Most people might think that manufactured and modular homes are the same, but they aren’t. Both styles are prefabricated, but one appreciates while the other depreciates.
This article will explain which home values between modular and their manufactured counterparts appreciate more. We’ll start by looking at the differences between the two building methods.
Finally, we will also explore possible reasons for their different appreciation rates. Let’s get in to!
Do Manufactured or Modular Homes Appreciate More?
Modular homes appreciate more compared to manufactured homes. In the last five years, their value has increased by an average of 5.7%. Compare that to the sharp decrease in value for manufactured homes, and it’s easy to see why modular is the better investment.
Why Modular Homes Appreciate More Than Manufactured Homes
Modular homes are more expensive than manufactured homes, and they appreciate in value due to several reasons, including the fact that they are permanent. Let’s look at these reasons more in detail.
Modular Homes Are Permanent
The main reason modular houses, also known as prefab homes, appreciate is that they are permanent. They are built on a site with a foundation and cannot be moved easily.
This build style is not the case with manufactured homes, which can be mounted on a truck and moved in one afternoon.
This feature means there is a scarcity value with modular homes because there are only so many plots of land suitable for residential use. However, manufactured homes are not limited in the same way.
Moreover, buying a plot of land and commissioning prefab construction is a much more significant investment than buying a manufactured home outright. This expenditure also drives up the value.
Modular Homes Are Built To Local Codes
Another reason modular homes appreciate more is that they are often built to local codes and regulations, are up to par with other traditionally-built houses in the area, and can be sold as such.
On the other hand, manufactured homes are built according to federal guidelines (HUD). As a result, they might not meet the building codes of the manufactured home’s area, making them harder to sell.
Modular Homes Are Easier To Finance
Then there is the issue of financing. It is easier to get a mortgage for a modular home than a manufactured one. This difference is because modular homes are seen as more permanent and, therefore, a better investment by lenders.
However, if someone had a parcel of land and built a concrete foundation for their manufactured home, you could also consider this a permanent home, and they might be able to get some creative financing for it.
This practice is done more in rural areas, though.
Differences Between Manufactured and Modular Homes
At first glance, it may be difficult to distinguish between a manufactured and modular home. Both are designed in factories and then transported to their new location.
However, some key differences affect their value, including:
- Size – modular homes are typically larger than manufactured homes, making them more expensive. That’s because manufactured homes are designed to fit on a chassis, which limits their size.
- Location – manufactured homes are usually placed in RV parks or other semi-permanent communities, while modular homes are placed on a conventional foundation. That means modular homes are sold together with the lot, which increases their value.
- Construction – modular homes are constructed in a factory but assembled on-site, while manufactured homes are built and assembled at the factory. This difference has an impact on the final costs of the house, as well as its overall quality.
- Financing – manufactured homes are often financed with a personal loan, while prefab homes are usually financed with a mortgage. That’s because lenders consider manufactured homes more like vehicles than conventional homes.
- Mobility – manufactured homes can be moved, while modular structures are typically designed to stay in one place. They’re built on a permanent foundation, making them more expensive to move.
- Customizability – modular homes are generally more customizable than manufactured homes. They’re built to order, while manufactured homes are mass-produced.
- Appreciation – modular homes appreciate at a higher value due to how they are built and their permanence.
The Drawbacks of Modular Homes
While modular homes offer several advantages over manufactured homes, there are also some drawbacks to consider. Let’s look at them now.
Longer Build Times
Modular homes take longer to build than manufactured homes. Each modular dwelling is made to order, meaning the lead time can be anywhere from four to six months. Factor in the cost of scaffolding, cranes, and labor, and the total investment can be pretty high.
Challenging To Finance
Another drawback is that modular homes are more challenging to finance than conventional homes. This is because they are often treated as second homes by lending institutions. You might have to put down a larger down payment or get a higher interest rate.
Regarding interest rates, it’s worth noting that those lenders you meet on the lot are not always your best option. For example, you might get a better rate from your local bank or credit union.
Not All Builders Have Experience With Modular Homes
It is also important to be careful when choosing a builder. Make sure they have experience with modular construction and are licensed and insured. The last thing you want is to end up with a home that doesn’t meet your expectations.
Alternatively, you can have the builder act as the general contractor and manage the project from start to finish. This route can be a great option if you want to avoid headaches and have a laid-back attitude over the entire building process.
When To Consider a Manufactured Home
So, now that we’ve looked at why modular houses appreciate more than the manufactured variety let’s explore when it might make sense to buy a manufactured home.
You Move Frequently
The first situation is if you plan on moving frequently. Because homeowners can easily relocate manufactured homes, that makes them an excellent option for many people who move around.
For example, if you are in the military or work in a job that requires you to relocate frequently, a manufactured home might be better than a modular one. In addition, people who like to travel or live in RV parks might also want to lead toward manufactured homes.
