks, insulated skirting and ground-set installation — all the result of enhanced site prep — offer manufactured home buyers a new look that transcends the box-like “mobile home” aesthetics of old.
Today, regional variations, such as Santa Fe, Cape Cod and bungalow-style manufactured homes are becoming a popular alternative to the traditional single- and double-section rectangles.
The HUD code allows for a Cape Cod-style second level, while modulars can readily be built with multiple stories and many more modules, which means more flexibility in exterior designs and total square footage.
Standards, Features & Politics
While manufactured homes built with hinged roofs can result in a 5/12 to 7/12 roof pitch, modulars offer an architectural advantage that allows for more variation in roof lines and roof pitches.
This is a key component that allows a modular to blend into a broader range of site-built neighborhoods — especially subdivisions.
A modular home can be installed anywhere that a site-built home can, because the standards mirror local building codes.
Manufactured homes, however, are often restricted by local urban zoning ordinances, making them more likely to be placed in rural areas or designated manufactured home communities.
This is a hot-button issue for manufactured housing associations, which point to the fact that federal preemption was strengthened by the Manufactured Housing Improvement Act of 2000.
Preemption means that federal rules are supposed to prevail over state and local zoning ordinances.
The Manufactured Housing Association for Regulatory Reform (MHARR) has pushed HUD for years to follow through with that stronger preemption, which is increasingly needed due to the growing affordable housing crisis.
The Manufactured Housing Institute (MHI) has recently sent HUD a letter that also calls on the regulatory agency to follow the 2000 law which strengthen preemption over local zoning.
Location, Location, Location
Because local zoning officials more readily accept a modular home, they are more likely to be found in conventional-style neighborhoods.
Modular homes are generally considered a better bet as far as future appreciation in value, for a variety of reasons that often come down to the appraiser’s knowledge of the two factory-built homes.
But like any aspect of real estate, it all comes down to location, demand and access to lending.
Manufactured homes are known to rise or fall in value for similar factors that impact conventional housing.
Will a modular in a declining sub-division retain more value over the years than a manufactured home on an upscale country estate, or in an up-and-coming resort-style community?
Ask the Realtors in Malibu, where even kitschy 1950s-era trailers command prices in the upper six figures on rented patches of sand in old-style parks like Paradise Cove.
While manufactured homes outsell modulars by about 5-to-1, there is still a stigma from the old pre-HUD-code mobile home days that affects financing and zoning issues.
Yet there may be very little difference between the products, when comparing a modular home to a residential-style manufactured home (as opposed to the entry level version).
About half of modular builders also build HUD-code manufactured homes, says Hamilton.
“A lot of them build both products on the same assembly line,” he says. “If the products were vastly different, you could never get away with that.”
Meantime, Kathy and Claus have decided that their next home definitely will be factory-built.
When the time comes to choose between a modular and manufactured home, “It will come down to where we want to put it, and how we want to finance it,” she said.
“They’re all beautiful and very well-built.” ##