Dave Says...Paying Cash Doesn’t Make It Smart

Dear Dave,

What is your opinion on paying cash for a “tiny house”?

Wes

Dear Wes,

This may be a really un-hip or un-cool thing to say, but I wouldn’t buy a tiny house at all. Paying cash for something like that might make the mover smarter, but that still doesn’t mean it’s a smart choice.

Now, don’t take what I’m saying the wrong way. I don’t have a problem with people who build tiny houses or buy them. My problem with these things is that there’s no track record on them. There’s also a pretty good chance they’re going to be just a fad. Another problem is that you’d have a really small market when it comes time to sell your tiny house. In other words, they probably won’t go up in value like a traditional home. They may actually lose value over the years.

There’s a thing in economics called the supply-demand curve, and from what I’ve seen tiny houses also have a tiny demand and pretty narrow market appeal. Their appeal seems to be mostly for early adopters and people who think they’ll never be able to afford a house. That means they’re not going to have broad appeal when you get ready to sell them, either. And that creates a problem.

I could be wrong, though. I mean, if enough people buy tiny houses and they become a real part of our culture, then maybe they’ll do okay. But right now it’s an unproven product line and an unproven concept. So I wouldn’t buy a tiny house. Honestly, I wouldn’t even buy one at half of its current value because I’d be afraid it would drop to a fourth of its value. There’s just no proven record at this point of these things going up in value.

—Dave