Do Modular Homes Depreciate In Value?


Do Modular Homes Depreciate In Value

Modular homes, also known as prefabricated homes, or homes that are built off-site, are quite popular because of how cost-effective and simple they are. Their simplicity and affordability is a huge selling point of modular homes, but many wonder if they will depreciate in value.

While some believe that modular homes lose value over time, in fact, they do not depreciate in value. Just as with any type of house, prefabricated homes only depreciate in value if the condition becomes unfavorable. However, there is nothing inherent or specific to modular homes compared to on-site built homes that makes them loose their value.

In reality, modular homes can actually increase their value just like a traditional site built home. Keep in mind that modular homes are not the same as mobile homes. Let’s take a look at why these homes don’t depreciate in value, contrary to popular belief.

What is a Modular Home?

A modular home is a home that is constructed typically in a warehouse, then trucked out to a property for installation.  They are also often referred to as prefabricated homes. Modular homes offer a fast building time often taking weeks as opposed to months for on-site building.

There are many possibilities with modular homes as they can be installed over basements and crawlspaces. Generally, modular homes cost $40-$80 per sq. ft. at the starting price. That price can go up once you get into customization, such as garages.

When you compare that price to the $154 per sq. ft. that typical on-site built houses costs, modular homes are a great deal.

What Are the Costs of Building a Modular Home?

The costs of a modular home include materials, land, foundation, permits, construction, and more. Here is a breakdown of what costs are typically involved in modular homes using a 1,200 sq. ft. house as an example.

Expenses Price
Base Model $50,000- $120,000
Land Prep Work $1,000-$5,000
Foundation $4,000-$15,000
Construction $3,500-$20,000
Installation $20,000-$50,000
Garage $18,000-$24,000
Permits $450-$5000+
Tax $5,000-$10,000
Finished Cost Estimate $101,950 (low cost) $259,000 (high cost)

Note that the high-end cost on the figure above is largely due to customization. One of the appeals of modular homes is your ability to customize them, but additions add a lot to the total cost.

For example, you can find modular porches ranging from $800 to $1,500 or more before labor. It is said that porches provide an average of an 84% return on investment, making it a worthy customization.

There are ways to keep the cost below $200,000 by opting for less customization and smaller garage space. Generally, however, many homeowners choose modular homes because they are already less costly than building on site.  On average, they are 15% cheaper than on-site built homes.

It also doesn’t hurt that it only takes weeks for a modular home to go up, whereas on-site home construction goes on for months.

How Can I Keep My Modular Home From Depreciating In Value?

You can keep your modular home from depreciating in value by adding unique features, choosing a good location, and keeping it in shape. Just like site-built homes, modular homes only depreciate in value when it is in poor condition or a bad location.

If you keep certain things in mind, you can keep your modular home from depreciating in value. Some of these factors include:

  • Choose a sought after location
  • Make additions that add value (garage, deck, patio)
  • Keep the house maintained and up to date
  • Select a floor plan that is popular

In 2019, 50% of homes purchased in the U.S were in the suburbs. That means that 50% of people looking for homes saw value in the centrality of a suburban home. Compare that to the 13% in the same year who purchased rural homes, and it’s clear that location really adds value and increases your chance of selling.

Additions like decks also keep your modular home from depreciating in value. On average, homeowners that add a deck can have an 85% return on investment and costs between $3,500 and $7,000 to build.

Finally, the right floor plan is key. In the U.S. 60% of all modular homes sold are ranch style. Ranch homes hold their value, whereas contemporary modular homes which make up only 12% of modular home sales are harder to sell.

Maintenance Is Everything

Keeping your modular home maintained is the best way to keep it from losing value. Believe it or not, every year that you get your house maintained, you add an additional 1% of value to it.

Everything from plumbing, electrical, and heating maintenance to a new coat of paint or a new roof can add value to your home. Take the roof, for example. On average, roofs can last up to 25 years, but maintenance is needed well before then.

If your roof is in bad shape and you are ready to sell your modular home, get it shingled. It shouldn’t cost more than $9,000 including labor, on average. Or, better yet, get a new roof entirely. A new roof costs up to $22,000, however, it adds an additional $15,000 in value to the home after costs.

Cheaper maintenance that also adds value to your home includes interior painting which costs $950-$1,000 typically. That small investment adds an additional $2,000 in value, making it a great way to increase your modular home’s value.

Square Footage Matters

Just like a stick-built house, the square footage of your modular home adds value to it and ups the overall price tag. The chart below shows how the square footage of modular homes is reflected in the price.

House Dimensions Cost
800 sq. ft. $65,000-$130,000
1,000 sq. ft. $70,000-$140,000
1,200 sq. ft. $95,000-$190,000
1,500 sq. ft. $122,000-$244,000
2,000 sq. ft. $150,000-$300,000
2,500 sq. ft. $200,000-$360,000
3,000 sq. ft. $240,000-$425,000+

Take a 1,200 sq. ft. house plan for example. Typically, houses that are 1,200 sq. ft. sell for $195,000. If you were to build a 1,200 sq. ft. modular home closer to the lower number of $95,000-$120,000, you could eventually sell it closer to $190,000-$195,000.

The average house size has grown by 62% making the most common square footage roughly 2,700 sq. ft. On average, a 2,700 sq. ft. costs between $270,000 and $540,000. You could save between $70,000 and $180,000 on the same floor plan by simply choosing modular over stick-built.

Summing It Up

Modular homes do not depreciate in value any more than a traditional stick-built home would. Because construction costs typically amount to $40 to $80 per sq. ft., many builder-owners choose modular homes over stick-built.

If you want to ensure that your modular home does not depreciate in value, keep it maintained. By having the roof maintained, interior repainted, and making sure the electrical is up to date, you can retain and even increase your modular home’s value.

Avoid areas that do not add to the value of a home, like isolated, rural areas as they only make up 13% of modular home sales thus decreasing the value. If possible, consider additions such as a deck to increase the home’s value.

Additions such as deck can provide an 84% return on investment and up the selling price of your modular home when the time comes. Not only do modular homes not depreciate in value, but there are endless possibilities for increasing their worth.

Nick Durante

Nick Durante is a professional writer with a primary focus on home improvement. When he is not writing about home improvement or taking on projects around the house, he likes to read and create art. He is always looking towards the newest trends in home improvement.

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