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Industry also copes with housing slowdown

BY JIM WASSERMAN, Sacramento Bee, www.chron.com - May 5, 2007

SACRAMENTO, CALIF. — Factory-built housing is touting environmental benefits and a fresh look to win a new generation of buyers as the industry continues to fight an image of cheap design and endure the same housing slowdown pummeling conventional home builders.

Among the industry's innovations: tiny backyard houses where baby boomers can house aging parents, two-story log houses and a three-story townhomes.

The century-old manufactured housing industry still competes, with prices estimated at 20 percent to 25 percent lower than building on-site and faster move-in time. And its housing remains a fixture of the highways, where trucks haul their wide loads — half a home at a time — to their locations. But the nation's housing slump and tighter lending standards for factory-built homes are forcing some changes that tilt toward more upscale buyers.

Fans of what's variously called "prefab," "modular" or "manufactured" housing say the industry is poised for new growth as architects explore fresh designs and more people associate the housing style with higher standards, better energy efficiency and less construction waste.

Definitions abound for this type of housing and can be confusing to buyers. "Manufactured" homes — the majority — are built to a U.S. Department of Housing and Urban Development code that industry experts say makes "a well-built" house. "Modular" or "prefab" homes are fewer in number but tend to be higher-end and more expensive.

It's the modular sector that's grabbing the most attention for cutting-edge design.

"In the Northeast it's been a really big business, and it's been going across the country," said Sheri Koones, Connecticut-based author of Prefabulous, a book exploring breakthrough factory-built homes from Massachusetts to San Francisco Bay.

The book features log homes, lodges and mansions — all built in factories.

Harder-to-get loans

Higher-end house construction is "still a small part of our overall product," said Allan Lemley, general manager of a Karsten Homes factory in Sacramento, where 150 employees manufacture up to two houses a day. "But we expect it to grow."

Behind the move are harder-to-get home loans for manufactured houses. Lenders are skittish about doing business with buyers of mobile homes and mobile homes because so many defaulted in the 1990s after a run of easy credit.

The lending crackdown has shrunk the industry nationally to about a third of its former production — to about 117,000 houses a year from 350,000 — said Lemley.

Indeed, the industry's big publicly traded companies have seen their stock prices hammered just like the nation's biggest home builders.

Fairfield, Calif.-based Valley Home Development has carved out a niche with its new "granny unit." That's in response to a 2004 California law making it easier to build small second houses on existing residential lots.

"A lot of the segment has been concerned that its business has slowed. We're going the other direction. We're ramping up," said the firm's owner, Steve Vallejos. "We found out our target market is the baby boomers. They're dealing with their aging parents as well as their kids."

The one-bedroom, one-bath mobile homes from 400 square feet to 1,200 square feet cost between $36,000 and $65,000. Total costs with installation, permits and fees usually run about twice the home's cost, he said.

"The whole process takes about three months, from permits approved to handing them the keys," Vallejos said.

The tiny houses are built at the Woodland, Calif., factory of Western Homes Corp., a division of Michigan-based Champion Enterprises.

In Karsten's Sacramento factory, houses are typically built in half sections and then assembled at the home site. The houses start as newly built floors on the north side of the 100,000-square-foot-interior facility and are gradually rolled south, where teams of workers add walls, a roof, windows and interior walls.

Eventually, in a process that takes about two weeks, workers paint interiors and install cabinets, appliances and lights before the half houses are rolled outside for trucks to haul away.

On display

Recently, a dozen mobile homes were displayed at Cal Expo, one of many home shows where retailers and manufacturers put their wares before the public. Prices ranged from $60,000 to more than $200,000, not including the cost of land, fees and thousands more for foundations and site preparation.

"We're trying to get out there and change people's perceptions," said Maxcy, with the California Manufactured Housing Institute.

Those perceptions are often rooted in past decades when the industry kept costs low at the expense of good design, Koones said.

Often, too, perceptions are associated with an unpopular word in the industry: "trailers."

"The quality of the product today is vastly different than what it was 20 years ago," said Dan DeVarennes, Karsten sales manager.

"Consumer demand has changed. The consumer has really pushed us. They don't want the old trailers."

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