The Google N-Gram Viewer shows the terms "hand-made", "handmade", and "hand made" coming into general use in 1880 or so. This coincides with the start of the "Arts and Crafts" movement, which celebrated objects made by hand and denigrated the products of industrial mass production.
It is interesting to compare the term "handmade" (and its variants) with the expression "homespun" ("home-spun", "home spun"), which enters common use in 1840 or so. Whereas "handmade" suggested that the item in question was more sophisticated and of higher quality than the product of a factory, "homespun" suggested a lack of sophistication and relatively poor quality.
It is likewise interesting to compare the terms "home-made" and "home-cooked." The first suggests that the item in question is of relatively low quality, while the second implies food of relatively high quality.
For a description of the "Arts and Crafts" movement, see this article: http://www.metmuseum.org/toah/hd/acam/hd_acam.htm
Google N-Gram can be found at this URL: https://books.google.com/ngrams
As an aside, was being machine made considered better during the early days of industrialization? Was it considered a novelty to have machine-made things?