We were recently featured on cable show HLN’s “Making It In America” where the emphasis was on people downsizing due to economic struggles. This was also kind of the focus when we were featured on CNN’s website and on ABC news in Phoenix.
Money is only ONE of the reasons we decided to live in a tiny house (check out the FAQ page for more reasons) but I thought I would write a series about Why Tiny? and I’ll start with economics, because that seems to be the most urgent motivator for most people. (excepting maybe No Impact Man…? his motivation seemed to be a desire to make his wife miserable! oh, wait, saving the environment.)
WARNING: THIS IS GOING TO BE AN OPINIONATED RANT. :)
I heard a statistic once (and I’m going to totally mess this up – I said I “heard” it, not “remembered” it…) that you could buy a home for two years’ salary in the 1950′s, whereas now it costs… 20 years’ salary? I can’t remember the exact numbers, but my takeaway was “oh, wow, the cost of housing has risen dramatically!” Well, you know what, it’s actually only risen an average of 0.2% per year since 1900, according to this guy. Here’s a chart from his blog: (observationsandnotes.blogspot.com)
So that is interesting. Or not. What is going on then? Oh yes – the other variable in that statistic: Salaries… Income… Wages. Talking with a friend of mine recently about switching careers she reported findings that we (Gen X) are the first generation to not “do better” than our parents. (Because this is the US, “do better” means do better financially. You have to go to France or Bali or North Korea?! to find that Happiness Index crap.)
Before I get into Income, did you notice the manic jag in the chart above that occurred around 2006?! Wow. Interesting how when you push loans on people who can’t afford them houses really fly off the shelves and the demand creates higher prices (?)
The researcher who developed the chart above explains the rise in housing costs that started in 1996/97 has no single cause, but a few obvious causes include:
- historically low interest rates
- growth of risky new mortgage products (i.e. ARMs)
- ridiculously lenient lending criteria
- new ability to bundle resulting risky mortgages into groups that obscure the risk
He says this may have started as early as the deregulation of the banking industry in the 1980s and “This so-called “subprime” mortgage crisis ultimately snowballed into the worst financial crisis in America since the Great Depression.”
Back to incomes. Basically, incomes (other than for the top 1%) have remained stagnant since 1970.
Here’s a chart or two from a CBPP (center on budget and policy priorities) article:
Look at that middle class down there on the bottom of that chart! “Jobs, job creators, we need more jobs”. Sure, and maybe we need to get paid according to the decade that we live in! It was odd to me that we didn’t hear about the Occupy movement or the 99% in any of the presidential debates. Because, to me, our current economy feels like a game of Monopoly….
I have always HATED the game Monopoly. When I played it as a child with my brother and sister we would break the rules constantly to level the playing field and not end the game in tears. Whoever was banker might notice a long face and a trembling lower lip and suddenly say “the bank is feeling generous!” and start handing out free money to everyone! (either we were extremely co-dependent… or socialist.) This happened several times during each game – basically whenever anyone started getting low on funds. Haha! It’s a game, it’s supposed to fun!
As an adult in my twenties I played the game with friends who did NOT break the rules and hand out free money. I lost. And I was SO upset. Not just over losing. (Though I don’t enjoy that either.) I was upset because, to me, the game Monopoly represents all that is wrong with our society. Those with the most money keep making more, those with the least money keep losing more, until they finally… lose.
Thank GOD life is not all about making money or owning property! (it’s not, right?!) It’s not. Hard to tell sometimes, but it’s not.
I digress. Why Tiny? Because we, like most everyone else, are getting paid the same flat salaries as people were in the 1970′s. And the price of housing has increased slightly more than inflation. That, coupled with the fact that we are BOTH in the building industry, which tanked after the crash of 2007/08. We chose to lower our costs in order to save money to buy some land and get some semblance of financial independence and security.
The game has changed. You can’t buy a starter home, sell it for more, use that money on a down payment on a bigger home, sell it for more, then get into the home you really want. That game was based on constant growth, which is ridiculous anyway. Check out my other opinionated rant on that topic.
You know what is so cool though? Because we live in a Tiny House our stress levels are SO low! We were paying about $1,400 per month in housing costs (and that’s relatively low for 2 people). Now we’re paying about $350. You know what that means? We don’t have to work all the time. We can do other things we enjoy.
What about YOU?? Are there economic reasons for why you want to live in a Tiny House?