Are prefab homes killing the construction industry?

If you've ever flipped longingly through the real estate section of the newspaper, you know how enticing the notion of building your own custom dream home can be. In the U.S., where that's often woven into the larger American dream, it's a difficult prospect to turn down.

But custom homes have their downfalls. Between architects, contractors and workers, they've got lots of moving parts; because construction takes place outdoors on the site of the home, all those teams are at the mercy of the elements, and construction can be held up for months by bad weather. Additionally, many areas, particularly large cities, have stringent zoning requirements, and would-be homeowners may find themselves struggling with mountainsof unanticipated fees and red tape.

Prefab homes address many of these issues. For one, they offer significant savings: At around $150 to $200 per square foot (or per 0.09 square meters) as of early 2012, prefab homes could run 45 to 50 percent cheaper than traditional homes, which could cost around $300 per square foot [source: Connors, McKeon]. Since they're factory-built, construction can take place any time, rain or shine -- which also means more efficient production and quicker turnaround times. And where prefab homes may have been lacking aesthetically in their first few years of existence, many modern companies are designing their products to be customizable, luxurious and environmentally friendly [source: Sylvester].

But prefab homes have their drawbacks as well. They're designed to align with local building codes, which makes it difficult for companies to do business outside a very limited area. This also becomes a challenge when they age: Repairs and maintenance require materials designed and sized specifically for your home, which you won't find at your local hardware store.

Lower cost is one of the major draws of prefab construction, and while it's true that the homes themselves are less expensive than custom projects, prefab home buyers can face hefty fees for assembly permits and large equipment rental. Additionally, when your home is built in a factory miles away, shipping charges -- anywhere from $5,000 to $30,000 -- apply as well [source: Vanderbilt]. And as much as we might like them to be, prefab homes are not DIY projects: They require heavy equipment and professional workers to piece them together [source: Sylvester].

Ultimately, though, despite the leaps that the industry has made, prefab homes still carry a stigma: Many contractors and consumers consider these factory-made homes beneath them [source: Hackney]. On the next page, we'll explore the statistics behind the stigma.

The worldwide recession that rocked the global economy in 2007 didn't do anyone much good, but the construction industry was hit perhaps the hardest. In a 2010 report, the U.S. Bureau of Labor Statistics predicted that the construction industry would grow 19 percent through the year 2018. However, as of early 2012, unemployment rates in the construction industry were double the rates of overall unemployment in the United States, and industry experts worry that the public sector's hesitancy to invest in long-term construction efforts could keep it that way [source: ACG of America].

However, that hasn't translated into sales for prefab homes. When the economic crisis hit, people didn't buy cheaper homes -- they just didn't buy them at all. The U.S. Census reported that placements of prefab homes dropped from 112,400 in 2006 to 94,800 in 2007, during the beginning of the U.S. housing crisis. They dropped even further to 80,500 in 2008; in 2011, only 46,000 prefab homes were shipped in the U.S. [source: Beers].

Despite their cost effectiveness (and some media buzz, largely thanks to Dwell Magazine), industry insiders don't see prefab homes as a threat: They carry too much of a stigma, and it's just not worth it for the majority of the home-buying population who want to build their own homes [source: Kusmiersky].

But there's still a place for prefab in the modern construction industry. Niche markets for prefab, even in the luxury sector, are popping up in the United States. And for those who value frugality over aesthetic freedom, prefab will continue to be a welcome alternative to traditional housing. The environmentally friendly aspects of prefab housing -- it creates less waste, for example, and is often made from recycled materials -- continue to attract green-minded folks around the country. And in a pinch, prefab often comes to the rescue: In the Hurricane Katrina-ravaged American South, prefab has seen a resurgence.

So while prefab homes aren't killing the construction industry, they're certainly beginning to make a name for themselves. And if they keep getting greener and more luxurious, they may yet win over the construction purists in the American market. Read on for lots more information about the prefab industry and where it could be headed.

I definitely came into this article thinking, "Well, that makes sense -- if they're cheaper and quicker, of course prefab homes are killing the construction industry." Clearly, I learned a lot during my research: Even with the housing crisis in the U.S. (which, I thought, would have given prefab a big boost), it wasn't that people were buying cheaper homes; they just weren't buying homes at all. Data and statistics played a big role in the research for this article, but I found my interviews with members of the construction industry (both commercial and residential) particularly helpful in gaining insight into the industry where prefab is concerned.

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