Modular Homes Build on Strong Foundation

Sally Arbogast and her children outside their two-story Cape Cod, a modular home, in La Plata. (By James A. Parcell -- The Washington Post)

Hambruch said three-dimensional computer imaging helps ease the builder's burden of meeting a customer's quality expectations. What's ordered is exactly what's delivered.

Construction quality isn't the sticking point for modular homes. In fact, they are widely known as energy efficient, have few mold issues and good structural connections, Hallahan said. The industry hasn't been widely accepted, he said, purely for aesthetic reasons.

"People think of square, ranchy boxes, not knowing that modular housing can mimic any architectural style," he said. "Most builders accept the technical quality; what is not accepted is the design quality."

That technical quality was tested after Hurricane Andrew in 1992, when the Federal Emergency Management Agency found that modular homes fared better than other types of houses because of their "inherently rigid system."

And as modular housing moves northward, the basic, boxy ranch of the deep South turns into a two-story colonial or Cape Cod, which becomes more acceptable to homebuyers, Hallahan said. Most of Maryland's 1,200 modular homes placed in 2005 were high-end houses in St. Mary's and Calvert counties, he said.

A big part of the industry's aesthetic problem is that many people lump modular homes in with manufactured homes, which carry the prejudices of living in a rural "double-wide" trailer.

In the industry, the term "manufactured homes" refers to what were once called mobile homes -- homes that are built to one uniform federal standard, the HUD code, which is less stringent than most local codes. Modular homes can be built to conform to almost any existing building codes, which makes them a more flexible alternative.

While modular homes are financed like stick-built homes with traditional mortgages, manufactured homes are often financed through personal loans with higher rates. According to Bankrate.com, which follows the lending industry, the market is slowly changing, and some banks are willing to provide lower rates and traditional mortgages if a manufactured home is fixed on a permanent foundation or the resident owns the land. But more than three-quarters of buyers finance their manufactured home through a retailer.

The Manufactured Housing Institute in Arlington released a 2002 report that stated the average person who owned a manufactured home is a retired baby boomer and frequently uses it as a vacation or second home.

Bruce Savage, vice president of public affairs for the association, said that manufactured homes often face stigma and zoning discrimination. So although they may be built to federal code, many municipal codes make them hard to place.

"There's a lot of 'They're not going to put one of those in my neighborhood,' going on," he said. "Many times these municipalities say 'This is not up to our electrical code or plumbing code.' "

But with the cost of land going higher and higher, a manufactured home is an easy and often cheaper alternative to site-built or modular homes, he said. He estimated that buyers can save 20 percent by placing a manufactured home on a piece of land. About 4,000 new manufactured homes a year are placed in Virginia and Maryland, according to the Census Bureau.

Savage said the way to deal with local zoning is with modular homes.

"They are slightly higher than manufactured homes, although still cheaper than stick-built homes, and can get around municipal codes," Savage said.

He said that most builders already use manufactured components such as roof trusses and floors in their homes, so making the shift to factory-built housing isn't a giant leap for the public.

Perhaps because of this, several established manufactured home companies have started making modular homes, such as Palm Harbor Homes Inc., which acquired Nationwide Custom Homes in 2002.

In 2003, investor Warren Buffett's Berkshire Hathaway Inc. bought Clayton Homes Inc., a manufactured home builder in Tennessee. It has added modular homes to its products. Hallahan said the company has become the nation's second-largest maker of such homes. Buffett is a board member of The Washington Post Co.

At Berkshire Hathaway's most recent shareholder meeting, the company showed off its newest designs, one of which was called "Warren's Pad." It retails for $79,000 and is 1,703 square feet.

"Manufactured housing production has fallen off 60 percent, mostly because of lack of financing for HUD-code homes," Hallahan said. "Companies with savvy management are now very seriously looking at and becoming high-volume modular manufacturers."