Thursday, March 8, 2018

Small Modular Homes Now on Millennial’s Radar

2,200 sq ft and climbing!

The size of the average new site built home.

However there is a small but rapidly growing new home buyer segment that is looking to go smaller; the empty nest Boomer and the Millennial buyers.

Small Modular Home courtesy of Architectural Designs

These groups are not looking at big homes or boxy rectangles with no redeeming appeal. They are searching the Internet for smaller homes, usually under 1,000 sq ft with unique features and great curb appeal, open space and now they are turning to modular homes in increasing numbers.

One Internet new home plan website, Architectural Designs, even has a entire collection of over 6,000 house plans devoted to modular friendly plans and will provide estimates. Have these folks found the key to unlock the empty nesters and the Millennial markets? Probably.

Let’s not confuse these homes with manufactured housing. They are built to the same high standards that are found in site built construction and because they are being built inside a factory by skilled production people, the quality not only rivals site built homes but in most cases exceeds it.

1,000 sq ft and under modular home buyers just might be your next target market. They want the best and are not afraid to ‘option up’ their new modular home.


Anonymous said...

I agree there is demand/interest for these smaller homes (1,000 Sq.Ft or less). However, they are extremely difficult to actually sell.

Problem 1
We have found time and time again that a 1,000 Sq. Ft. house is not a whole lot cheaper than a 1,500 Sq.Ft. house. The crane, transportation, and setup costs are for all intensive purposes identical. The manufacturer cost difference is primarily just a difference in quantity of materials used. So as an approximate example for relative pricing, a 1500 Sq.Ft. sells for $130-150K = $87-100/Sq.Ft. The 1000 Sq.Ft sells for $115-130K = $115-130/Sq.Ft. A ~30% premium per Sq.Ft.! Plus, the 1000 Sq.Ft. is just a 2BR/1BA vs. 3BR/2BA for the 1500 Sq.Ft.

Problem 2
The 1,000 Sq.Ft. does not appraise well due to the high $ per Sq.Ft. and comparable sales to 2 BR / 1 BA homes are terrible (at least in our market). We have seen these 1000 Sq.Ft. homes appraise for >$40K less than a 1500 Sq.Ft. If they 'option up' (as you put it), it gets even worse.

We would love to sell these and give buyers what they want, but the market dynamics do not work. These small homes might work for a cash buyer that does not care they are paying much more per Sq.Ft. Millennial's are typically not cash buyers. Therefore, I don't see much of an actual market for these small homes. We will just use them to start the conversation.

Anonymous said...

Excellent explanation of what happens with costs & pricing in the real world.

TN MODULAR said...

Cute but expensive..
I agree that the more square footage one can offer,the better chance of selling to a broader range of buyers that can actually pay for their wish list.
Financing and appraisers looking at this concept will be using comps that make sense and $135 a square does not make sense even with Millennials.
Cute Home thou for conversation..

Steve L said...

It is an experiment in affordable housing rental solution where none exist presently. The average home cost around $595,000 and up.

Modular Lifestyles is transforming a urban blighted trailer park using 170 to 960 square foot existing site built plus adding factory built Tiny to Small houses for an independent community structure.

See for yourself