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Factory-built housing offers cost savings, improved materials

Got land? Need an affordable home? Many San Diego County residents are eschewing the traditional "site-built" house for a factory-built manufactured or modular home, according to industry insiders.

Lower costs and better quality are the big draw, said Joe Feeney, general manager of Heritage Discount Homes in Escondido.

"It's a fabulous opportunity for folks to actually put homes on their own property and save 25 percent," compared to homes constructed on the site, Feeney said. "The bottom line is they're eliminating a lot of the contractor's costs."

A site-built home costs $135 to $150 per square foot, Feeney said. His company can go in and do it for between $60 to $90 per square foot.

"We save thousands of dollars purchasing manufactured housing that's better than site-built," he said. "It's built in a factory with zero tolerances, with government guidelines. It doesn't sit outside since it's built in an enclosed environment. The cost and the labor can be monitored. The engineering and architectural costs are priced into the product."

Another advantage: It could take a year to build a home on site, Feeney said, whereas a factory-built home can be installed in 60 to 90 days.

His company, which specializes in installing manufactured and modular homes on private lots, helps people find the land, do the financing, design the home and pull the permits.

The company sells several factory-built homes for private land, he said. The customers are "anybody who wants to save money on a high-quality product," Feeney said. "As building becomes more expensive, manufactured and modular housing becomes more cost-effective and more alluring. It makes sense."

According to the California Manufactured Housing Institute (CMHI), manufactured homes are built to comply with the National Manufactured Home Construction and Safety Standards, a uniform building standard administered and enforced by the U.S. Department of Housing and Urban Development.

More than 97 percent of manufactured homes built in factories in California meet this code.

Modular homes are built to comply with the California Factory-Built Housing Code, which is very similar to the code regulating building housing on site, according to Bob West, president of the housing institute.

A factory-built house after installation. The 2,000 square foot model was placed on a pre-built foundation.

They're very similar to site-built housing, he said. "If you were to put a manufactured home built to HUD code next to (a site-built) one, you would never know the difference unless you're really an expert in the business," West said. "There aren't any big discrepancies. They're a little different on plumbing, a little different on electricity."

The real difference is the kind of materials that can be used. The HUD code is a performance standard, meaning that it doesn't tell builders what type of wood to use, he said. Manufactured housing builders must use engineering calculations to prove the materials will work.

The HUD code also allows more flexibility to make changes to the structures.

The state's uniform building code is prescriptive: The code mandates the species and dimensions of the wood. "It'll give you two or three things you can use," West said. "You can't vary from that."

For these reasons, modular home prices range from $5,000 to $20,000 in excess of manufactured homes.

"I don't think it's worth it," West said.

Very few modular homes are sold in California, compared to manufactured homes. That could change.

Last year, Fannie Mae (NYSE: FNM) tightened regulations for financing manufactured housing products, West said. The reason stemmed from poor loan performance. The change had nothing to do with the product.

As a result of the change, Fannie Mae offers more financing options for modular housing than it does for manufactured housing, according to West.

By state law, zoning is identical for both housing types, he said. The structures may be put on private land as long as they match surrounding structures. There are very few things cities can require of these buildings, except for exterior materials, roofing material and roof overhang up to 16 inches.

Manufactured homes are scattered around San Diego County, some in so-called mobile home parks and others on private property. Most of the volume is in communities in the south and east counties where it's more rural and more land is available, West said. They're found from Oceanside east to Escondido, south toward Santee and El Cajon.

Modular housing is transported one of two ways: on a flatbed truck or by hauling it if it's secured to a chassis with an axle and wheels. The chassis can be removed.

The floors of manufactured homes are built on a chassis, with an axle and wheels. The house is hauled. The wheels and axle are removed when it's time to install the house and chassis -- which can't be detached -- on a permanent foundation.

Once factory-built homes are installed on the homeowner's lot, they are considered real estate. If they're installed on a rented lot such as in a mobile home park, they're considered personal property, according to Pete Mikolajewski, who owns Ideal Manufactured Homes in El Cajon with his two sons, PJ and Matt.

It's easier for borrowers to get financing for a home that will go on a permanent foundation than for a home that can be moved, he said.

These factory-built homes are a far cry from mobile homes, which weren't built after June 15, 1976, according to the CMHI. Up to that point, mobile homes were built to comply with standards enforced by the state. After that date, the federal preemptive HUD Code became effective.

Today's factory-built homes look like site-built homes, Mikolajewski said (see photos below). They can have shake or tile roofs, stucco walls, 10-foot-high ceilings, dry-wall interiors, double-paned windows and copper plumbing.

By the end of this year, his business will have sold about 700 manufactured homes to be installed on privately owned lots since 1975, he said. Last year, they put 78 manufactured homes on private property. Through June this year, they've done 44, he said. The bulk of their business is on private land but they also install the homes in mobile home parks.

The cost of a manufactured home, including the land and construction costs, utilities, plumbing and electricity, building a garage on site and putting in a driveway, could be between $250,000 to $300,000 for a 2,000-square-foot to 2,500-square-foot home, Mikolajewski said.

"I sell a 2,000-square-foot home for $125,000," he said. "That's just the home delivered and set up. On top of that you've probably got $100,000 to $150,000 for the land, and another $50,000 to $60,000 for construction. You can get to $300,000 pretty quick."

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