Building Off Site HGTVPro Article March 2007 by r4NxxJ3V

                                                                                      March 5, 2007

Building Off Site: The Evolution of Modular Construction
Today's modern modular homes are a far cry from those of the '70s.

By Richard Wall

If Kevin Flaherty could rename the business he's in, he would call it the off-site construction industry.
Modular? He'd rather not use the word.

He and others who presented seminars on the modular construction industry at IBS 2007 were determined
to change builders' perceptions of the often-stigmatized building method. With modular construction
probably the fastest growing segment of a sluggish housing market, they got a lot of interest from builders
at IBS. Flaherty, who is vice president of sales and marketing for Genesis Homes, tackled the lingering
myths about modular construction in his seminar Modular Homes: Build Better Homes in Less Time.

Modular Mythology
Myth One: Modular is a type of home or class of housing. "Modular construction is simply a building
process," says Flaherty. "We're not a different type of home, just a different way of assembling it." Modular
factories are controlled-environment stick-building operations. They use the same materials, plans, and for
the most part, the same practices that on-site operations use.

Myth Two: Modular construction only works for single-family homes. "I show builders current
examples of a 17-story building my company is constructing using steel modules," says Flaherty. "Modular
manufacturers are making townhomes, apartment structures, commercial buildings, as well as all kinds of
customized single-family homes."

Myth Three: Modular construction is only applicable for small builders in rural markets. "The entire
industry is seeing a lot of partners who are intrigued with benefits of modular construction in the higher-
growth building markets in urban areas," says Flaherty.

Existing modular manufacturers are expanding and new manufacturers are coming into the field. A key
factor in modular construction is that because of transportation issues, a manufacturer's market area is
limited to a 300-mile radius of the factory. Flaherty says modular used to be concentrated in the Northeast,
where one out of every ten new homes is modular. But modular is strong and growing in the Rockies, the
Midwest and the Mid Atlantic, and Flaherty's now seeing huge interest in the West Coast, Florida, and Gulf
Coast markets.

This sprawling mansion hardly fits the common perception of a    This 12,700-sq.-ft. hoceanfront ome was built from 26
modular home, yet that's exactly what it is. Photo courtest of   modules. Photo courtest of Epoch Homes.
Epoch Homes.
Overcoming Decades of a Poor Image
"Modular" used to be a dirty word in the building industry, bringing up images of hucksters touting
crackerjack-box homes plopped down on a street corner or a vacant lot. "Those guys were more like
entrepreneurs: they were dealers, not builders," says John Colucci, vice president of sales and marketing for
Westchester Modular Homes in Wingdale, N.Y., who co-presented the IBS seminar Custom Homes the
Modular Way: The Next Step.

"Before the late '70s, the industry was building very standard, production-oriented products," says Colucci.
"Modular was said to use the Henry Ford theory of housing: You can have any model you want as long as it's
in the brochure, and you can't make any changes to it."

The building boom of the '80s brought more business to the modular industry — and more technological
advances in design and manufacturing, as well. "All of a sudden we weren't building 24 by 40 ranchers. We
were doing colonials with customized floor plans," says Colucci.Construction labor shortages began to pinch
builders, making modular even more appealing. The industry also got better at telling builders what it does:
stick-building houses in a factory and deliver them to the job site.

"As the labor shortage became even more of a factor in the late '90s and into 2000, our business changed,"
says Colucci. "We weren't dealing with the entrepreneur or a vendor; we were dealing with the stick builder,
the guy who has a subdivision or location to put up a model home and sell from there to put modular homes
on people's lots."

Where Modular Fits In
Large-scale production builders are not generally interested in modular construction because they often
have the economies of scale to leverage even greater discounts on materials and subcontractor fees than a
modular manufacturer can. Modular now appeals more to medium-size builders.

They can expect to build a modular house for about five to 16 percent less than the same conventional
stick-built house. Due to the need to get the module under highway bridges for delivery, very large open
spaces and high ceilings are the most likely limitations in modular designs. Experts estimate that 80 to 90
percent of today's residential home designs can be modularized.

The modular industry, which boasts strong structures that can easily meet high-wind zone code
requirements, is gearing up for the replacement of hundreds of thousands of houses in the Gulf Coast. "I
was doing a seminar in Louisiana, and right next to me was a site builder, one of the largest builders in the
New Orleans area," says Flaherty. "He was telling his people: 'You better look at modular. They build them
stronger than we build them; they can give you the designs that you want. The fact is, we don't have
enough traditional builders here to meet the demand. I would encourage you to look at modular.'"

Flaherty didn't disagree with him.

Richard Wall writes about the building industry.

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