Prefab Solutions to Unattainable Housing

The dream of home ownership is slipping away for many Americans. Why?

To address the glaring issue first, the rising cost of housing is a key deterrent to homeownership in recent years. Looking at the bigger picture, the US is experiencing a significant housing shortage; meanwhile housing costs are outpacing median incomes quite drastically.

In the last decade, the median home price climbed about 30 percent while incomes rose just 11 percent.

As if climbing housing prices aren’t prohibitive enough, bidding wars intensify the struggle for first-time homeowners. In 2021, 50 percent of homes sold for more than their list price (a record high) and listed homes spent an average of 17 days on the market (a record low), according to data from Redfin.

In Freddie Mac’s 2019 Profile of Today’s Renter and Homeowner survey, 41 percent of respondents considered their inability to afford monthly mortgage payments a “major obstacle” to becoming a homeowner.

Across the country, housing is in short supply.

Between 2018 and 2020, the housing stock deficit increased by approximately 52 percent from an estimated 2.5 million in 2018 to 3.8 million in 2020, according to a 2021 report by Freddie Mac. The share of entry-level homes in overall construction declined from 40 percent in the early 1980s to around 7 percent in 2019, according to the US Census Bureau.

Price Predictability& Potential Affordability of Modular

In the face of a seemingly impossible housing market, modular homes (or prefabricated homes) can present a few solutions. While the total cost of a modular home build will vary widely based on the builder you choose as well as the cost of land and site preparation, modular manufacturing offers more predictability once you’ve identified the home you want. Nobody is trying to outbid you for a modular home. You choose what you want, and you might even get to make some of your own design choices.

In some cases a modular home will be significantly less expensive than an existing home on the market, but as real estate varies city to city, so does the relative affordability of modular homes as an alternative to traditional real estate.

The availability of modular homes is a particular benefit in the face of housing shortages. Around the world, modular manufacturers are contributing to housing supply by building homes to order. Yes, you will still need to secure land, but you won’t be fighting someone for the home of your dreams. You get to build it.

Building a custom home can take years.

Between finding an architect, determining plans, securing a crew, obtaining permits, sourcing materials in today’s supply chain environment and then actually building the home, a custom home can take anywhere from one to three years to finish. Why the crazy timelines? Bringing some clarity, 81 percent of the construction firms surveyed by Associated General Contractors of America in 2020 cited labor shortages as an issue. In addition, the NAHB (National Association of Home Builders) claims that in 2021, more than 90 percent of builders reported delays and materials shortages.

Modular Homes Offer Faster Timelines

Quicker construction time is where modular homes can really shine. Modular homes usually take weeks or months—rarely more than a year—to build. Some of the reasons for this faster production cycle are the efficient building systems that modular manufacturers are known for and the ability for modular facilities to continue building during weather (rain, snow, or intense temperatures) than would prevent on-site construction.

The fact is, housing as we know it isn’t working for everyone. As the housing crisis continues, home-seekers are continually looking for alternative solutions to traditional home-buying, and modular homes have created a solution to some of the major challenges we face. While housing costs rise, incomes lag behind, and bidding wars emerge from housing shortages, prefab manufacturing offers available housing, more predictable costs, and faster construction timelines.

We’re excited to be a part of the evolution currently taking place in real estate. Prefab homes have been around for a long time, but we’ve barely scratched the surface of what’s possible as we keep adapting to the needs of modern society.

Resources:

Bankrate analysis of data from the National Association of Home Builders/Wells Fargo Housing Opportunity Index.

https://www.redfin.com/news/housing-market-update-half-of-homes-sell-above-list-price/

https://www.freddiemac.com/research/insight/20210507-housing-supply