Real Estate

Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

Help Wanted
Following the recession, the rate of construction job openings has outpaced hires.
Source: Bureau of Labor Statistics
Seasonally adjusted

With a labor squeeze in construction making U.S. houses less affordable, it's nice to know there's a less costly alternative for would-be homeowners. It's just that the solution -- modular housing -- has an image problem with many Americans. So let's clear that up.

First, what they're not: Modular houses aren't the same as mobile homes, despite some misperceptions to the contrary. While both are factory-made, modular houses are constructed in pieces, or modules, according to the specifications of local building guidelines, then shipped and assembled on site. They don't go anywhere after that.

Now for what they are: Modular houses have much more in common with traditional homes, and they can be just as varied. The modular construction method allows builders to offer hundreds of floor plans in all types of shapes and sizes that can be customized based on buyers' specifications. The quality level is also similar to "stick-built" homes, or those constructed from the ground up.

One big difference is cost: The median permit value , a rough estimation of construction costs, comes in at $146,000 for modular houses. That's more than $50,000 less than the median for traditional houses. 

Cost Savings
Median permit value per square foot in 2014
National Home Builders Association, Census Bureau

Even with highly customized floor plans, homeowners can save with modular homes because centralized factories benefit from their purchasing power when buying materials, according to Kerri Kondisko, director of marketing at Innovative Building Systems, which owns modular housing producer Excel Homes. 

Modular houses also take a shorter time to build than traditional homes, in part because labor shortages are less acute at the building facilities.

Just in Time
Months to completion
Source: National Home Builders Association, Census Bureau

While modular home construction is the norm in places such as Scandinavia, factory-built houses made up only 2 percent of single-family homes completed in the U.S. in 2014 -- and that's down from 4 percent in the late 1990s, according to Census Bureau data. Instead, the modular method is more widely used among U.S. businesses to build everything from cruise ships to hospitals and hotels.

Home Stay
New single-family houses completed nationwide by construction method
Source: Census Bureau

Certain regions, including the Northeast, have been friendlier to modular homes, but they’re nowhere near mainstream. 

Model Housing
Share of single-family modular houses by region
Source: Census Bureau West not included due to low response rate (share, when available, is lower than 0.5 percent)

Modular houses have their roots in mobile-home construction and some modular builders, including Champion Homes and Berkshire Hathaway’s Clayton Homes, also make mobile units. That can make the association with mobile homes  -- and the stigma some attach to them -- difficult to dispel. 

To break these misconceptions, the Modular Home Builders Association recently formed a committee to coordinate a national marketing effort. While they don’t have all the details nailed down yet, Tom Hardiman, the association's executive director, says it will emphasize all of the things modular homes are -- and not what they aren’t.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Rani Molla in New York at rmolla2@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net