Confused about buying methods? We can answer those questions.
Component construction (panelized building) builds homes according to local building codes using traditional framing details. Components are built in a factory as roof trusses, wall panels and floor panels. The components are then transported to the job site where they are assembled into place with a crane. Completion of the exterior and interior of the home is done at the job site.The advantage to building this way is time, and we can have your home tight to the weather in approximately 3 days.
Stick Built Construction refers to the building method where the entire home is built at the jobsite stick by stick. Today few homes are built completely as Stick Built Construction because most homes use components that are built in a factory such as roof trusses, windows, pre-hung doors and cabinets. Component Construction just continues the trend by building walls and floors as components.
Both Component and Stick Built Construction follow the same local building code and use the same traditional framing details. Component Construction builds inside in a controlled environment, on specialized equipment with all of the materials within easy reach. Stick Built Construction builds outside on the ground in all types of weather and has to work with material where ever the lumber yard dumps it.
The main advantages of Component Construction are that the builder has much better control of their costs, the homes are framed in much more quickly and there is less weather damage and theft at the jobsite.
Modular Construction starts out the same as Component Construction with roof trusses, wall panels and floor panel components. With Modular Construction, the components are assembled into three dimensional modules in the factory. Most of the exterior and interior of the modules are completed at the factory approximately 88% finished. The modules are then transported to the job site and set in place with a crane. Homes generally consist of two or more modules.
Mobile Home Construction refers to a building method where the home is built according to a national HUD code instead of the local building code. This code allows mobile homes to be built with different and often lesser quality standards than regular houses. The goal is to provide housing that is more affordable than regular housing. The main disadvantages of mobile homes are that they depreciate in value, they do not qualify for conventional mortgages and insurance costs are higher. The characteristic that is most unique to mobile homes is that the floor is a metal chassis with removable wheels that is used to transport the home to the job site. The only similarities between the two methods of construction are that the homes are built as modules and they are both built in factories.
Many mobile home companies also produce modular homes in the same factory. These modular homes built by mobile home companies are built according to local building codes but often contain the same lesser quality materials and are built with the same lesser quality standards as mobile homes. Kickapoo Homes does not build mobile homes and only uses high quality materials and are built to the Wisconsin Uniform Dwelling Code.
Technically a manufactured home is a mobile home. In 1976 the US Government adopted a national HUD building code for mobile homes. In that program they defined mobile homes as manufactured homes and the mobile home industry has since adopted that name. A better name to use for these types of homes is manufactured mobile homes.
How Can I tell the difference between homes built with each of these different construction methods?
You need to find out what building code the home is being built to. The home is a manufactured mobile home if it is built following the national HUD building code. The most unique characteristic is that the floor is a steel chassis. The home is a regular home if it follows the local building code. All regular homes use components that are built in a factory. The degree of completion in a factory is what defines the difference between modular, component and stick-built homes. All three of these types of homes are indistinguishable from each other when the home is finished.
Q & A on Buyer’s Concerns
It seems that home prices appear to be moving down. So why should I buy now? If I wait, won’t prices go even lower?
All the market fundementals show that now is a good time to buy – prices are down, interest rates are affordable, there are lots of homes to choose from and you can bargain with sellers.
If you try to wait and time the market until it hits rock bottom, you are likely to lose out. Just as no one can accurately predict the peaks and valleys of the stock market the same holds true for housing. If you sit on the fence and wait for the absolute best deal, you could end up literally waiting for years. And most likely, your guess on market timing would be wrong. But if you choose to buy now, you will not only be in the driver’s seat during the buying process, you will also reap the gains of price appreciation once you become a home owner. Remember, those who purchased homes in the early 1990’s during the last big economic and housing downturn came out as big winners.
My neighbor sold his house six-months ago for $300,000. Today, I can only get $270,000 for my home. Why should I take a $30,000 loss on my home? Doesn’t it make sense to wait out the market until I get the same price on my home that my neighbor got before buying a move-up home?
It’s always better to trade up in a buyer’s market, like the one we are in now. While the value of your house has fallen, the price of higher-end homes has also dropped. Your home value is now down 10 percent to $270,000. But don’t forget that in today’s buyer’s market, higher priced homes are also dropping in price.
