Tiny Houses: More People Choosing Smaller Homes

[jeffrey]

Living in a place that's a lot less than 1,000 square feet is usually reserved for people just starting out on their own.

But a growing group of people are choosing to live in smaller homes, even if they can afford something bigger. Tiny houses or "micro-homes" appeal to buyers who want to pare down their lives in every way.

In San Francisco and New York, tiny apartments measuring as small as 220 square feet have begun to seem like a viable way to combat rising rents. Mayor Michael Bloomberg challenged architects to design a New York micro-apartment, and chose a winner in January...

http://homes.yahoo.com/news/tiny-houses-on-the-market-nationwide-185513819.html

[lorraineb]

Houses tend to be a major problem for a lot of people I know who have issues with their finances. They have houses that are too big for their income. I don't understand why everyone seems to think that buying a McMansion is a good thing with far too many rooms than they realistically need.

[disneysteve]

I've been wondering how long it would take for the ever-growing size of houses to swing back the other way. I published an article about 15 years ago in a national financial magazine that included a then-current statement that the average house in 1995 was twice the size of the average house in 1950 even though the average family size was 13% smaller. Since then, I believe the average size has gotten even higher. So it is good to see that people are beginning to realize that they just don't need monstrous houses anymore.

[Wino]

The reason for the house size increases is marketing and greed, plain and simple.

The realtors have for years told people "Buy as much house as you can afford. Since houses ALWAYS go up in value, you make 5% of $400K, or $8K per year instead of 5% of $200K, or $4K per year. That's like having $167 less in house payments every month."

So, folks have bought bigger and bigger houses. Like any Ponzi scheme, there comes an end to new investors and baseless value increases. This is part of the reason for the housing bubble. The above formula works as long as the basic premise holds true: House prices always rise.

We now have ample proof that house prices can fall, and that's why the above strategy ultimately failed.

In addition, I think Dave Ramsey has opened people's eyes to the fact that credit is an income killer; more precisely, paying interest is an income killer. Folks just prefer to have the cash, which means "save where you can," and this leads to "how much house do we need, not want?"

[JoeP]

Right, there has to come a point when you have to sell the thing, and you're more likely to find buyers for smaller houses simply because the price will be within reach of more people.

[riverwed070707]

Agree. When we bought our first house, it was just the two of us. It was a 1600 sq ft house with fully finished basement (2600 total). A couple years and a kid later, we realized we bought more than we can afford but we also realized we didn't use but a fraction of the space. A finished basement was on our must list when we bought because we didn't want to do it later, but truth was we didn't use it but to store a few boxes that could have easily been accommodated elsewhere. We had a 3rd bedroom upstairs that we thought would be used for a "must-have" guest room that got used a handful of times and always felt like wasted space to me. We loved our second floor deck off the master bedroom, but when it came to daily living, we never used it because it made more sense to just use the 3-tier main level deck, plus we couldn't afford to furnish both! We left that house with a mission of finding something smaller and landed in a 600 sq ft, 2 br bungalow. Stripped to the studs and completely refinished, there was no work that needed to be done so we were able to just enjoy it. It had a big yard, which is where we spent 3/4 of the year, and it made the house feel larger. It was crowded at times (especially when we were cooped up in winter!) but overall I really loved the smaller home. Ironically, we're back in the bigger house now because of a bad contract deal, and its been kind of nice to stretch our legs a bit (maybe feeling this way because its winter again!) but even as a more established family its way more space than we can use. We're filling the void and supplementing the finances by renting the basement since it was unused space. If we were to leave and buy again, I definitely think we would look more for something finished with upgraded fixtures, exterior, etc rather than the biggest we could buy. A lot of lessons learned from that first purchase, and while its working out OK for us, I do think we could have started off a lot differently if we had a better grasp of what we could afford and really, what we "needed" in a home.