"If I had 100 of those built today, I could sell 100 of them, today, at a huge profit. But, I can’t build them, nor can you get a loan for one, because neither of us can get loans for them."
The residential builder I was speaking with last week owns a family business that has successfully built homes all over Seattle for over one hundred years. I assumed, at this point, he could get a loan for just about anything with a furnace and a refrigerator. Sounds like he won’t be able to go near the Tiny Homes trend.
"I get it. I get exactly what you want. My kids want it. All millennials want it. But we can’t get a loan for it. You have to build something BIGGER." He told me.
But my wife and I don’t want something bigger. We want something cooler. High ceilings, industrial floors, two bedrooms, and a garage as big as the house for all of our adventure toys. But we can’t build it. Our loan-ability is there, our intent is there, and we are ready to wire the money straight into a willing bank’s pocket. But, if we want to build a home, we have to build a big one, and we don’t want that. It seems like none of our friends want that.
We (Millennials and Gen-X’ers) are getting married later, earning dual incomes and delaying parenthood. Most importantly, we aren’t at home, and when we are, we don’t want to be cleaning fourteen bedrooms and mowing a lawn. We make up well over half of the buying public (according to the National Association of Realtors, 59%), and, in a crowded world want a simpler, smaller, (awesome-er) homes.Why not buy a condo, you ask? We live in a condo, and, we love it, but at some point you tire of the footsteps (or the banging headboard) in a condo and want to grow up. Just a little bit, though. Into a perfect, 700-1,400 foot home.
But mainstream lending standards won’t let us.Most of the smaller housing stock in the United States was built in the forties and fifties. They feel like bunkers. Not good enough. We want small, but sexy. We want to ditch the dining room for a master bedroom (because who uses a dining room anyway anymore?) and trade the office for a utility room big enough to wash a horse in.If you want to feel dirty about how much home you own, and how much of it you waste, read Jeanne E. Arnold’s (et. al.) book: Life at Home in the Twenty-First Century: 32 Families Open Their Doors (Los Angeles, CA: The Cotsen Institute of Archaeology Press, July 12, 2012). Turns out you use your kitchen, constantly, but most of the rest of your house is catching cobwebs for you to clean after a ten hour day and sixty minute commute. Let’s just cut the clutter, and save the world at the same time. Let me build a smaller home (please?!).Underwriters want to see home structures that are two to four multiples ("2X to 4X") more valuable than the land. This is to say, if you have a $200,000 lot, they want you to build a structure that costs $400,000 to $800,000.
Here’s the problems: First, there are more lions that $200,000 lots in Seattle. Second, what Millennial wants a mansion? We don’t, most of us anyhow, until we have kids, buy those big houses, and then complain about them until we sell them to get smaller, and cooler ones.
Why the ratios? That’s my question. Loosen them up and I know at least three people, my wife and I, plus a great builder, who will pay you for them. Then we will sell them to all these people looking for tiny homes. You know where to find me.
Matt Parker is a real estate professional in Seattle, WA, having sold over $75m in homes and becoming a top producer in his market during the real estate collapse in 2008 and before he was thirty. Parker works entirely paperless and happily lives in a 560 square foot home with his wife, as he prioritizes living and not clutter. Parker is an avid outdoor adventurist and co-founder of a CrossFit gym south of Seattle, WA. He graduated Magna Cum Laude from Western Washington University in Bellingham, WA. Parker can be reached through MattCParker.com/ or on LinkedIn and Twitter. Parker’s real estate book series can be found on Amazon and other fine booksellers.