#What Happened
Housing prices in America have been a key topic for years, and recent discussions point to one main issue: the high cost of home construction. While prices in some sectors, such as manufacturing, have leveled off, building homes remains expensive and difficult to scale efficiently.
Brian Potter, the author of The Origins of Efficiency, recently shared insights from his time at the modular homes startup Katerra, which filed for bankruptcy in 2021. He noted that the modular approach—often seen as a way to lower construction costs through mass production—has not yet made a big impact on the housing market. The U.S. modular construction market reached about $20.3 billion in 2024, but that’s still only around 5% of total construction, according to the Modular Building Institute.
Housing construction remains shaped by material costs, labor shortages, and regulatory barriers. Construction labor costs in 2025 are roughly 30% higher than before the pandemic, according to the Bureau of Labor Statistics. Typical modular homes now cost about $240,000 (range $160,000–$320,000), not including land.
These factors continue to shape how investors view the real estate market and housing-related companies.
#Why It Matters
For investors, high construction costs may create challenges for homebuilders and real estate investment trusts (REITs). If costs stay elevated, profit margins could tighten, and home affordability may remain a concern. This may also increase interest in new housing methods or alternative investment areas.
#What to Watch Next
Retail investors should monitor reports on construction materials and labor costs, as well as zoning and housing policy changes. Federal initiatives like the Housing Supply Action Plan, which supports modular and factory-built housing, could influence how the market develops. Any new incentives for modular construction may change demand and pricing trends.
#Quick Take
If construction costs don’t come down, pressure on the housing market and housing-related stocks may continue.
#Broader Market Angle
This discussion ties into broader real estate trends. Companies like D R Horton Inc (NYSE:DHI), Lennar Corporation (NYSE:LEN), and ETFs such as the iShares U.S. Home Construction ETF (ITB) could be affected as investor sentiment shifts based on construction costs and housing supply data.