Buying the biggest house you can afford for your first house makes as much sense as learning how to run by starting with a 100 mile race. Yes, it might work, but there’s a good chance you’ll hurt yourself. What we’re witnessing now are a lot of people with strained financial hamstrings just now trying to get back into the race. It shouldn’t be a surprise that idea of starting with a tiny house is just as appealing as a runner deciding to restart their training with some nice walks.
There was good logic behind the concept of buying the most house you could afford, and buying the cheapest house in the neighborhood for the minimum downpayment. It maximized your money, leveraged the value of the mortgage, and amplified that by participating in the higher rise created by the increased prices of the rest of the houses in the area. That logic worked as long as some assumptions worked. Housing prices are most likely to go up. Your mortgage will become a smaller fraction of your monthly costs because of some combination of it being fixed, or the rate being lower than your raises, or the appreciation making everything else moot. That world almost existed for a long time. Today, we know prices aren’t safe from retreats, mortgage rates can do strange things, and raises are rumor for most.
My current situation is too common, though how I got here is unique enough for a screenplay. Someday I’ll write that, maybe. I started, though, by following that logic. I bought a nice, though cheap, house just inside the border of a golf course estate; and lived with finances so close to the edge that even with a frugal life and an engineer‘s salary, I had to close off the upstairs and hope the roof didn’t leak. I was lucky. Within four months the house appreciated by 30%. Any lack in discretionary income was secondary to making more in real estate than I did in months of overtime professional paychecks. Four years later, when I decided to sell because I was getting married, I had to drop the price enough that a lot of those gains were gone. Amortized over four years my returns were a few percent per year.
We’re three paragraphs into this explanation and maybe you’ve noticed what I didn’t mention. It was a house, not a home. You may have noticed that it was more house than I needed or wanted. At the end of those four years I was relieved to be rid of it. There weren’t any upgrades, except a new fence. The roof hadn’t leaked, but the hot water tank, which was oddly installed in the second floor crawlspace, had dramatically leaked sending a stream of hot water down the staircase. Raises meant I was finally returning to discretionary spending, but filling the empty rooms with furniture seemed pointless, so I didn’t. When the house hit the market again, my minimalist style meant the prospective buyers thought I’d already moved out before I’d packed up anything.
“First they ignore you, then they laugh at you, then they fight you, then you win.” – Nicholas Klein (not Gandhi)
Within the last decade or so, people have begun taking advantage of the minimum building size rules to construct tiny houses. The idea within the regulations was that there should be some lower limit to building size under which the regulators wouldn’t have to worry about approving permits. If a parent wanted to build a play house for their kid, they shouldn’t have to fill out paperwork. If a spouse needed a studio, a study, a sanctuary, or a place to get away from their spouse, they shouldn’t have to explain it to anyone except their spouse. The authorities ignored such insignificant dwellings.
It is easy to ridicule the concept of living in a space that is smaller than a MacMansion’s master suite walk-in closet. If you shop ’til you drop, then you need a place to put all that stuff. A 120 square foot shed isn’t big enough for some people’s shoe collection. Foodies have pantries and wine cellars bigger than that. Wal-Mart and Costco exist for reasons; people like buying things and buying in bulk may save money, and bulk needs a place to live. How could a person live in such a small space? Don’t they wear clothes or shop?
The reality is that many people had more than enough incentives to find the smallest housing options available. Concern for the environment, a desire to lower their utility bills, a repugnance towards mortgages, a destroyed credit rating for too much debt or not enough income, a desire to walk away from the mainstream, a sense of style, control over every aspect of their lives, or because they had not other option – all reasons people have used to live in Tiny Houses. If you haven’t heard about them, it’s a trend that is already becoming hard to ignore. Go check out Tiny House Listings and see the variety of solutions people have found or are selling. A nominal Tiny is about 120-160 square feet. Houses as small as 96 square feet are notable, but common. Step up to 240 square feet and you’ve got a place some would consider palatial.
The fight has begun. Regardless of people’s need for shelter, the defenses are being raised by conventional housing authorities, frequently with the backing of conventional providers. There are arguments for regulation, or minimum size requirements to uphold neighboring prices, or automatic responses purely based on attacking something that’s different. The attacks are underway. The attacks lack alternative solutions to the compassionate need that inspired pioneers to act.
I suspect the Tiny House movement will win. The momentum exists, and is growing. I’m witnessing it as I write about them for a Seattle real estate site, Seattle.Curbed.com. There are tens of thousands of people reading the pieces even if there are only a few dozen buying, for now. I have friends who have , and are improving Tiny Houses. I stayed in one. I’ve visited others. Laugh as you may, but anyone who appreciates the workmanship inherent in yacht design can appreciate a similar level of expertise inherent in many tiny houses. When you’re only working in 120 square feet, you might as well make them all exquisite.
Today I had to repair a window. The light was brighter in my bedroom this morning, and that was not good. It meant the storm beat my storm window into shreds. I left work a bit early to come home and stretch some plastic over a window screen frame that hopefully will survive until I have more discretionary income again. It made me wonder. This house, my first house after having owned four to actually be worthy of the name home, is only 860 square feet. It and its 7,000+ square foot lot are more than I can take care – at least to the level I deem appropriate. Its market valuation and the mortgage balance was too close for comfort. Do I still have too large a house?
Imagine, as I did, starting my real estate experience by buying the smallest that house met my needs. Not the cheapest house, but the smallest one that met my needs including neighborhood and commute. Instead of trading around houses and mortgages based on an old bit of conventional wisdom, I could have bought a house for far less, carried less debt, took better care of it because there was less of it to care for and because I had more money to spend on it – and then, moved up to something larger if I wanted to. There’s a strong chance that by now I’d be out of debt, have more money in my portfolio, and wouldn’t feel subordinate to the needs of a major fragile investment – even if it is home.
I cheer the people who are building tiny houses. When I day dream about winning the lottery, I dream of buying or building a house that is just the right size for me to take care of and enjoy, and that leaves more than enough time for enjoying the rest of life. A tiny house, that’s off the grid, on a large lot, with a gorgeous view; and, while the list continues, the details are secondary to the appreciation I have for the people who, regardless of regulations and convention, are building their homes to the right size for their needs and wants. They are the winners.