Saturday, August 4, 2012

Why Are West Coast PreFab Homes Are So Expensive?

Living on the East Coast and being very familiar with modular housing here, I just can’t believe the amount of money that the West Coast “prefab” factories get for their product.  I’ve compared the homes to Lego block homes and single wide HUD homes and still there are people willing to buy them and of course Architects and factories only too anxious to help relieve them of their money.

Now old abandoned cargo containers are being converted into habitable space and being touted as the next big thing in housing.  But are these homes actually “factory built?”

First let’s look at the typical East Coast modular home factory.  The production lines are housed in buildings are large as 100,000 sq ft. That’s over two acres!  Production is done in an assembly line fashion with some plants having up to 20 work stations.  Material is delivered to each station on a “just in time” method that holds done inventory costs.

The East Coast factories have dedicated fleets of trailers ready to ship the homes when needed and until recently it was not unusual to find 40 or more modules setting in their shipping yards waiting for delivery to the builders.  Every factory has a service department along with an “Engineering” department that includes CAD operators and no Architects.

There are also the inherent green benefits of modular housing.  Low waste and recycling of everything from scrap wood to drywall.

Now move to the West Coast and the new “prefab” factories that brag that they can bring in homes for around $200-300 a sq ft.  We’re talking the Michelle Kaufmann inspired homes and not modular homes built by the big factories.  So why are they so expensive compared to factory homes? 

West Coast prefab homes are:
  • One-off homes.  Every home they build has to be submitted for plan review individually.  Expensive.
  • Architect designed.  Not only is this expensive, in a lot of cases the Architects actually have an interest in the factory.  Very Expensive.
  • Built on cribbing.  The modules are built on stacks of wood called cribbing and don’t move from station to station which dictates that the same materials for every module must be taken to each station.   This alone probably has Henry Ford rolling in his grave. Expensive.
  • Stick built in the factory.  The only difference between a site built home and one of these MK inspired homes is that the prefab will be built in sections, craned onto flatbed trucks, shipped to the job site, craned onto the foundation and finished on-site.  Because the prefab is basically site built in the factory, the advantage goes to the site builder.  Expensive.
  • Built in smaller, warehouse type factories.  I’ve seen them as small as 6,000 sq ft.  Four modules setting on cribbing and production comes to a standstill.  It can take up to 3 weeks to build one home which means that if they sell more than 17 homes in one year they have to open another factory.  Very Expensive.

These are the top reasons that the MK style prefab is more expensive than its modular factory cousin but I’m sure there are plenty of others. 

We all want to drive the new $57,000 Telsa electric car but few of us really want to own one.  That’s why they have built so few (less than 150) and why Toyota builds 5,000,000 $27,000 Prius’ a year.  Mass production.

Now let’s move on to living in a shipping container………..maybe later.


Terry Thon said...

Like alot of things - Demand has alot to do with it.
Consider price of labor in the West is about 40% higher than a $ 12 guy in Pennsylvania.
Materials for small factories run about 20-30% higher.
Workman's comp in CA is probably North of 8% or 10%. Colorado is reasonable at 7%.
As for 100,000 sq ft factories - unless rent is wonderfully cheap, rent in CA is about $ 12 - $ 18 sq ft per year vs $ 2 to $ 3 sq ft back east in the rust belt.
CA has real tough road restrictions as well. Plus CA's market expects to spend a higher price for Pre Fab- the perception is from a "well heeled" buyer not a budget consumer.
I really believe there is a place for a small mfg with small number of homes

Anonymous said...

Coach, another reason that they are more expensiveis that they don'[t have any sales people or builders. The people that own the fctory sell directly to the customer. This makes all their sales retail.
Terry, I don't know why you think it's cheaper to build in the East because it isn't. How much overhead do you have compared to the $millions that of eaxt cosst guys?
I find it interesting that a rust belt factory can build the same house for less than half. Look at Claytons' ihouse for building a cheaper modern prefab house.

Anonymous said...

Comparing PA guys to some of the West guys is like comparing apples to the number four.

If they each have customers and have a working business, who the heck cares how "expensive" they are.

Method Homes customers would never buy from Ritz Craft. Ritz Craft customers would never buy from Method.

Coach, you're always talking about expanding the modular industry. If you want it to expand, then you need diversity in the product.

Not everyone wants your Prius. Some are willing to pay the premium for a German diesel that gets the same mileage, but has style and is quality built.

Coach said...

I don't drive the Prius either. I drive a Ford. I welcome diversity but what I question is taking a home, deconstructing it in factory where it is built in modules using a very expensive cribbing system that was found to be outdated over a hundred years ago.

Prefabs don't have to be built in garages. There are plenty of conventional modular factories that would welcome the work and get the houses built faster and cheaper.

I think that a lot of prefab companies think that their homes are so special that by building it in an efficient factory would somehow make it mundane and low priced.

I have written several articles about Method Homes and how I think they are one step above the rest of the prefab crowd.

Greenotter said...

Yet, with trailers (my passion, not yours), a basic single wide from the national dealer "Factory Expo" in Oregon has R40-R21-R33 and 2 x 6 sidewalls standard, whereas the same dealer in Pennsylvania it is R14-R11-R11 and 2 x 4 sidewalls. It is partly the building codes, and partly the market. Yeah, the Oregon one is more expensive. But, considering what you're getting, it's a bargain, with the better construction and twice the insulation. So, I think the West Coast is a better value there for that type of manufactured home.