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Demand for tiny homes sends prices up

By Mike Wheatley | August 23, 2021

The coronvirus pandemic led to a surge in demand for so-called “tiny homes”, which can be either standalone or backyard dwellings.

Tiny homes are in demand as people look for additional living space, or alternatively just for somewhere to live that’s more affordable. But like the rest of the U.S. housing market during the COVID crisis, the costs of tiny homes have accelerated fast.

The official definition of a tiny home is a dwelling that’s less than 600 square feet, though the average size is much tinier – at just 225 square feet. That’s around eight times smaller than the median home in the U.S., according to researcher Volodymyr Kupriyanov.

The average price of a tiny home in the U.S. hit $52,000 at the end of July,’s latest survey found. Though that’s about 87% cheaper than the average cost of a typical home, buyers are paying around 62% more per square foot for such modest dwellings.

“There is a lot of detail and complexity in connecting and integrating all the mains in a relatively small building,” Kupriyanov told CNBC in an interview. “All of the material and labor often require custom or specialty sizing, which all adds to additional cost of building and maintaining the tiny home.”

Other factors drive the costs up too, Kupriyanov said. For instance, local zoning laws in some states can add to the costs of some tiny homes, and utility hookups can be more expensive. For instance, if a tiny home is located off the grid, the owner may need to dig a well, collect rainwater, use solar panels and plan a septic tank installation project.

“These will all add to the cost of a tiny home build,” Kupriyanov noted.

Even so, tiny homes may still appeal in some states. In North Dakota, for example, the average price of such a dwelling there is just $28,000, the cheapest in the entire country, making them extremely affordable. Indeed, North Dakota ranks along with New Hampshire and New Jersey in the top three states for tiny homes in terms of affordability. In each of those states, tiny homes cost less than half the averae annual household income, the study found.

However, if you consider prices purely in terms of square footage, then the cheapest tiny homes overall are to be found in Arkansas, Porch’s survey found.

Tiny doesn’t always mean cheap though. In Hawaii, the cost of a tiny dwelling has soared to an average of $149,000, or $490 per square foot. That’s maybe not so surprising though, as Hawaii has notably always been one of the most expensive housing markets in the U.S.

There are other costs to keep in mind too. Insurance research website ValuePenguin notes in a recent analysis that the most expensive state to insure a tiny home is Oklahoma, where coverage is 242% more than the national average. Tennessee, Kansas, Texas and Colorado are also extremely expensive in terms of tiny home insurance. It’s notable that all of those states have something in common though – they have high rates of tornado activity.

In terms of popularity, ValuePenguin says that an analysis of search terms on Google shows the most popular states where people are searching for tiny homes to buy include Alabama, Arkansas, Idaho, Oregon and Wyoming.

Anyone that’s considering buying a tiny home may want to make their move sooner rather than later though, as the costs of building the miniature dwellings continues to rise. Porch’s study found that the median cost to build a tiny home these days is $60,000, and that the price is climbing steadily as demand increases and the costs of land and building materials grow.

That said, it’s worth pointing out that tiny homes may not be such a smart move from the perspective of an investment.

“Tiny homes may actually depreciate in value, especially if it is customized to your wants and needs,” said Kupriyanov. “Tiny homes fall into a very niche market so it may be harder to sell your home.”

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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