Prefabricated Housing Demand on the Rise
Prefabricated Housing Demand on the Rise
Shelter is one of the basic necessities of life. Hence, I was naturally drawn in when I came across a new research report forecasting that the U.S. prefabricated housing demand is set to expand 15 percent annually by 2017. The report did a great job of examining and providing readers with data on the demand for prefabricated housing such as modular, pre-cut and penalized homes for the years 2002, 2007, 2012, while providing forecasts for 2017 and 2022.
The outcome of the report is that investors in housing can expect their stocks to experience an increase in revenue as general U.S. housing demand is expected to see major improvements over 2012 levels. In fact, the hard data from the report is that we can expect an increase in demand of up to 135,000 units by 2017. In addition, the report estimates the volume of shipments in the main prefabricated sector will reach $4.6 billion by 2017 while the shipment of other types of prefabs will rise to $3 billion.
While the average investor will be looking at the big names, probably because of their stability, now may be the time to consider investing in small-caps that have much more room for growth and could expand exponentially as the market grows. The first small cap to consider is Cavco Industries, Inc. (NASDAQ: CVCO,) a producer of manufactured homes in the United States with a market cap of $318 million. Cavco produces prefabricated homes through a network of 53 company owned retailers and 1,029 retail outlets in the U.S., Japan, Mexico and Canada. The stock recently closed at $45.75 to gain 1.25 percent even though the industry was down 0.25 percent.
Another stock that should be in your portfolio, as we expect an increase in demand in the housing sector, is AV Homes Inc. (NASDAQ: AVHI), a company primarily engaged in homebuilding, community development and land sales in the states of Florida and Arizona. AV Homes has a market cap of $191 million and even though the stock traded down 2.06 percent recently, to close at $14.71, the future looks very promising. For instance, AV Homes is moving ahead to carry out some improvements on Vitalia at Tradition (a property that it bought some three years ago). The improvements will see AV Homes spending about $8 million on a state-of-the art recreation building as well as a network of roads that will crisscross the 1200 lot community.
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Small cap housing companies will be at the center of the growth. I see some huge upside potential in Cavco. Its well positioned to capitalize on the prefabricated fad.
Sounds like a good niche in the sector. Had never given it much thought. Thanks for the education.
I always knew prefabricated housing would be next big thing in housing. I am on the look out for any company that combines prefabricated housing with eco-friendly homes.
Modular homes offer consumers a great level of customization, so each customers gets exactly what he or she wants. At the same time, the whole process is cost effective for building companies, so it makes sense to invest in this stock and reap profits down the line because other forms of building are becoming obsolete.
Cavco looks like a solid play in this emerging industry.
The recovery in US housing and construction is already having ripple effects on other economic indicators including jobless claims. More people buying new houses is a positive sign for Cavco Industries.