How Prefab Houses Work

Prefabricated houses have a long history in the United States. An early version of a prefab home was sent from England in the 1600s, but real prefabrication did not take off until the arrival of "house kits." House kits contained all of the house's parts, so the owners built the homes themselves or hired people to construct them. The Aladdin Company started selling the earliest house kits from its catalog in 1906. One of the best-known early kit-home sellers was Sears, Roebuck and Co., which sold more than 100,000 homes from 1908 to 1940 [source: Sears archive].

A number of factors contributed to the popularity of the kit homes. Companies like Aladdin, based in Michigan, benefited from the automotive, iron, steel and coal industries that were booming in their areas. People with money wanted to build houses for their families away from the city, and an improving road system allowed them to build in the country. Additionally, just as in the automotive industry, manufactured houses benefited from assembly-line production. Housing parts, instead of being constructed on site by carpenters, could be mass-produced on conveyor belts and shipped to the site for much lower costs. Skilled technicians wouldn't have to make plaster walls if drywall could be mass-produced in a factory. Plumbing and electrical wiring, which could also be installed much more cheaply at a factory instead of on site by an assortment of skilled laborers.

Lower costs meant that more middle-class Americans could build homes. For less than $2,500, the home buyer received a kit containing about 30,000 pieces -- including everything from lumber to nails and hardware to paint and shingles -- plus a book on how to construct the home.

The kit homes were not just for those looking to build their first homes; they were popular for the more upwardly mobile who wanted a vacation home or beach bungalow. For those interested in taking their vacation homes with them, "trailer coaches" were invented in the 1920s. But after the stock-market crash of 1929, not nearly as many people had the money for their own homes, and kit-home sales declined.

Mobile homes were the first type of prefab home sales to rebound after World War II. Returning veterans needed housing, and many were taking to the new highway systems with their families. Mobile homes were also cheap, so eventually, many people stopped moving theirs from town to town and settled down, using their mobile homes as their permanent residences.

By the 1970s, the federal government decided to regulate these manufactured homes for safety reasons, and in 1976 the government adopted the U.S. Department of Housing and Urban Development building code -- more commonly known as the HUD Code. The code set standards for heating, plumbing and electrical systems, as well as structural design, construction, fire safety and energy efficiency. (In 1994, the government updated the HUD Code to include even higher standards for prefabricated housing.)

After that, manufactured homes became a source for low-cost housing. However, in the past few decades -- and especially since the current housing slump -- innovations have allowed manufactured homes to cater to a more upscale market and to those looking to go "green." And people in more crowded countries looking to build affordable, durable housing have also turned to prefab.

Next, we'll learn a­bout the prefab modern homes.

Although the concept of modern prefab design has been around since the '60s, the architectural movement didn't take off until early 2000. As technological advances like SIP panels (structural insulating that is precut and can be locked together) were made and interest in residential architectural design blossomed, architects turned their attention to prefab houses. The goal was to create a home that could be transported to a building site, be easily erected and look like modern architecture -- all within a reasonable budget.

To further stoke the flames of interest, Dwell magazine held a modern prefab invitational in 2003 to create an economical prefab home that could be mass-produced. Allison Arieff, the former editor of Dwell, had written the 2002 book "Prefab," which profiled modern prefab prototypes. Nathan Wieler and Ingrid Tung contacted Arieff with the hopes of obtaining more information about how to build a modern prefab home. Instead, Arieff asked the couple if they'd be interested in using their land in Pittsboro, N.C., as the site for a design competition. With an initial construction budget of $200,000, the couple agreed and soon was helping the magazine create the criteria for the home and judging designs [source: Boston Globe].

The Dwell invitational created an opportunity to take the modern prefab concept and make it a reality, with the goal of introducing mass-produced prefab homes with architectural modern flair to the market. However, challenges remained. The architectural firm Resolution: 4 Architecture delivered the design, but the project went $50,000 over budget, resulting in the reduction of the home's footprint in order to stay within budget [source: Dwell].

