Analysis from our data science team reveals a movement on the rise. The tiny house market is increasing at a rapid pace, and it isn’t showing any signs of slowing down.

What’s a Tiny Home?

Have you ever thought about decluttering your life, selling most of your things, and moving into a tiny home? If so, you’re not alone—more than half of your fellow Americans have thought along the same lines.

The generally recognized definition of a “tiny home” is between 100 and 400 square feet, though some include any home up to 1,000 square feet in this definition. Others feel that anything between 400 and 1,000 square feet is just a small home, not a “tiny” one.

Most tiny homes are built on trailers and can be moved from one location to another by getting towed behind a heavy-duty vehicle, although some are built on permanent foundations.

The “tiny house movement” started in the late 80s and really took off toward the beginning of the millennium. Many people were looking to downsize, declutter, and live more simply. A lot of people wanted to get away from the hustle and bustle of the big city and the emphasis on having “stuff.”

After the financial downturn in 2008, the movement gained additional traction as more and more people struggled to make the monthly mortgage on their slightly-too-large homes.

“Right-sizing” started to become the trend—selling homes that had more space than the average homeowner needed, and buying a home that, as Goldilocks would say, was “just right” in terms of square footage.

General Stats

In 2012, only 1 percent of real estate sales came from tiny homes.

It’s difficult to know how much this has grown in the years since, but we do have data for select cities, which we’ve included in the chart below.

As you can see, in New York City, only 2.1 percent of all real estate sales between 2010 and 2018 were tiny homes. In Chicago, tiny homes made up only one-tenth of one percent of all real estate sales during that time period.

However, one tiny home builder, Escape Tiny Homes, reported seeing a 200 percent increase in business over the past several years. So, in some locations, the tiny home business is booming—but in others, not so much.

In 2012, professionally constructed tiny homes cost, on average, between $20,000 and $50,000.

By 2018, that had risen, on average, to around $65,000 for a 28-foot length home (the average size of tiny homes in 2018). High-end tiny homes could cost as much as $200,000 or more.

As you can see, while the average lows appear the same, you might actually be getting less for your money at that price point in 2018 than in 2012.

One interesting thing tiny homeowners had in common was having less debt and more savings than the average American.

As you can see from the chart above, 89 percent of the tiny house community had less credit card debt than the average American, while 60 percent of them had no credit card debt at all, and 55 percent had more savings than the average American.

Sales estimates for tiny homes range from around 2,000 per year on the conservative side to an optimistic 5,000 per year, although there are no definitive numbers owing to the differences in definitions of “tiny home” when it comes to square footage.

Tiny Home Pros

For those of you who are seriously considering whether or not tiny living is for you, we break down some of the pros and cons—and a few of the things you may not have thought of previously.

While you may be moving from a 2,600 square foot home to a living space half that size, that’s not a tiny home you’re moving into. Remember, living spaces in tiny homes are typically only 100-400 square feet, and possibly up to 1,000 square feet.

Appreciation?

Does the value of tiny homes appreciate? There’s conflicting information here. According to data from Realtor.com, tiny homes appreciated at a rate of 19 percent compared to 9 percent for “regular” houses in 2017.

However, other sources claim that tiny homes depreciate at a higher rate since tiny homes on wheels (portable homes) are considered in many communities to be Recreational Vehicles, and face the same fate as any other “vehicle” by depreciating rapidly.

This one may be a pro or a con depending on where you live and what the tiny home market looks like in your area.

Smaller Carbon Footprint

Let’s face it—living in a smaller home means less electricity or natural gas usage, and many tiny home builders install energy-saving items like solar panels and washer/dryer combos that do the work of two machines in one.

It costs less to heat or cool a smaller space, tiny house owners tend to use more fresh foods than pre-packaged or frozen due to smaller fridge/freezer space, and it’s kind of hard to have mountains of laundry when you have a tiny closet.

The early interest in tiny homes was, after all, to get away from big city life and get back to nature, living as cleanly and simply as possible.

More Bang for Your Buck

Another obvious pro is that tiny homes cost much less (typically!) than regularly sized homes, and you’re getting something brand new that, in most cases, you’ve helped design.

In 2018, the average tiny home cost $65,000 (for the average 28 foot long home). The average regularly sized home cost around $272,000 in 2018.

Is Tiny Home Living Right for You?

Before you say, “Yes!,” there are some potential downsides and just the normal realities of tiny living to come to terms with.

Trouble Getting Financed

If you don’t have a large amount of savings, or items you can easily convert to cash, a tiny home might not be for you. There are very few mortgage companies that are willing to take on the risk of a tiny home, especially if you plan to build it yourself.

While you may be able to get a personal loan, many companies are leery of pouring resources into such a niche market.

Insurance

Not all insurers are willing to insure a tiny home—again, especially if you build it yourself. Some tiny house owners have been fortunate enough to get RV insurance for their portable tiny homes, but it’s still a difficult process. And even more difficult if your tiny home was built on a permanent foundation.

Personal Space

Interestingly, a third of American homeowners said their biggest home-buying regret was not purchasing a larger home.

It’s easy to underestimate the amount of personal space we each feel comfortable with and to romanticize tiny living without thinking about the realities of space constraints.

There isn’t much privacy in a tiny home, and you may not have any space you can call your own in a home that only has 400 square feet to share.

Families with children may feel especially cramped in such a small space day after day, and one reason tiny homeowners gave for moving back into a larger home was needing more space for their children.

