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Manufactured Housing: The New Affordable Alternative

Katie Jensen
Dec 03, 2021
Manufactured_Homes

While the housing market is grappling with widespread affordability and supply, manufactured homes are gaining ground as a new alternative. 

KEY TAKEAWAYS
  • A new single-family home built on-site sold for an average price of $392,000 in 2020, while new manufactured homes only cost $87,000, not including land.
  • The industry is on pace to build 100,000 new manufactured homes this year for the first time since 2006.
  • The manufactured homes are constructed in factories and shipped out to their destination. They are traditionally sold through dealerships that offer limited financial options.
  • These manufactured homes represent 9% of new single-family home construction, the National Association of Homes Builders reports.

While the housing market is grappling with widespread affordability and supply, manufactured homes are gaining ground as a new alternative. 

A new single-family home built on-site sold for an average price of $392,000 in 2020 or $309,000 excluding the cost of underlying land, according to data from the U.S. Census Bureau. However, new manufactured homes only cost $87,000, not including land. 

The industry is on pace to build 100,000 new manufactured homes this year for the first time since 2006, the Journal reported. The Biden administration also pointed out in a White House statement that manufactured housing is a viable solution for the shortage of affordable homes. Specifically, the policy stated, “Boost the supply of manufactured housing and 2-4 unit properties by expanding financing through Freddie Mac.”

The manufactured homes are constructed in factories and shipped out to their destination. They are traditionally sold through dealerships that offer limited financial options. For that reason, many people will buy a manufactured house as a piece of personal property, rather than getting a mortgage that tethers it to the underlying land. 

According to the CFPB, 42% of manufactured homes are secured by the home but not the plot of land, and those loans typically have far-higher interest rates and borrowers are at greater risk of losing their home if they don’t own the land. 

Still, manufactured home developers need to convince prospective buyers that their manufactured home has solid construction and safe financing choices. Those who remember the manufactured housing boom of the 1990’s when dealers pumped up sales by offering unrealistic loan terms to people who couldn’t afford them, leading home shipments to spike up to 400,000 in a year. Eventually, many borrowers defaulted, lost their homes, and lenders shut down. 

Additional roadblocks stand in the way, such as zoning laws that conflate them with trailer parks. Plus, factories that manufacture homes are facing the same supply constraints as the rest of the housing industry and broader economy. 

These manufactured homes represent 9% of new single-family home construction, the National Association of Homes Builders reports.

Still, this new alternative might provide hope to those who are priced out of the hot housing market, which continues to break records with ultra high prices and scarce inventory. According to the Journal, only 21% of new site-built homes sold for less than $300,000 in September. 

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