Study Shows Appreciation in Manufactured Home Values Similar to Site-Built Homes When Sited on Owned Land
The following are excerpts from a comprehensive study by the Joint Center for Housing Studies at Harvard University. Over the next few weeks we will be reporting here at ManufacturedHomes.com./blog other important study revelations supporting the importance of manufactured housing in addressing the nation’s affordable housing crisis.
Manufactured Home Appreciation Vs. Site-Built
An important consideration for manufactured housing as an affordable homeownership option is whether these homes offer the same potential for appreciation over time as site-built homes.
Appreciation is an important contributor to the financial benefits of owning a home. In fact, research on this issue has consistently found that when manufactured homes are owned along with the land they are sited on, rates of appreciation are similar to those of site-built homes (although the average rates of appreciation are slightly lower and the variation in appreciation rates is greater, suggesting these returns come with higher risk relative to the site-built). As with site-built homes, the rate of appreciation is found to vary with the initial quality of the home, the degree of maintenance spending, and the location of the home. However, in cases where manufactured homes are not on owned land, the structures are generally found to depreciate over time – as all housing structures do – and so do not offer opportunities for appreciation.
The conclusions regarding the appreciation rates of manufactured homes on owned land are supported by a more recent Federal Housing Finance Agency analysis that developed a repeat sales index for manufactured homes as a point of comparison with its index for site-built homes. FHFA found that between 1985 and 2018, changes in the price of manufactured homes closely followed the trends of site-built homes, although the price trends were more volatile, with larger decline peak-to-trough and a slower recovery since the Great Depression. Still, the general conclusion of FHFA’s analysis is that price trends of manufactured and site-built homes are broadly similar.
Previous Studies Comparing Cost of Manufactured and Site-Built Housing
The study aims to assess the extent of construction cost advantages of manufactured homes relative to the conventional, site-built alternative. The potential for cost advantages is derived from several sources. As noted above, the standardized HUD Code offers the advantages of a simpler process for inspecting homes in the factory rather than on site. But, more importantly, by creating a single national standard, the HUD Code also facilitates the mass production of these homes for markets in multiple states, enabling factory-based assembly line production that site-built homes cannot replicate. These advantages include economies of scale that result from large material purchases, reduced waste from more standardized designs and the controlled factory environment, vertical integration of the production process that eliminates the use of subcontractors, advanced fabrication machinery not used on conventional construction sites, and a reduced reliance on skilled labor that comes from this increased degree of automation. In addition, the building process is insulated from changes in weather and seasonal variation which can lead to setbacks and delays.
