Mobile, lower-income buyers may grow flexible roots and find a home in 200-square-foot tiny houses.
Tiny houses measuring in at less than 500 square feet are popping up across the country -- but it’s unclear whether such units would succeed in San Diego.
Nathan Moeder, principal at The London Group, and Tony Pauker of Draper Properties, said standalone tiny homes could generate demand in the right areas.
“Larger houses obviously have more room for storage, and amenities, but in high-demand areas, the neighborhood is the amenity,” Pauker said. “A small unit should imply lower cost and hence be sought after for those seeking lifestyle. This likely works best in highly urban areas with available services, jobs and entertainment.”
Tiny homes -- and especially houses on wheels -- are purchased by all kinds of people, said Debby Richman, chief marketing officer for the Sonoma-based Tumbleweed Tiny House Company.
“Some are looking to downsize and get out of burdensome mortgages, others are using them for additional living spaces, and still others aspire to debt-free lives,” Richman said in an email. “Tumbleweed Tiny House Company sees interest in backyard offices, mother-in-law units, artist studios and boomerang adult children space.”
San Diego is similar to other areas where there is a demand for tiny houses in that there is a general interest in scaling down and living more responsibly, Richman said. Tumbleweed gauges interest based on workshop attendance, and Richman said San Diego’s workshops have been well-attended. She expects Tumbleweed to work in San Diego in the future.
“The interest in learning about tiny living has grown exponentially since the recession, motivated by lifestyle, as well as financial considerations,” Richman said.
The appeal of a tiny house is mostly affordability. The homes can sell for as little as $30,000 -- which is more than $65,000 less than a 20 percent down payment on a median-priced home in San Diego.
The median price of a home in San Diego County was $485,040 in the third quarter, according to the California Association of Realtors. The percentage of homebuyers who could afford to purchase a median-priced, existing single-family home dropped to 27 percent in the third quarter, down from 32 percent in the second quarter and 43 percent in the third quarter of 2012.
San Diego homebuyers needed to earn a minimum annual income of $99,670 to qualify for the purchase of a $485,040 median-priced, existing single-family home in the third quarter. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,490, assuming a 20 percent down payment and an effective composite interest rate of 4.36 percent.
While tiny houses are a more affordable option for home buying, they're not necessarily houses for only the less well-off, Richman said.
“There’s a seachange underway culturally, and it seems like some straightforward zoning and code changes could make tiny houses flourish,” Richman said.
“I think the micro-home concept comes from Japan, where population density is many times higher than San Diego,” Pauker said. “Our version of ‘micro’ may be a bit small, but a well-designed unit can be achieved in 400 square feet and get great demand -- in the right areas.”
Moeder said the market in San Diego is probably too narrow for these tiny houses.
“They’re competing with a lot of other inventory that’s larger and probably offers more space,” Moeder said. “Having said that -- there’s always some plot of land out there where it might make sense to do something tiny in that market in San Diego somewhere on that land.”
Pauker agreed that the standalone for-sale tiny homes have not come to San Diego yet, most likely because they are not economically attractive, due to required parking. Attached condos and townhomes would make more sense from a planning perspective.
There are older homes in the region -- pre 1950 -- that have 2-bedroom, 1-bathroom granny flats in the 500- to 600-square-foot range, Pauker said.
“Other builders like Lennar Homes are incorporating Next Gen homes within larger single-family homes. The Next Gen unit is an innovative 400-square-foot or small separate unit -- a modern twist to a granny flat. The demand exists,” Pauker said.
Moeder compared developing for this market to developing a 20,000-square-foot home -- the extremes of the market that have limited demand. Only 1 percent of buyers nationwide purchased a home 1,000 square feet or smaller, according to the 2013 National Association of Realtors’ Home Buyer and Seller Generational Trends report.
The report showed that 2 percent of homebuyers age 48 to 57 purchased a home with 1,000 square feet or less, and only 1 percent of those 32 and younger, 33 to 47 and 58 to 66.
People are driven to these tiny homes for the price points, Moeder said, and because of that, the values won’t appreciate with the rest of the market.
“The only people who will buy them are people who want it to be affordable,” Moeder said.
Richman said Tumbleweed focuses on house-to-go homes, which depreciate. There is a small re-seller market that keeps prices steady, she said, and Tumbleweed’s cottage plans, which are built on foundations, hold value based on the land and configurations where they are built, she said.
“Building tiny homes on foundations is more difficult than houses-to-go, because there are more zoning and code restrictions for immovable homes. We created house-to-go models because they solve many of the zoning problems for tiny homes,” Richman said.
In addition to being affordable, Moeder said these houses are most likely easier to manage and more efficient with utilities than larger homes.
Buyers may have to build their own tiny house and are able to move it around as they please -- assuming there are no laws against it.
The Tumbleweed Tiny House Company is based in Sonoma and Colorado Springs, Colo. It offers house-to-go models from 117 to 172 square feet and cottage plans ranging from 261 to 874 square feet, according to its website. They offer more than 20 plans to choose from with full bathrooms, kitchens, heating and AC included.
Experts have said that the younger generations are avoiding homeownership in order to maintain their mobility and flexibility. A tiny house could potentially solve that issue, creating a new vision of the American Dream.
There are examples of tiny house communities in different parts of the country. Washington, D.C. has created an experimental village and Austin, Texas, has had a tiny house village in the works for years, planned for homeless citizens.
There’s a question of necessity or choice when opting for a tiny house. There are rental units smaller at 500 square feet and less, Moeder said. The units are tiny but have high ceilings, making them feel bigger.
Moeder said these rental units make sense for San Diego, because it allows the people living there to stay for one or two years, then move on.
“They’re not making a personal financial investment in the unit where they live there for five years or longer -- it’s a different mindset,” Moeder said.
Pauker said there are “many new apartments ranging from downtown high-rises to innovative developments by local firms Butler Malick, Lloyd Russell, Jonathan Segal and others [that] have had great success on innovative small rental units below 500 square feet.”