The Case for Buying a Small House

When I decided to write an article in defense of the small house, it was hard to know where to start, because there are so many reasons why I think small is beautiful when it comes to houses. I freely admit that I love living in small houses - in fact, my ideal abode would fit many people's idea of a tiny house. My previous home in Portland was only 420 square feet, and for me, a single woman, it was perfect. My current home, which is huge by comparison but still under 900 square feet, seems too big to me.

Now that you know my personal prejudices towards smaller homes, I'll give you a few reasons for my unusual preferences.

First, smaller homes are more affordable for the average American worker. I just did a quick search through the real estate listings for the Portland Oregon metropolitan area for all homes for sale under $120,000. I chose that price range because the average annual wage in that area is around $37,000 a year. Since home prices have risen much faster than wages, a single buyer in the Portland area could only afford a 30-year mortgage under $100,000 at current interest rates, but the median price for a home in the area went up to $297,000 in May 2007. Yes, by my calculations, the average worker can afford 1/3 of the average house in Portland. But that doesn't mean that you have to do without a house altogether, as many people assume. You aren't doomed to rent forever, if you're willing to look at a smaller home.

Admittedly, you may still need to haggle a bit to get the price down to a level you can afford, and you may need to do some repairs once you move in, but if owning your own home is important enough, you can do it, even in high-priced areas. The least expensive house in the Portland real estate market on the day I write this is a 748 square feet two bedroom, 1 bath home listed at $119,000. The seller notes that it needs some work, but it has a new roof, new vinyl flooring, and new washer and dryer that come with the house. This may not fit your idea of a dream home, but putting money towards something you own is a lot more satisfying than spending money on rent, even if you have to put up with less personal space and even (gasp!) share a bathroom with your spouse.

Even if you have two wage earners in the family, buying a smaller house could still make sense, especially if you have a child or two. By reducing the available personal space for each family member, you might be able to afford to let one parent quit working full-time to stay home with the kids. When you add the daycare costs you won't be paying, the smaller mortgage, and the money you save on the daily commute, you could find that you come out even - and your kids won't be raised by strangers.

Aside from the initial affordability of a smaller home, you also save money each month when you receive your utility bill. Smaller houses are more efficient when it comes to heating and cooling them than larger ones, even when the smaller homes have less insulation and older windows. The idea of a "green" McMansion is an oxymoron - you cannot create a small environmental footprint if you build a huge house.

The average cost to heat and cool a home with electricity in the same real estate market discussed above is approximately 58 cents a square foot, per year. My tiny 420 square foot house cost an average of $20.30 a month to keep it comfortable all year. That affordable 748 square foot home that is currently listed for $119,000 will cost approximately $36.00 a month to heat and cool. On the other hand, an 1800 square foot house, which some people consider "small," will have an average monthly heating and cooling bill of $87.00. The utility bill can actually be high enough to make the home unaffordable even for a family with two working adults, when you add this cost to the monthly mortgage.

But money isn't everything in life, so let's look at a few other reasons why I think small is beautiful when it comes to houses. First, small houses are easy to decorate, and even to remodel, if you get the whim to make some changes. They're easy to sell, because there are far more people who can afford a small house than a large one (my tiny house was on the market for less than a week before I accepted a full-price offer). They take up much less space on the lot, which means a lot to a gardener like me. And if the house is small enough, and the city is encouraging contractors to build on flag lots, you may be able to divide your lot and make enough money from the sale to pay off the mortgage on your house.

If you're thinking about buying a house, consider looking at the small ones now available in your real estate market. You might find one that fits your lifestyle, your budget, and your long-term financial goals.