The cost of a modern prefab home remains the chief complaint today, with the average modern prefab home running about $175 to $250 per square foot [source: BusinessWeek]. In fact, Dwell magazine is now offering modern prefab homes through their company Empyrean. Proponents of the movement point out that although many of the products available cost as much as, if not more than, stick-built homes, homeowners can save money in design and construction costs. Many architect-designed homes exceed $300 per square foot, not including design fees [source: The New Yorker] . After all, you're not paying for one-of-a-kind architecture. The architect is reselling the design, and even if modifications are needed, those costs are usually small.

When it comes to mass-producing affordable modern prefab homes, Rocio Romero is one of the most recognized architects. Romero's company, located in Perryville, Mo., creates flat-packed cubelike houses with sleek, modern exteriors. House kits range from $23,650 to $45,255 [source: Rocio Romero]. Finishes and amenities also impact the price. Romero uses a series of interlocking panels for ease of building construction. The company also sends a videotape along with instructions for the general contractor or the handy homeowner who goes it alone.

While some prefabs qualify as "traditional homes" to mortgage companies because they use some of the methods of stick-built homes, others do not. But many new modern prefabs are being introduced to home-builders. The Swedish company, IKEA, introduced its modern prefab home, the BoKlok, to the European market. In 2006, the Walker Art Museum presented an exhibit around modern prefab, "Some Assembly Required: Contemporary Prefabricated Houses." And as the market demands more environment- and wallet-friendly housing choices, the modern prefab market should continue to grow in the scope of its offerings.

In the next section, we'll learn about the different types of traditional prefab houses.­

"Prefabricated housing" is an umbrella term that covers manufactured and modular homes.

Manufactured homes (previously known as mobile homes) are built on nonremovable steel frames, known as chasses. The chasses are used for transporting the homes and for permanent support. Manufactured homes are built according to Manufactured Home Construction and Safety Standards (HUD Code) and can be placed on permanent foundations, at which point they can be considered real estate. They typically are considered a low-cost alternative to regular construction because of their assembly-line construction.

Modular housing, on the other hand, is considered manufactured housing's higher-class sibling and is associated more with the "prefab" trend. Modular homes consist of units or modules that are constructed in factories and joined together on site; they often use costlier materials and are bigger than manufactured homes. Plus, modular housing offers many more customization options, including pricey upgrades like granite countertops and personal touches like antique tile flooring. In fact, many upscale module houses are pricier than site-built (also known as stick-built) houses after owners add the desired details and upgrades. Modular housing must conform to the home site's state, local and regional building codes -- which go above and beyond HUD Code restrictions. The houses are transported on reusable carriers and are classified as real estate once they're placed. Modular homes do not use steel frames; similar to stick-built homes, they are constructed using wooden beams with steel posts for support. The framework, as well as the fact that modules can be stacked and reorganized, allows for multiple stories and basements.

A subset of modular housing is panelized and precut homes -- but sometimes modular housing is considered the subset of panelized and precuts, depending on whom you ask. The walls of panelized homes are constructed in factories and shipped to the site, much like rooms are shipped in modular housing. Precut homes have separate units joined together on-site, but the homes are much more structured, designed like puzzles that fit together in a unique order, rather than the à la carte construction method of modular housing. Log homes usually fall into the panelized or precut category.

Manufacturers have started to expand operations for choosing a prefabricated house. Some buyers will go to a showroom and pick out units or rooms, but prefab manufacturers are now trying out site-selling. Buyers can go to a site or even a community and tour houses that they can buy, and a manufacturer will deliver the pieces to the home site. They can also pick and choose rooms and customizations.

Ordering a prefab home sounds like a cinch, but what other costs need to be factored in? We'll find out them on the next page.

Buyers can typically expect to pay less for a prefab home than they would for stick-built construction. Modular homes do offer pricey customization, but the material costs still decrease with assembly-line construction.

