US demand to expand 15% annually through 2017
Demand for prefabricated housing through 2017 will benefit from an expected recovery in overall US housing demand from the subdued 2012 level. Prefabricated housing demand is forecast to expand 15 percent annually through 2017 to 135,000 units. The US prefabricated housing industry encompasses a number of shelter products -- manufactured, modular, precut, and panelized housing -- that reduce the need for on-site construction. While the rebound in overall housing demand will boost demand for all prefabricated housing, the trends will differ for manufactured housing and other prefabricated types. Manufactured housing’s market share is projected to drop from that of the 2007- 2012 period as conventional mortgages become easier to obtain. Thus growth in manufactured housing demand will trail that of overall single-family housing demand. For other prefabricated housing, market shares will be little changed, and demand increases will be similar to that for single-family housing overall.
Manufactured housing has gained share of total prefabricated housing market
Over the past decade and a half, the fate of manufactured housing has differed markedly from that of the other prefabricated housing products. Manufactured housing suffered declines in demand almost every year for the past decade. The decline actually began in the late 1990s, when manufacturing housing lenders increased approvals to subprime borrowers for low and no down payment loans. As the US economy cooled at the turn of the millennium, some of these borrowers defaulted on their loans, generating a rise in repossessed units, which then competed with new units. From 2002 through 2006, the easy availability of mortgage credit led many potential purchasers of manufactured housing to opt instead for conventionally built units. The result was a declining market share for manufactured housing from 1998 through 2005.
The collapse of overall US housing demand from 2006 through 2009 further reduced the absolute demand for manufactured housing, but it also contributed to a slight rise in market share. As mortgage credit terms tightened and lenders were less willing to write loans for conventional housing, some households turned to manufactured housing, especially for smaller, single-section units.
Other prefabricated housing types maintained a relatively steady market share over the 2002-2012 period, and as a result, the level of demand was related to overall US housing demand. As housing demand boomed, other prefabricated housing saw gains in unit demand. When housing demand collapsed, unit demand dropped as well.
US shipments to reach $4.6 billion in 2017
Trade in prefabricated housing is minimal, and shipments will generally track domestic demand. Manufactured housing shipments are expected to reach $4.6 billion in 2017, a vast improvement from the 2012 level, but still below that in 2002. Through 2017, shipments of other prefabricated housing types are projected to rise to $3.0 billion. Advances will be fueled by rising unit growth after a period of depressed demand. Price increases will account for a significant portion of this growth, as increased raw materials prices and a shifting product mix raise the average cost of units produced.
US Prefabricated Housing Market to Reach 140,000 Units in 2017
Prefabricated housing shipments are forecast to rise 13.6 percent annuallythrough 2017 to 140,000 units, a vast improvement from the declines of the 2007-2012 period. Prefabricated housing will benefit from a rebound in housing starts. Bothtypes of prefabricated housing declined steadily from 2002 on, and were hit hard by thehousing market collapse that began in 2007. As the housing market and generaleconomy recover, demand for prefabricated housing is expected to rise along with totalsingle-family housing starts. Despite the promise of some reduction in constructioncosts, these products have had limited market penetration, in part because ofconsumers’ familiarity with traditional construction practices, or in the case ofmanufactured housing, some stigma attached to the product itself. These and othertrends are presented in Prefabricated Housing, a new study from The FreedoniaGroup, Inc., a Cleveland-based industry market research firm.
Overall, shipments of manufactured housing will reach 90,000 units in 2017.Demand for manufactured housing is concentrated in rural areas and in certainsegments of the population -- particularly lower income groups such as young, first timehome buyers and those over 55, such as retirees on a fixed income. Expected growthin these populations will boost manufactured housing demand. However, manufacturedhousing’s market share is projected to drop from that of 2012 as the economy continuesto expand and conventional mortgages become easier to obtain, and as newregulations make chattel loans (commonly used for manufactured housing) moredifficult to secure.
For other prefabricated housing, demand is more evenly spread throughoutgeographical areas and the segments of the population. As such, demand is less affected by trends in certain areas or populations, and will more closely track demandfor overall single-family housing. Therefore, market shares for other prefabricatedhousing types will be little changed, and demand increases will be similar to those forsingle-family housing overall.
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