A Place to Park

Where will you park, or build the foundation for, your tiny home? Zoning laws in your area may make it difficult to buy land for your tiny home’s permanent foundation, and some areas will not allow you to permanently park a portable tiny home within city limits.

In addition, you need to add in the cost of renting or buying land on which to place your tiny slice of paradise. While your tiny home may have only cost you $35,000, land to put it on could cost you another $35,000 or more.

Your Hobbies

Maybe your house is purged down to the bare necessities and you’re ready to go all-in on tiny living. But what about those golf clubs for your weekly trips to the golf course?

Or all your fishing gear? Or those DIY projects taking up space in the garage that get you pumped for the weekend?

You might need to consider (if you’re unwilling to give up your favorite hobbies) renting storage units for anything that doesn’t fit in your tiny home. This is an extra expense to take into account, as well.

So is the tiny home movement gaining steam or losing ground? What can we expect for the near future?

Looking Ahead

Where is the tiny home movement headed? Well, while tiny homes will probably never be as popular as the average-sized home, they are sure to become more popular with two key groups.

Boomers and Millennials Will Drive New Tiny Home Sales

Because of the large numbers of Baby Boomers who are set to retire, and the Millennials’ debt, those two groups are projected to drive sales of new tiny homes for the foreseeable future.

Baby Boomers are likely to consider tiny homes for several reasons:

• Downsizing after retirement to a smaller space.
• Wanting to reduce expenses (dumping that mortgage) to enjoy their retirement years with less (or no) debt.
• With the ease of portability, boomers can travel to see grandkids or just go exploring with their tiny homes in tow.
• They may even be buying tiny homes to use as mother-in-law suites on their children’s or grandchildren’s property.
• For Millennials, tiny homes provide the opportunity to actually own a home in a real estate market where many are either priced out or can’t get approved for a mortgage due to their debt load.

However, there is one caveat for the tiny home industry when it comes to Millennials: they tend to view tiny homes as a temporary option, just one step on the ladder to “real” homeownership, hoping to eventually graduate from a tiny home to a regular-sized one.

Tiny Homes Will Continue to Grow in Size

Tiny home builders across the board reported that new tiny homeowners want bigger tiny homes. The most common size for a tiny home at the beginning of the decade was 20 feet long by eight feet wide, for a total of 160 square feet.

Twenty years ago, that was even smaller, at nine by ten feet, for a total of 90 square feet of livable space.

Now the standard size is 28 feet in length, with some buyers asking for 30 to 40 foot long tiny homes. A 28 foot by nine foot tiny home is 252 square feet—nearly triple the norm from twenty years ago and more than one and a half times the square footage of tiny homes from a decade ago.

These are, of course, still tiny, but creeping up in size, as you can see in the infographics below.

Tiny Homes Will Become More Luxurious

Another trend tiny house builders have noticed is an uptick in customer requests for high-end finishes and standard-sized appliances in their tiny homes, and even king-sized beds.

Many tiny homeowners feel that if they’re giving up living space, they want to treat themselves with luxury finishes and things they otherwise couldn’t afford to do in a larger home.

However, heavy items, like marble, granite, and stone tile may put too much weight on a trailer for portable tiny homes, and it’s best to save those kinds of upgrades for tiny homes that are built on an actual foundation and aren’t intended to be moved.

As noted earlier, tiny homes are trending toward costing more, due in part to the luxurious expectations of new tiny home buyers.

Tiny Homes Will No Longer Be Viewed as Primary Residences

More and more people are beginning to buy tiny homes to use as rental properties and sources of income.

In fact, one company, Getaway, was designed around that premise—building multiple tiny homes in the wilderness and renting them out to urban vacationers looking to get away from the city.

They’ve made enough profit that they’re looking to expand their business to 30 new markets within the next year or so.

Other homeowners, tired of renting other people’s properties, will buy tiny homes to use as their own permanent vacation homes, giving them the additional freedom of being able to visit whenever they want instead of having to schedule their time.

This is already happening in some areas and seems to be where the tiny home movement is heading—away from primary residences and more toward the second home/vacation rental industry.

Towns and Cities Will Make It Easier to Build and Park Tiny Homes

This is already beginning to happen in certain states around the country, with Spur, Texas being the first city to declare itself tiny home friendly.

Several other cities have been working on removing size restrictions from their zoning laws to allow for the building of tiny homes.

The chart below shows the most and least tiny-home-friendly states.

The darkest states in our chart were the friendliest toward tiny homes, many creating special laws or setting aside land specifically for tiny homes and tiny home communities.

Most of the states embracing tiny homes are west: Texas, Colorado, Nevada, Nebraska, and South Dakota. Michigan, Maine, and North Carolina rounded out the friendliest states for tiny homes.

The pale orange states were among the least friendly, several with laws specifically prohibiting or severely limiting tiny home construction or permanent placement of tiny homes.

They were Alaska and Montana (surprising for two states that tend to prize independence and living off the grid), Mississippi, Alabama, Arkansas, Ohio, New York, Connecticut, and New Jersey.

So keep that in mind if you plan on moving into a tiny home any time soon.

In Summary…

While tiny homes may never grab a large share of the real estate market, they’re perfect for the right buyer.

Just be sure before you buy one that you’re prepared for potential obstacles along the way, you’re really ok with the loss of personal space, and that you’ve done your homework on builders/DIY kits, and locations to park/pour a permanent foundation.