Last year, people made big changes. COVID changed the way people worked, interacted with their community, and educated their children. It also changed the residential real estate market in more ways than one. 2020 was a year when many people decided that what they wanted was less space and more adventure, hence the surge in tiny homes and full-time RV living. As we bypass the one-year mark living with COVID, almost everyone knows someone who has decided to leave the traditional way of life behind and invest in a tiny home or has embraced a minimalist lifestyle.
This sudden demand for more compact living space and more eco-friendly living will just be another factor that changes the way agents navigate the real estate market in 2021.
What is a Tiny Home?
A tiny home is exactly what it sounds like: an entire home compacted into 400 square feet or less. These homes range from very simple and minimalistic to ultra-luxurious. Some are built on a solid foundation, and others are built on trailers which makes them easy to move. A tiny home may be fitted with solar panels or plumbing to make it a more sustainable dwelling. Not all neighborhoods and cities are equipped to handle an influx of tiny homes, so homeowners are limited in their location options for their tiny homes. More and more cities are leaning toward being tiny-home friendly to appeal to a rise in homeowners who are looking for more affordable, eco-friendly housing options.
Why People Love Tiny Homes
Steep job losses across the country caused many families to reevaluate their living situation. Downsizing has helped many families save money during a time when steady work and income are uncertain. There are many reasons why there has been a sudden surge in the tiny home market in the last year or so:
- They’re affordable.
The average cost for a tiny home ranges from $23,000 to $60,000, depending on whether you want to build and customize your tiny home or order one built-to-suit. The average cost for a traditional home across the country is $275,000. This difference in price makes downsizing very tempting for people who want to get out of debt and decrease their living expenses.
- They’re better for the environment.
Smaller spaces mean a smaller impact on the environment. These homes use less gas, water, and electricity than traditional homes, and many come standard with eco-friendly features like water-saving appliances and solar panels.
- They’re easier to maintain.
A tiny home compacts all of the basic features and functions of a full-size home into less than 1,000 square feet. This means these tiny homes are easier to clean, organize, and maintain. The limited space forces people to focus on minimalism and allows them to declutter and be very intentional about what they buy, what they keep, and what they focus on.
- The appreciation and resale value.
Many people buy tiny homes with the intent to upgrade them and resell them. The market for modern, Pinterest-worthy tiny homes is high, and investors are quickly seeing how they can turn a profit and maximize their ROI fixing and flipping this kind of real estate. Some experts believe that tiny homes can appreciate quickly, while others worry that since they are built on wheels they will fall into the same category as recreational vehicles and depreciate quicker.
The Tiny Home Market
The appeal for tiny homes has expanded significantly in the last couple of years, so there’s not a lot of concrete data about how this type of real estate will impact the residential real estate market. However, experts predict that the rise in people working from home will lead to more people wanting to change their living situation. Wide-spread unemployment may also cause people to downsize their homes, or invest in real estate that is more energy-efficient and lowers utility costs.
One of the drawbacks to investing in a tiny home is the uncertainty of the market. The newness of this type of real estate could make it hard for traditional buyers to find financing. It also requires buying or renting land for the tiny home. Millennials and retirees will drive the tiny home marker for a while, and as the demand for this lifestyle increases, tiny homes are expected to increase in size and luxury. The demand will also require more cities and towns to be “tiny home” friendly. Places like Texas, Maine, and North Carolina are already ahead of the trend and considered some of the most “tiny home friendly” states in the country.
The Impact On Traditional Residential Real Estate
With the limited data available on the tiny home market, it can be hard to tell how this new kind of real estate will impact the traditional real estate market. The consensus is that although there has been an increased interest in this more compact way of living, most homebuyers are still looking for space. A tiny home is a perfect option for a very specific type of buyer, but the majority of home buyers still want their space. One of the biggest complaints homebuyers have is that they wish they would have bought a bigger home.
Tiny homes are also practical for singles and couples, but families with three or more people usually need more space than a tiny home can provide. These buyers will still be buying single-family homes. And because tiny homes can only be placed in certain areas, homebuyers who need to be close to the city center or are looking to be part of a traditional suburban neighborhood may find that a tiny home is too restrictive.
Tiny homes can be a great investment for the right buyer. For those looking for a more minimalist housing option, tiny homes can be a great eco-friendly option. However, most real estate professionals agree that even the sudden surge of interest for a tiny home living will not dramatically impact the residential real estate market in the next 3-5 years.
As a real estate agent, continued education is key in understanding market trends and staying on top of the ever-evolving housing market. Mbition offers online courses and classes to help agents stay on top of their game, and provides the resources they need to grow their business and their client base. Check out these online real estate courses for new and seasoned agents.