If Inflation is Skyrocketing the Cost of Easter Candy, Is It Still Realistic to Buy a Tiny Home??!

Apr 05, 2023

If you are reading this post, you likely want to buy a tiny house.

But do you feel like you can't even THINK about Buying a tiny house when chocolate bunnies cost, like, a thousand dollars?!

*Insert howling ghost emoji.*

Inflation. Amiright?

Interest rates. Amiright?

Easter celebrations are just around the corner, but it can be hard to feel light and spring-like when we're experiencing such uncertain times. And if uncertain times have you feeling bummed out about your tiny home journey, keep reading because people just like you are forging ahead with their tiny home plans.

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In fact, tiny houses give tiny home owners flexibility and options in an uncertain world!

In other words, the very reasons you're hesitant to buy a tiny home could be the exact reasons a tiny home is the answer. But don't take our word for it; let's break this down so you can decide if buying a tiny home is a good idea for you.

SCENARIO: You leave your money in the bank.

In changing economic times, it can be tempting to squirrel away money in a bank. But unfortunately, this is one of the places where inflation does the most damage. So while having a chunk of change in your account can feel comforting, inflation causes that money to lose value.

The longer you leave your money in the bank, the less buying power you'll have when inflation strikes.

Now, let's look at what happens if you put that money into a tiny home.

Many tiny home owners who bought tiny houses several years ago have discovered that just a few years later, they could sell their homes for more than they paid. (Yes, even though tiny homes technically depreciate.)

This is because tiny homes are still subject to market value. The market value for tiny homes can be increased by several factors, including:

The demand for tiny homes
The popularity of certain tiny home builders
The increased cost of building materials
Inflation

So what happens if you buy a tiny home now?

SCENARIO: You buy a tiny home in the midst of inflation.

Let's say you spend 150k to build your dream tiny house.

You might pay 150k today, but if inflation continues to rise, a tiny home that costs 150k might cost 175k in the future. So if you wait, inflation could affect your tiny home journey by giving you less buying power.

But if you buy a tiny house now, it could act as a hedge against inflation.

After all, if it would cost more than you paid to recreate your tiny home in the future, you might be able to sell your home for a profit.

Here's an example with numbers.

Let's say you buy a tiny home today for 150k.

Inflation continues, and a few years later, the new cost to build is 175k.

You decide to sell your tiny home, and the market value (demand, inflation, etc.) allows you to do so … for 165k! (Which would look pretty good to a buyer whose options start at 175k!)

Of course, we can't predict the world's financial future, nor can we make guarantees of resale value, but these numbers give you an idea of why inflation may not be the problem you think it is.

But if inflation isn't crushing your tiny home dreams, what about tiny home interest rates?!

OK, we're not going to sugarcoat this: yes, tiny house interest rates have gone up.

But interest rates don't have to stop you from applying for a tiny home loan!

Let's consider a little historical perspective.

In 1981, the annual average of a traditional home mortgage was 16.63%. (This is according to Freddie Mac data.)

If that seems shocking, just remember that housing prices and interest rates tend to change in relation to one another. For example, when housing prices are high, interest rates are low, and when interest rates are high, housing prices come down.

So which would you rather have? A high housing price? Or a high interest rate?

Well, if you have plans to build a tiny home but have been hesitating because of interest rates, here's an interest rate hack you might find useful!

If you overpay your mortgage (even by a little!), you can effectively reduce the interest rate on your tiny home loan!

Here is a mortgage payoff calculator by Bankrate that will allow you to factor in extra payments so you can see for yourself. Just be sure to double-check with your lender that your loan doesn't come with any prepayment penalty!

Even after reading our tiny house blog post, you might still feel nervous about buying a tiny home. And that's normal! It's also why our team at Teacup has worked hard to become the tiny home experts you deserve. You don't have to know everything about tiny homes; you just have to work with a team who can guide you.

Uncertain economic times can be challenging, but remember that housing is a necessary expense.

100% of the money you're paying to rent an apartment is gone forever. So if your plan to live in your Teacup tiny house, be sure to factor in the cost of not going tiny when doing your financial calculations!

Do you plan to use your Teacup as an income-producing rental property? Tiny house rental properties can be very profitable- even with today's tiny home interest rates! If this is your vision, just run your numbers with several scenarios in mind, so there are no surprises. (And remember our trick about overpaying your tiny house loan each month!)

Are you ready to apply for tiny home financing? Excellent! We'll make it easy.

You can get started here.

And if you're ready to speak with a member of our team, just schedule a Discovery Call, and we’ll be happy to answer your questions.

Thanks for reading, and we'll see you next week!

Until then,

-Jen