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Offsite, On Target—Building More with Modular Building

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Offsite construction isn’t new, and in fact, is still recovering from the precipitous drop that hit the housing market in 2008. In 1998, offsite construction accounted for nearly 7% of single-family homes, the largest market share in the period from 1992 to 2017, according to the U.S. Census Bureau’s Characteristics of New Housing survey. The number of homes built using offsite construction was cut nearly in half between 2008 and 2009, but it’s interesting to note that when the housing market bottomed out in 2011 with fewer than 450,000 homes completed, offsite construction accounted for nearly 4.5% of those.

As the housing market started to recover, consumers turned to traditional methods and the share of modular and panelized homes shrank, even as the real number of homes began to climb. As of 2017, offsite construction accounted for almost 3.3% of single-family homes, roughly split between modular and panelized methods.

Related: Understanding Modular and Prefabricated Building

Offsite construction seems poised to grow as it solves a number of challenges for builders and for homebuyers: labor shortages, materials costs, sustainability and affordability.

Mark Dearth, owner of Grand Junction-based Colorado Building Systems, saw the value of modular building early on.

Dearth started Colorado Building Systems 25 years ago to integrate modular building with site-built homes, building homes in areas like Telluride where traditional methods were extremely expensive.

Right now, all of the projects Colorado Building Systems is taking on are system-built, Dearth said. He said it takes about three months to complete a modular home project from the time the order is made.

“We are backlogged to October right now,” he said. “There’s just such a demand, especially up in the Carbondale, Basalt areas, where building starts at $450 a square foot. We can come in at half that or less.”

He added, “I think it’s going to be the new way of construction. We have 100 people that work in the factory. They could put out a house a week; there’s just tremendous value in that.”

For Ron Davies, CEO of Fair & Square Construction in Steamboat Springs, offsite construction was a way to expand his client base.

His company started building homes in 1980, but they started taking modular jobs in 2009. “We saw it as an opportunity to expand our market since site-built homes tend to be more custom and higher end,” he explained. “We wanted to be able to offer more [options] for the middle class, the working class.”

Fair & Square focuses on residential building, but has done everything from high-end custom homes to simple additions and renovations, Davies said. About 30% of Davies’ jobs are for modular homes, “and it’s growing,” he said. “Every year we do a little bit more.”

Davies said a modular home will typically cost between 10% and 15% less than a site-built home. The big savings with modular, though, is in time. “It usually takes about half the time with modular construction versus site-built.”

From website to jobsite

Like any other project, selling and building a modular home starts with the client. For Davies, clients may find him by searching for a modular builder, or by a referral from the manufacturer, Heritage Homes. Davies works exclusively with the Nebraska-based manufacturer for modular builds.

He starts by meeting with clients to make sure they understand what they’re paying for. “A lot of people really don’t understand construction costs, which I completely understand. If you don’t build, you wouldn’t know,” he said.

Then they’ll start talking about the lot and what the client wants in the home. Davies said that most of the time, they don’t end up building the exact floor plan that started the conversation.

“We typically do modifications: move rooms around, redesign to meet the owner’s desires,” both for the home and for the best views the building site can afford.

That process can take a month, he explained. Before manufacturing can begin, the owner has to pay a plan deposit and plans have to be approved by the Colorado Division of Housing.

“They provide all architectural drawings for the house,” he said of Heritage, as well as the “structural [plans] for what they’re building in their particular modules.”

Site work involves excavation, pouring the foundation, and sometimes building garages, decks or porches, Davies said. Sometimes a local engineer will be brought in to design a basement.

“It’s a combination of plans from the modular company as well as some local engineering plans,” he explained.

Customization is an inherent part of the design process, says Colorado Building Systems’ Dearth.

“We build each and every home to specific individual client’s requirements,” he said. He walks them through available floorplans and modifies each plan to meet the client’s needs.

Options for finishes are as endless as on any site-built home. Dearth noted one of his suppliers offers “hundreds and hundreds and hundreds of upgrades. We get this thing just loaded up: alder cabinets, alder trim packages, just beautiful finishes inside.”

Some of those upgrades could be very expensive for a traditional builder if they have to source each product or find custom options.

He’s also had clients approach him with floor plans they’ve found on the internet that they want built.

“We can modify a lot of them; the biggest thing is CDOT, getting [the modules] down the highway,” he said. “You can build anything in the plant; it’s getting it from Point A to Point B that’s probably the most difficult part.”

Fair & Square’s Davies acknowledged that while there is a “lot of wiggle room” in designing a modular home, both in finishes and floorplans, the dimensions of the modules are restricted. “You can’t just have a free-for-all,” he said, but as “long as you’re meeting their shipping dimensions, [you] can do pretty much anything.”

Some homeowners may not appreciate how many decisions go into designing a custom home, and get overwhelmed by the number of things they have to sign off on. Davies jokes that “if you’re a homeowner, plan on making about 50,000 decisions. [System-built] really simplifies that process, and you can still go outside the finishes that the modular company offers.”

For example, one of his clients decided not to have any bathroom vanities installed in the modules, opting instead to purchase her own. “She got a couple from Pottery Barn and a couple from Wayfair. She wanted more furniture-looking pieces that the modular company did not offer,” he said.

Offsite oversight

Unlike manufactured and mobile homes, which are constructed according to the Manufactured Home Construction and Safety Standards administered by the U.S. Department of Housing and Urban Development, modular homes are built to comply with standards in the International Residential Code.

However, Dearth noted there may be differences between what is required or allowed in different jurisdictions. His company builds along the I-70 corridor, as well as in Southwest Colorado cities like Durango, Silverton and Telluride. In Grand Junction, where his company is based, the building department adheres to the 2012 IRC code.

Related: How Modular Construction Impacts Builder Warranties

However, “we have to stay with what the state requires, and the state always requires the most current codes, which is the 2018 IRC code,” he said.

Davies noted that in Routt County, the local building department oversees the site work, while the State of Colorado oversees the modular construction process.

“In some ways, we’re working with two building departments: one being the State of Colorado and then the local building department,” he said.

Manufacturers file plans with the state before manufacturing on the modules starts, then state-approved inspectors review work throughout the build process.

One of the benefits of working in Routt County, he said, is that it’s a “participating jurisdiction,” meaning it has partnered with the Colorado Division of Housing to perform inspections of factory-built homes.

“That’s a big help here because I have worked in other areas where [inspections are all done] through the state and you have to get somebody up from Denver,” Davies said.

The future of offsite

Dearth sees a lot of potential for offsite construction, both for companies like his that work with other builders on system-built projects, and for those traditional builders who are looking for a way to do more with less.

“A lot of stick builders are looking at us to provide them product where they in turn can go ahead and finish them off on site,” he said.

He continued, “We are turning stick-built [projects] down. They’re just way too time consuming for us, and we have such a demand for systems-built.”

The value to homeowners of a quick turnaround can’t be overstated. “They love to be able to get in their house sooner versus later,” Davies said.

Beyond the emotional factor, a more practical consideration is the ability to get a shorter construction loan, he pointed out. In light of affordability challenges around the country, any cost savings will be a factor in a homebuyer’s decision.

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