You Have a Tight Budget
Another reason you might consider a manufactured home is if you are on a tight budget.
Manufactured homes are less expensive than modular homes because they are less costly to produce. So if you are looking for a starter home or an investment property, a manufactured home might be a wise choice.
However, a modular build is better if you plan on living in the house for a long time or want to pass it down to your children.
You Live In a Rural Area
You might also want to ponder a manufactured home if you live in a rural area. This consideration is especially true if you are looking at land not serviced by utilities. Again, you get a great deal of flexibility with manufactured homes.
Drawbacks of Owning a Manufactured Home
Of course, there are also some drawbacks to mull before buying a manufactured home. Aside from the fact that they tend to deteriorate faster, there are others to consider.
They Depreciate Over Time and Are Harder To Finance
Manufactured houses depreciate over time because they are not seen as permanent homes by banks and other lending institutions.
They are also harder to finance compared to modular and conventional homes. This downside is because the financing options tend to be limited, and some areas can have a stigma attached to manufactured homes.
And because they are often not built to local code like prefabs, manufactured homes tend to be more expensive to insure.
Manufactured Homes Can Be Too Small
Size is also a consideration, as manufactured homes tend to be smaller and more limiting in terms of options. If you are looking for a large home or want to customize your space, it’s probably better to consider modular construction instead.
So, deciding between a manufactured and modular home will come down to your needs and budget.
Let’s Talk About the Budget
A manufactured home can set you back as little as $45,000 for a basic model, which can be a no-frills, one-bedroom, one-bath house. This setup is often found in RV parks.
The materials used are not necessarily of lower quality but don’t expect granite countertops or a Jacuzzi tub. As mentioned, size is limited, and so is the level of customization.
Still, we have seen some units rival modular homes in terms of quality and aesthetic value. But, of course, this will cost you more money, which might be as much as $100,000 or more for the same size unit.
You could easily spend $250,000 or more on a manufactured home at the other end of the spectrum. These homes are usually much more extensive, often with two or three bedrooms and baths.
And just like a conventional home, you can choose the countertops, tile work, and other design details. But you’d be hard-pressed to find a manufactured home with as many bells and whistles as a modular one.
In the end, it comes down to what your budget can afford. Do your research, talk to people with experience in manufactured or modular homes, and make an informed decision.
For example, we have seen people sell their manufactured homes for more than they bought them, so there is a market for these homes, and you don’t always have to sell at a loss.
If you want to make an intelligent investment, consider the pros and cons of both home types before purchasing.
How To Ensure Your Modular Home Will Appreciate
If you are interested in buying a modular home, it is crucial to ensure that it will appreciate over time. Doing so will depend on several factors, including your home’s location and construction quality.
One of the first steps is to find a reputable builder or contractor. Do your research and ask for references from past clients.
You will also want to weigh your home’s design and floor plan. This consideration is important for resale value, as many potential buyers are looking for a specific type of layout or style that matches their preferences.
For example, you will have a more challenging time selling a home with a small, closed-off kitchen if most of your neighbors have open floor plans.
It would help if you also thought about the materials and finishes used in your home, as these can impact resale value. For example, using high-end materials like granite countertops or hardwood floors will make it easier to sell your home for a higher price.
In terms of location, you will typically get a better return on investment if your modular home is in a desirable area. These locations could be near a popular vacation spot, in a sought-after school district, or close to other amenities that buyers are looking for.
Overall, it is essential to be strategic about your purchase and make sure you are getting a good deal. Do your research, find the right builder or contractor, and invest in quality construction materials.
With these tips, you can ensure that your modular home will appreciate over time.
Factors To Consider When Choosing a Modular Home
When choosing a modular home, there are several factors to consider. These include:
- The site’s topography
- Access to the site
- The climate
- The zoning regulations
- If you want a one-story or two-story home
Each has its own set of benefits and drawbacks.
Also, it will be easier to build your modular home if the land is level. However, if the site is on a hillside, you must weigh whether your home can withstand the natural forces that may cause damage over time.
It would help if you also thought about access to utilities and other infrastructure.
Can utilities like water, electricity, and gas be easily connected? If not, it could increase your construction costs significantly. We saw this first-hand when a friend tried to build a modular home on a section he inherited in Bisbee, Arizona.
The climate is another critical consideration. If you live in an area with extreme weather conditions, you must ensure that your home can withstand high winds, heavy snowfall, or other conditions.
Verdict – Manufactured vs. Modular: Which Appreciates More?
Modular homes appreciate more than manufactured homes. They are built to last longer, can withstand extreme weather conditions, and appreciate based on the quality of construction materials used.
So if you are looking for an intelligent investment, consider buying a modular home.