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Are prefab houses affordable?

Prefabricated houses are no longer tiny cottages without indoor plumbing like they used to be. Now they can be thousands of square feet and have several stories. They often have better construction and more environmental benefits than traditional homes.

Manufactured houses are mass-produced on assembly lines just like auto parts are, which is much less expensive than sending carpenters, plumbers and electricians out to each site to build individual homes. Factories buy the supplies in bulk, which also drives down the costs. There are no weather delays because all the parts are made indoors.

Just like when you make an offer on a site-built or "stick-built" home, the price of a prefab house is open to negotiation. You can expect to spend 10 to 25 percent less for a prefab house than for a stick-built one, but you're still going to have to pay for the property on which you want the house built. And unless you're extremely handy and have an 80-foot crane, you'll need to hire professionals to put the house together.

In the early 1900s a prefab housing kit could be bought for under $2,500. Now, with prefab houses that have modern architectural flair, cost has become a major complaint. The average modern prefab house costs between $175 and $250 per square foot [source: BusinessWeek], although you'd still save on the costs of design and construction. Architect Rocio Romero offers prefab housing kits for $23,650 to $42,2555 [source: Rocio Romero]. IKEA makes a prefab house, called BoKlok, as well.

Modular prefab homes qualify for mortgages but other kinds don't. This is because a home is not considered real estate until it's permanently installed. It might also be harder to get a loan because manufactured homes depreciate in value over time. Keep these financing issues in mind when deciding what kind of home you want to buy.