This was the lowest-budgeted film Universal produced in the eighties.
(at around 6 mins) A sequence involving an entire house exploding in flames was filmed using a real house which was in the path of the California 105 freeway construction. The production company bought the house for $500 from the State of California, under the condition that they would move it from the site. The original house was one story but a second story was added to match the house from the first film. A safety officer was sent to supervise the stunt and kept restricting the amount of explosives due to the fact that the house was near an airport. When he asked what movie the scene was being filmed for and was told it was Phantasm II, he responded "This is Phantasm?... Blow the hell out of it" and allowed them to use as much explosives as they desired. The house was then rigged with primer cord, mortars, black powder bombs and a plenty of gasoline and blown up. The sequence was shot with six cameras and was tightly choreographed with Angus Scrimm, Reggie Bannister, and Lorie Loughlin (doubling as a young Mike) requiring to walk or run away from the fireball of the explosion on film, all in one take. It also doubled as Reggie's house when the Tall Man kills his family by blowing up his home later in the film. Afterward, the production company kept their word and removed what was left of the house.
The film's $3 million budget was 10 times larger than that of Das Böse (1979) and the biggest one in the entire series.
Reggie Bannister did all his own stunt work for the film except the scene where he has to jump over a chainsaw, which they wouldn't let him do.