But for argument’s sake, let’s say that a $500,000 move-up home has also dropped 10 percent in value and now sells at $450,000. If you sold your home today for $270,000 and purchased the larger house for $450,000, the difference in price would be $180,000.
But if you waited to recoup the 10 percent value on your home and sold it at $300,000, chances are that same move-up home would also move up in price to at least $500,000. That’s a $200,000 price difference between the two homes. So by selling today, you would actually save $20,000. And most likely, by jumping into the market today your savings would be even greater because consumers have much more bargaining power when shopping for higher-end homes in a buyer’s market.
The best way to “play it safe” is to actually buy a home. And here’s why. Studies show that owning a home is the best way to build wealth. The sooner a person owns a home, the faster they begin to build up equity and wealth. When you buy a home, you are also purchasing price stability, knowing that you will pay the same monthly payment for the life of your 30-year mortgage.
Now consider the current rental market. During the past few years, many rental units have been converted to condos. As a result, there are fewer apartment rentals on the market. While home prices have been moderating, rents have been going up. Each year, your rent can easily go up a minimum of five percent to ten percent. Where is the economic security in know that it is possible your rent could surge 30 percent in three years? You don’t receive any tax benefits from paying rent, nor do you accumulate any price appreciation, as you would if you owned a home of your own.
All of the economic fundamentals show that this is a good time to buy a home and that there is upward pressure on rental appartments. The real risk isn’t in buying a home; it’s sitting on the fence.
Interest rates have come down in recent weeks. I think they will continue to move even lower, so shouldn’t I wait until that happens before I decide to buy a home?
Interest rates currently stand at about 6.5 percent and are extremely favorable for buyers. In fact, they are hovering near 30-year lows. But waiting to time the market is a dangerous – and losing game. Even those who follow the market for a living can’t figure out when interest rates will bottom out. If they could, they would all be millionaires. Because interest rates are near historic lows, it is much more likely that they will head higher in the future as opposed to moving even lower.
And home prices don’t necessarily move in unison with interest rates. So, if you decide to roll the dice and wait to purchase a home and the price were to actually drop $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up a half-a-point during this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.
In short, the smartest and safest time to buy is now. We know that interest rates are low today. We know that home prices are down. We know that there are plenty of homes on the market to choose from. We know that sellers are willing to bargain. And we know that builders are willing to offer attractive incentives to get your business. Any or all of these favorable variables could change for the worse six months from today.
I am a first-time buyer and still can’t afford the type of home that I want. Is it best to wait and hope that prices eventually move lower?
If you continue to wait, you may never be able to afford to get into the housing market. Even as home prices are currently moderating – or even falling in some areas – rents continue to climb. The best way to build household wealth is to own a home. One you become a homeowner, you are able to take advantage of the generous tax deductions that homeownership offers, and you begin to build equity in your property. As your property builds in equity, you can use those gains to sell your starter home and afford to move into a bigger house.
With so many homes on the market to choose from, your best strategy may be to scale back expectations for your dream starter-home. Instead of trying to buy a 2,000 square foot home, consider shopping for a 1,500 square foot home. Remember, the sooner you make the jump from renter to homeowner, the quicker you begin to creat and build up wealth for your family. After a few years, you will be able to leverage this investment and buy a larger house.
Thanks to the concept of “leveraging,” purchasing a home is by far the best long-term investment. Leveraging means putting down a small amount of moeny to earn a big return.
For example, say you use that $10,000 to purchase a $150,000 home, and the house appreciates five percent during the first year. That means after one year, the house would be worth $157,500 a gain of $7,500. Your annual return on your $10,000 investement would be a whopping 75 percent.
By contrast, putting the same $10,000 in the stock market and posting a similar five percent gain would only net a $500 return on investment.
And as a homeowner, your savings continue to grow in two ways. Every year, a greater portion of your monthly mortgage payment goes to the principal, reducing the overall loan amount. Second, your home appreciates over time, making it one of the very best financial investments. Not only is homeownership a stepping stone to a future of financial security, it also helps to build neighborhoods and stregthen communities. It is truly the cornerstone of the American way of life, and the fulfillment of the American dream.