As Starter-Home Prices Rise, Buyers Look to Factory-Built Homes
As starter-home prices continue to increase, first-time homebuyers are considering alternative forms of housing. Rather than buy a costly home or continue renting, some prospective buyers are considering manufactured (also known as HUD-code) and volumetric modular homes as a more affordable options at scale, according to housing market platform Realtor.com.
Affordability concerns are driving first-time buyers to seek out alternative forms of housing
What were once considered starter homes have increased to upwards of $1 million in some states, leaving buyers with less options. Add to that rising mortgage rates, many would-be buyers feel priced out of the market. In fact, as of 2024, the share of first-time buyers in the market dropped to a historic low of 24%.
When it comes to factory-built housing, homebuyers benefit from high appreciation and lower building costs
While there are key differences between site-built and factory-built homes, the rate of appreciation is surprisingly similar. From 2000 to 2024, site-built homes appreciated 212.6%, During the same time, manufactured/HUD-code homes appreciated 211.8%.
Additionally, and at scale, manufactured (and to some extent modular) homes can be built at a fraction of the cost of site-built homes. In 2024, the average new single-family home sold for $665,298, with 64% of that price tied directly to construction costs and 14% attributed to the cost of land.
While factory-built homes offer a number of advantages for first-time buyers, the use of these construction methods remains low across the U.S.
- Despite More Interest, Use of Off-Site Construction Methods Remains Limited: As of 2024, modular and panelized construction accounted for just 3% of all new single-family homes.
- The Case for Manufactured Homes as an Affordable Housing Solution: While many view factory-built homes as an affordable alternative, negative perceptions hold the sector back from seeing substantial growth.