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The Cost of Modular Homes in the US

By John Biggs

Owning a home has long been considered one of the hallmarks of the American Dream, and for most people, their home will be the single largest and most valuable asset they ever own. However, for many, the high cost of homeownership keeps that dream out of reach. According to Statista, the average sales price for a new home sold in the US has nearly doubled since the year 2000, to $408,800 in 2021.

This means in order to put 20% down on a home, buyers have to come up with $81,760. Considering the average US savings balance is around $17,750, this can make homeownership seem impossible. Compounding this challenge is a white-hot housing market-driven in part by a pandemic exodus to the suburbs, where people are paying 10, 15, or even 20% above asking price on a regular basis. Those considering purchasing a home are eyeing less-expensive alternatives, including modular homes, which can bring costs down significantly, particularly in a high cost of living area.

What is a Modular Home?

Modular, or prefabricated homes are built in a factory-like environment. The parts are then shipped to their final location and assembled on-site. They look identical to homes constructed with traditional methods, but thanks to their assembly line-style production process, which requires fewer workers and takes less time, modular home prices are usually significantly lower. While traditional built homes cost anywhere from $150-$250 per square foot, the cost of modular homes start around $50 per square foot and can reach $250 per square foot for luxury builds.

Another benefit to modular homes over traditional stick-built construction is the speed with which they can be erected. According to The Nest, traditionally constructed homes take between nine and 12 months to fully build, compared to as little as two to three months for a modular house. Since modular homes are built in climate-controlled, indoor factory settings, structural elements are not exposed to the weather during construction as with traditional builds, which could increase their durability over time. Modular homes also tend to be built tough, since they’re designed to survive being trucked to their final destination, sometimes hundreds of miles from where they’re manufactured.

Factors Affecting Modular Home Pricing

As is the case with traditional builds, modular home pricing is highly dependent on the desired floor plan and any extra amenities or customizations the purchaser wants included. For starters, the cost of land, which can vary greatly based on location, will impact the final price. Some estimates say you should expect the price of land to make up about 25% of the cost of a modular home build. More square footage will also affect the price of a modular home, just like a custom-built home constructed using traditional methods.

Delivery cost will also vary, and often depends how far the pieces need to be shipped before they’re assembled at the site. Many modular home floor plans are templates, so any alterations, such as moving a window location, adding a bedroom, or changing the overall configuration will take additional assembly time and increase overall cost. Then there’s the choice of materials. Buyers can go with the materials preferred by the builder or upgrade to custom finishes, flooring, countertops, etc. for a premium. Custom luxury modular home builds can exceed $300,000.

The base price of a modular home includes the off-site fabrication, hauling it to its location, and assembling it. This doesn’t include site-preparation work like pouring the foundation, any permits required, or finishing touches like walking paths, driveway, or any landscaping, which will also increase the final cost.

Even a highly-customized modular home will still cost 10–20% less than a traditional build. The lower price tag and faster completion than stick-built homes make modular homes an appealing alternative, particularly for first-time buyers struggling to put a down payment together.

History of Modular Homes

The history of modular homes goes back a lot further than you might think. In 1908 Richard Sears, of Sears-Roebuck fame, started selling “kit homes” through the company’s catalog. These kits included a DIY package including all materials and instructions needed to build a habitable house.

By 1913, Henry Ford had introduced the assembly line, which allowed professional home builders of the time to start creating prefabricated home sections in factory-like settings.

During the housing boom that followed World War II, building companies needed a way to quickly and efficiently build affordable houses to meet the soaring demand, and many turned to prefabrication. It was around this time that builders realized they could build entire homes in factory settings, as opposed to just walls and facades.

The post-war baby boom meant the size of American families was growing, and with it, their need for additional space. This kicked off the first modular housing boom in the late 1950s, when the first double-section off-site created home was built in accordance with local building code. It was around that time when the modular building trend extended to include hospitals, schools, offices, and other building types.

As construction and design technology have improved in the decades since, modular structures have become much more customizable, and able to be built more rapidly than ever. McDonald’s is one example of a major company turning to modular construction for their restaurants, at one location going from the start of construction to open for business in an unthinkably fast 13 hours.◾️

John Biggs is an entrepreneur, consultant, writer, and maker. Biggs spent fifteen years as an editor for Gizmodo, CrunchGear, and TechCrunch and has a deep background in hardware startups, 3D printing, and blockchain. His work has appeared in Men’s Health, Wired, and the New York Times. Biggs runs the Technotopia podcast about a better future.

Originally published at https://www.procore.com on May 24, 2021.

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