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System-Built Single-Family Homes in 2014

Special Studies, October 1, 2015
By Na Zhao
NAHB Economics and Housing Policy Group
Report available to the public as a courtesy of HousingEconomics.com 
 

Building systems (for example, modular or panelized systems) are an alternative to conventional stick-built construction. Systems manufactures can provide builders a range of products from individual components to entire houses produced in the factory-controlled environment. Whatever the variety, system-built homes are constructed strictly to local codes, and should not be confused with manufactured housing (sometimes known as mobile homes) that are governed by a national code managed by HUD.

According to the manufacturers, building systems offer several advantages. Manufacturing in a controlled factory environment can minimize waste and labor and lead to cost saving. Construction time is generally reduced. The on-going cost of owning system-built homes can also be smaller, as these structures are energy-efficient.

The data source for this analysis is the 2014 Survey of Construction (SOC), conducted by the US Census Bureau and partially funded by the Department of Housing and Urban Development (HUD). The SOC collects information on the physical and financial characteristics of new and privately-own single-family residential buildings across the United States. Furthermore, it identifies if the homes are “modular” or “panelized/precut.” Precut is the term used by the Census Bureau. Sometimes homes built using this method are called log homes. Although it is not ideal way of putting panelized and precut in one category, it still provides us in-depth statistics on two general types of building systems: modular and panelized/precut. The Census Bureau classifies homes built without using either modular or panelized/precut methods as “site-built.”

Where Are System-built Homes Constructed?

The total number of newly started single-family modular homes was 10,560 in 2014. More than 80 percent were clustered east of the Mississippi River, with 29% in the South Atlantic division, 22% in the East North Central, 20% in the Middle Atlantic, and 15% in New England (Figure 1).

Figure 1. Number of Single-family Modular Homes Started in 2014

Besides modular homes, there were 10,334 single-family panelized/precut homes started in 2014. These also tend to be geographically concentrated, with 38% built in the South Atlantic, 25% in the East North Central and 24% in the Middle Atlantic (Figure 2).

Figure 2. Number of Singel-family Panelized/Precut Homes Started in 2014

The story for panelized and precut homes in 2014 was the strong surge in production in two of these divisions. In the Middle Atlantic the number of panelized/precut homes tripled to an annual rate of 2,490. The number of panelized/precut homes also rose 70% to 2,506 in the East North Central division (Figure 3). In both cases, this was by far the most panelized/precut homes built in the division since 2009.

Figure 3. Number of Panelized/Precut Single-family Starts

The usage of building systems varies not only by census division, but also by metropolitan status. Almost half of single-family modular homes were built outside the Metropolitan Statistical Areas (MSAs) in 2014, whereas only a small proportion of panelized/precut homes, 589 units, were constructed outside MSAs (Figure 4).

Figure 4. 2014 Starts Inside and Outside Metro Areas

Market Penetration

Around 3.2% of single-family homes started in 2014 were built using either modular or panelized/precut methods, but market penetration varied across the United States. In the Middle Atlantic, nearly 14% of newly started single family homes were built using one of these two methods, followed by 10% in New England.

The highest adoption rate of modular homes in 2014 was nearly 9% in New England, and then 6% in the Middle Atlantic (Figure 5). For panelized/precut single family homes, the highest market share of newly started homes were in the Middle Atlantic division with around 9%, followed by 4% in East North Central (Figure 6). While a large share of modular and panelized/precut homes were started in the South Atlantic in 2014, that is also where a large share of all starts occur, so market penetration is not particularly high.

Figure 5. Market Penetration of Modular Homes Started in 2014

Figure 6. Market Penetration of Panelized/Precut Homes Started in 2014

Purpose of Construction

Figure 7. Purpose of Construction

The tendency of modular construction to be used more often outside of metropolitan areas helps explain some differences in particular characteristics, such as purpose of construction. Most single-family homes started in 2014 were built for sale, usually in tracts or subdivisions, which are more typical development in metropolitan areas. Meanwhile, the majority of modular homes started in 2014 were custom homes, built one at a time on the home owner’s land. These are called contractor built homes in the typical case where the owner employs a builder; owner-built in the less common case where the owner his- or her-self serves as the general contractor. In 2014, 65% of new modular homes were contractor-built and 19% were owner-built (Figure 7). Building homes one at a time like this is more common in sparsely populated areas outside of MSAs.

Size and Permit Value

The size of finished floor space is another important character. Modular single-family homes had a smaller median finished floor space than site-built homes- 1,722 square feet compared to 2,457 square feet. However, the median size of panelized/precut single-family homes was the largest among these three construction methods, 2,786 square feet (Figure 8).

Figure 8. Median Finished Floor Space

Of the several measures of value available in the data, permit value is the only one generally available for both custom and for-sale homes. Permit value excludes land value and so, subject to idiosyncrasies of local permitting offices, is a rough measure of construction costs.

For panelized single-family homes started in 2014, the median permit value was $200, 000, reaching the national average value of single-family homes. The median permit value for modular homes in 2014, however, was only $146,700, more than 25% less than panelized/precut homes (Figure 9).

Figure 9. Permit Value

Since total construction costs vary with the size of the home, Figure 9 also shows median value per square foot. Of the categories of new single-family homes shown in the figure, site built had the highest median permit value per square foot: $84. Compared to this, median permit value per square foot was significantly lower ($76) for modular homes, and lower still ($70) for panelized/precut homes. This is consistent with manufacturers’ claims that building systems offer construction cost savings.

Foundation Types

Foundation type varies greatly across different construction methods, and this is likely due to regional climate differences. Nationally, about 28 percent of new single-family homes started in 2014 have a full/partial basement, 15 percent a crawl space, and 56 percent built on slabs. Modular and panelized/precut new homes are differentially located in northern divisions (Figures 5 and 6). Basements tend to be more common in these colder divisions, largely because building codes require footings so deep that a full basement can be constructed for relatively little extra cost.

Figure 10. Foundation Type

Time to Completion

Modular homes, on average, require the shortest time from start to completion, followed by site built homes, and then panelized/precut houses. Based on the 2014 Survey of Construction, it normally took 5.4 months to finish a modular single-family home, 6.2 months for a site built home, and 6.4 months to complete a panelized/precut home. The smaller median finished floor space of modular homes helps explain why modular homes take the shortest time to build and panelized/precut homes the longest time to completion. Moreover, the construction time of modular homes is likely shortened because sections are manufactured at the factories and delivered directly to the job sites and then the construction clock starts to tick.

Figure 11. Months to Completion

Number of Bathrooms

Table 1. Number of Bathrooms

The number of bathrooms is another fundamental characteristic of a home. Most single-family modular homes only have two bathrooms, which are naturally smaller in finished floor space. Panelized/precut single-family homes, however, have more bathrooms, with 48% having at least three (Table 1). Panelized/precut homes generally had more living space than modular or site-built homes (Figure 9).

Other Physical Characteristics

Table 2 Other Physical Characteristics

Newly started single family modular and panelized homes also have major differences in other physical characteristics. Among houses with a full/partial basement, 56 percent of new panelized homes have finished basements, compared to only 20 percent of modular homes in 2014. Moreover, most modular homes have only one story. In contrast, 72% of new panelized homes have at least two stories. Around 90 percent of new panelized homes are connected to public water and sewer system in 2014, whereas less than half of newly started modular homes are connected (Table 2). Homes in outlying territory or outside of metropolitan areas, of course, are less likely to be connected to public sewers and water supply.


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