Prefabricated housing in the United States is forecast to surge by 13.6 percent annually through 2017 as housing starts rebound, according to a new market study.

Factory-built housing was hit hard by the residential housing market collapse in 2007, but as that market and the general economy recover, the demand for manufactured and modular homes should return, reaching a total of 140,000 units by 2017, according to “Prefabricated Housing” from The Freedonia Group Inc.

LivingHomes LLC

The prefabricated housing market is expected to increase 13.6 percent annually through 2017. The "C6" modular home, introduced last year by LivingHomes LLC and Cavco Industries, features zero-VOC paints and recycled building materials.

Despite the promise of reduced construction costs, prefabricated homes have had limited market success, due in part to consumers’ familiarity with and preference for traditional construction methods, the Cleveland-based research firm said.

Also, manufactured homes still carry a stigma with some buyers, which has affected market penetration, the study said.

Manufactured Shipments Increase

However, shipments of manufactured housing are anticipated to reach 90,000 units by 2017, the report said.

“Demand for manufactured housing is concentrated in rural areas and in certain segments of the population—particularly lower-income groups such as young, first-time home buyers and those over 55, such as retirees on a fixed income,” according to the report.

Expected growth in these populations should boost that demand.

However, manufactured housing’s market share is projected to decline from that of 2012 as the economy continues to expand and conventional mortgages become easier to obtain, the report noted.

Further, new regulations have made chattel loans (commonly used for manufactured housing) more difficult to secure, the report said.

Little Change for Modular                                     

For other prefabricated housing, including modular housing, demand is more evenly spread throughout geographical areas and population segments, according to the report.

As such, demand is less affected by trends in certain areas or populations, and will more closely track demand for overall single-family housing.

Therefore, market shares for other prefabricated housing types will be little changed, and demand increases will be similar to those for single-family housing overall, the firm noted.

The Freedonia Group is a leading international industrial research company, publishing more than 100 studies annually.