Live Tiny: Protect Yourself From Future Housing Crises
With past housing booms and crashes and the potential, if not probability, for history to repeat itself, many of us in the tiny house world understand these risks and the need to protect yourself from future housing crises by living tiny. We were recently directed by Ryan Mitchell from TheTinyLife.com to an informative article which covers housing trends, the economy and where things are headed. The author, Richard Florida, points out that another perfect storm for a ‘real estate crash’ is brewing (much like the 2008 crash). We were personally affected by the ’08 event as we were in the middle of a Green residential development project when the bottom fell out of the real estate market. As such, the news of another potential crash brings with it a familiar sense of concern. In the article, the author reports that, “When it comes to housing, sometimes it seems we never learn” and that “a spate of reports show that families are having a harder and harder time paying for housing.” At the crux of the problem is the fact that “Americans continue to want more space in bigger homes.”
Somewhere along the line we began to build bigger and bigger houses. The promise of the American “dream” is alluring and as material costs have decreased over the years, our ability to get more for our money has become an irresistible temptation, leading us to build as big as possible. According to the US Census Bureau, the average house size in the United States has increased 61% since 1973 (now about 2,600sf). Interestingly, the average household size has decreased in that same time period (meaning that less people are living under the same roof); however, the average square footage per person has nearly doubled (now about 1,000sf each). Does one really need 1,000sf in order to be comfortable? And is it worth the extra cost and stress?
The cost of this increase in square footage has been significant not only to our resources and planet (click here for an infographic showing the environmental costs of tinys vs. average houses) but also to our pocket books. According to newly released data from the Bureau of Labor and Statistics, Americans spend, on average, more than 33% of their income on housing. 33%!!! How much time each week could you save if you didn’t have to give 33% of your income towards your housing? How many hours away from home, your family, your hobbies does this represent? For most people, two out of their 5 work week days go towards their housing payment alone. Consider that most people are living in spaces much bigger than what they actually need, and that the same level of comfort can be achieved in much smaller spaces with good design. Paying 33% of your income is insane!
It is clear from the recent studies that Florida sites in his article that more and more people are struggling to make their housing payments. A CNN article on America’s unsettling comfort with personal debt, shares, “Americans haven’t become much better at keeping track of their personal finances since the recession began in 2008″. Further, in the article, Greg McBride, chief financial analyst at Bankrate.com, says, “American consumers are not showing improvement in these areas”. Compounding this debt issue is the fact that mortgage underwriting standards have become even more lax.
The trend towards larger housing continues and 2014 marked the largest average home size on record in the US. The average cost of new house construction in the US according to the National Association of Home Builders NAHB was nearly $250k in 2013 (not including land). By rough calculation, the average down payment on a construction loan is 20%, or $50,000. Now consider that the cost to build hOMe was just over $33,000. You see where I’m going with this: why not build a totally functional, beautiful and safe tiny house for $17,000 less than the DOWN PAYMENT of the average construction loan?
It doesn’t take a genius to understand how tiny houses can bring back equilibrium to our spending habits and economy. Not only do tiny houses cost significantly less to build, condition, and maintain, but they also make more mindful consumers out of us. There just isn’t space for unnecessary items. As such, we can’t go out and spend money blindly. The lessons we personally learned from the ’08 real estate crash were in large part what motivated us to break from the shackles of high housing costs and to downsize into our 207sf tiny hOMe. Now, no matter what happens with the economy, one thing is certain: we will always have a beautiful roof over our heads. There is nothing tiny about THAT luxury.