Visualizing the Rise of Tiny Homes
Born out of the desire for a simpler, more affordable way of life, the tiny home movement has spread at a furious pace—with the global market estimated to grow by a CAGR of almost 7%, adding nearly $5.2 billion in market size by 2022.
Given the economic pressures of today’s world, these alternative housing solutions have become not only a viable option for many people, but a vital one.
Today’s infographic from Calculator.me illustrates how the tiny home market got so big, and how it fares against traditional housing when it comes to providing environmentally friendly and affordable options.
How Did Tiny Homes Get So Big?
It was not until the 2009 recession hit the U.S. that tiny homes became more of a realistic option, as the benefits of downscaling became more apparent.
From then on, three things propelled the popularity of tiny homes: rising house costs, shrinking incomes, and a greater consideration for the environment.
Today, 63% of U.S. millennials would consider living in a tiny home. However, the need to go tiny is not only confined to millennials, as 40% of tiny home owners are over fifty years old.
Tiny Vs. Traditional
According to the infographic, a home is considered tiny (or micro) when it is between 80-400ft², and is at least 8ft in height.
Tiny homes also come with a tiny pricetag, costing just $23,000 on average to build—meaning tiny homes are almost ⅒ the price of traditional homes.
|Metric||Tiny Homes||Traditional Homes|
|U.S. Median Cost||$59,884||$312,800|
|Average Cost To Build||$23,000||$206,132|
|Home Ownership||78% own their home||65% own their home|
|Mortgage||32% have a mortgage||64.1% have a mortgage|
|Credit Card Debt||40% have credit card debt||37% have credit card debt|
Other benefits of tiny home living include:
- Avoiding mortgage debt
- Less maintenance required
- Allows for a more flexible lifestyle
Further, tiny homes are providing people with alternative solutions for more sustainable living.
An Environmentally Friendly Way of Living
Certain models of tiny homes use energy from solar panels—presenting ample opportunities for an independent off-grid lifestyle. Moreover, research from Virginia Tech shows that living in tiny homes reduces energy consumption by up to 45%.
Using less energy can also be attributed to tiny homeowners using the space outside as an extension of their home. In fact, when there is usable space available outdoors, tiny home living may not seem as drastic in comparison to living in a traditional home.
Room For Improvement
There are however, some challenges for those who are considering this way of life. Zoning laws and building codes in the U.S. can be restrictive, with some states more supportive of the idea than others.
Despite these barriers, there are numerous organizations and initiatives that have been created in order to eliminate the pain points that come with tiny homes, and legitimize the industry.
Not Just a Passing Trend
With the promising trajectory of tiny homes, it is inevitable that the interest from global retailers continues to grow.
Japanese minimalist company, Muji, released their own tiny homes in 2017, costing $26,000 on average. At just under 107.6 ft², these tiny homes are prefabricated, meaning they are constructed in a factory off-site.
Amazon also recently announced their foray into the tiny home space, with dozens of models available on their website—delivering new homes right to their customers’ front doors.
The Future Comes in All Shapes and Sizes
Beyond the typical tiny home formats we see entering the market en masse, there are other alternatives which will become more readily available to consumers, including:
- Traditional modular homes
- Shipping containers
- 3D printed houses
- Recreational vehicles
It is also worth pointing out that tiny homes and these alternative models don’t have to be restricted to under 400ft². Flat packs and do-it-yourself tiny homes can be as big as 1,000ft², with some of the largest models housing up to 24 people.
It is clear that the tiny home movement is not just about going back to basics, but rather, about making home ownership a reality for everyone—potentially disrupting the current housing market in the process.
The question is not if tiny homes will become the new normal, but when.
Recession Risk: Which Sectors are Least Vulnerable?
We show the sectors with the lowest exposure to recession risk—and the factors that drive their performance.
Recession Risk: Which Sectors are Least Vulnerable?
In the context of a potential recession, some sectors may be in better shape than others.
They share several fundamental qualities, including:
- Less cyclical exposure
- Lower rate sensitivity
- Higher cash levels
- Lower capital expenditures
With this in mind, the above chart looks at the sectors most resilient to recession risk and rising costs, using data from Allianz Trade.
Recession Risk, by Sector
As slower growth and rising rates put pressure on corporate margins and the cost of capital, we can see in the table below that this has impacted some sectors more than others in the last year:
|Sector||Margin (p.p. change)
|🏡 Household Equipment||-0.9|
|🚗 Automotive Manufacturers||-1.1|
|🏭 Machinery & Equipment||-1.1|
|🖥️ Computers & Telecom||-2.0|
*Percentage point changes 2021- 2022.
Generally speaking, the retail sector has been shielded from recession risk and higher prices. In 2023, accelerated consumer spending and a strong labor market has supported retail sales, which have trended higher since 2021. Consumer spending makes up roughly two-thirds of the U.S. economy.
Sectors including chemicals and pharmaceuticals have traditionally been more resistant to market turbulence, but have fared worse than others more recently.
In theory, sectors including construction, metals, and automotives are often rate-sensitive and have high capital expenditures. Yet, what we have seen in the last year is that many of these sectors have been able to withstand margin pressures fairly well in spite of tightening credit conditions as seen in the table above.
What to Watch: Corporate Margins in Perspective
One salient feature of the current market environment is that corporate profit margins have approached historic highs.
As the above chart shows, after-tax profit margins for non-financial corporations hovered over 14% in 2022, the highest post-WWII. In fact, this trend has been increasing over the past two decades.
According to a recent paper, firms have used their market power to increase prices. As a result, this offset margin pressures, even as sales volume declined.
Overall, we can see that corporate profit margins are higher than pre-pandemic levels. Sectors focused on essential goods to the consumer were able to make price hikes as consumers purchased familiar brands and products.
Adding to stronger margins were demand shocks that stemmed from supply chain disruptions. The auto sector, for example, saw companies raise prices without the fear of diminishing market share. All of these factors have likely built up a buffer to help reduce future recession risk.
Sector Fundamentals Looking Ahead
How are corporate metrics looking in 2023?
In the first quarter of 2023, S&P 500 earnings fell almost 4%. It was the second consecutive quarter of declining earnings for the index. Despite slower growth, the S&P 500 is up roughly 15% from lows seen in October.
Yet according to an April survey from the Bank of America, global fund managers are overwhelmingly bearish, highlighting contradictions in the market.
For health care and utilities sectors, the vast majority of companies in the index are beating revenue estimates in 2023. Over the last 30 years, these defensive sectors have also tended to outperform other sectors during a downturn, along with consumer staples. Investors seek them out due to their strong balance sheets and profitability during market stress.
|S&P 500 Sector||Percent of Companies With Revenues Above Estimates (Q1 2023)|
|Real Estate ||81%|
Cyclical sectors, such as financials and industrials tend to perform worse. We can see this today with turmoil in the banking system, as bank stocks remain sensitive to interest rate hikes. Making matters worse, the spillover from rising rates may still take time to materialize.
Defensive sectors like health care, staples, and utilities could be less vulnerable to recession risk. Lower correlation to economic cycles, lower rate-sensitivity, higher cash buffers, and lower capital expenditures are all key factors that support their resilience.
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