Because prefab home parts like windows and walls are made uniformly, there is no need for skilled workers to manufacture parts individually, which drives down costs. Also, factories, unlike most individual tradesmen, can buy the supplies in bulk. Prefabricated houses are constructed indoors and away from the weather, which also reduces delays and subsequent costs. Prefabricated houses, like stick-built homes, do not have fixed prices, so buyers can negotiate. In general, they can expect to pay 10 to 25 percent less for prefabricated houses over stick-built construction.

Typically, land is the biggest cash outlay for a prefabricated house. And, depending on your skill level, construction could be the other big expense.

People who ordered Sears, Roebuck and Co. homes in the 1900s usually possessed carpentry skills, but most modern homeowners wouldn't feel comfortable laying their own foundation. There are other regulations for building, including zoning restrictions, survey requirements and electrical and water hookups. Some companies offer their own services -- for an extra fee, of course.

Once buyers have the land and the house they want, financing can be a hurdle. Manufactured homes aren't considered real estate until they are permanently installed, so it can be more difficult to get financing for them. Even then, manufactured homes can depreciate in value, so lenders are less likely to give out loans.

Modular homes, however, do not suffer as much from this lower-quality stigma, so financing for them is more similar to that for stick-built houses.

Prefab houses are constructed from the inside out. They are manufactured in the following order in a couple of days or less, with inspections following each step (the process can take longer if the buyer has customized the home):

Once the housing units are constructed, they need to get to the owner's land. The transportation of the modules is limited by roadways, overhangs and power lines. The builders have to scout out all these factors before delivery, but in general each unit must be less than 16 feet wide, 60 feet long and 11 feet high. Because travel can be unpredictable, buyers are usually on site with independent contractors to inspect the units for scrapes and cracks.

The house has to have someplace to sit, so a foundation is required. Before the home arrives, homeowners must have the land excavated and have a foundation in place. The foundation can be poured concrete, concrete blocks, basements or crawl spaces.

The house arrives and is placed by crane on the foundation. Workers use heavy-duty cables to move the units, which come together at points called marriage walls. The marriage walls tie the house together and ensure that it is level and properly bolted together. At this point, the roof is placed if it was not factory-installed. A hinged roof, also made in the factory, is unfolded onto the house. The entire delivery and placement of the house can usually be completed in about a day. After that, decks, staircases and extras can be installed.

Variables such as customization, financing and factory schedules can contribute to the process, but from choosing the house to completion, most manufacturers give a timeframe of a few months. ­

On the next page we'll learn about prefab-home trends in the United States and around the world.

In the United States, the Northeast has been the biggest adopter of modern prefab because of the area's lack of land, shorter building season and higher cost of labor. Because of environmental advances (see sidebar) and the high cost of real estate, California has also become a player in the prefab market. Since Hurricane Katrina and the housing slump, the South has also increased its number of prefabricated houses. Many of these are low-cost housing, but some manufacturers have added environmental benefits, like energy efficiency, which increases their value. Plus, these prefabricated houses get positive reviews for aesthetics, durability -- including wind rating of a 150 mph -- and price over the infamous FEMA trailers.

European countries have embraced prefab housing because of land constraints. Companies in England and Germany use cranes to set modular units atop pre-existing buildings. In Sweden, hip home furnisher Ikea has expanded into the homebuilding business. Appealing to a workforce that cannot afford to live in the higher-priced cities, Ikea has sold thousands of its Live Smart ("BoKlok") apartments.

In space-deprived Japan, car maker Toyota has expanded into home-building. Just as its auto assembly plants have gotten a reputation for efficiency, so have its modular housing production centers. And because the housing is made under the strict confines of its factories, Toyota can market it as durable and sturdy enough to endure earthquakes, which are common in Japan.

For more information on prefab housing and related topics, check out the links on the next page.