Rising interest rates are slowing home sales and sending construction costs higher for home builders, but one burgeoning production method offers a fast and cost-effective workaround. The modular construction industry surpassed $12 billion in North America in 2022, accounting for roughly 6.03% of all new construction starts last year, up from 5.5% in 2021.
Modular construction requires less labor and less time than traditional home construction, and according to Construction Dive, it also streamlines approvals and entitlement on subsequent projects for a faster financing process, an enticing benefit for buyers bogged down by today’s elevated mortgage rates.
Those financing issues surrounding traditional construction projects continue to boost interest in modular adoption, said Vaughan Buckley, CEO of Volumetric Building Companies, a Philadelphia-based modular builder.
“I would absolutely say that interest rate increases and the difficulty of finding construction lending is a tailwind for modular construction,” said Buckley. “In Philadelphia, there are large projects that were otherwise simply not going to be underwritable that were converted to modular and are now going into production.”