Housing Costs Are High, Could Alternative Homes Be One Answer?

Traditional housing costs have increased nationally over the last 2 years, and between inflation and the lingering effects of the COVID-19 pandemic, it’s unlikely that the cost of real estate will decrease any time soon. With home prices having risen, how far are prospective home buyers willing to go to save on their home purchase?

While some are compromising on budget or nonnegotiable home features to buy a home in this housing market, others are opting to forgo the white picket fence entirely in favor of alternative home options like converted vans and RVs, tiny homes, shipping container homes and more. This may be why the biggest population of tiny homes is located in New York City – the location with the least-affordable housing costs in the country.

In a new survey by Rocket Homes^SM of 500 alternative homeowners, 78.6% said they are happy with their home purchase. But who is choosing to buy alternative housing and how does the real experience of living in an alternative home compare with the glorified stories one might encounter on social media?

Top 10 Reasons Americans Bought An Alternative House

From the perks of a nomadic lifestyle to the ability to have a self-sustaining home, the reasons why a prospective new home buyer might consider alternative housing are varied.

While 14.4% of alternative homeowners said they chose their alternative home to have the space to do what they want, 13.8% made the move as an attempt to experience the beauty of nature and 13.6% were seeking additional privacy from neighbors.

Affordability and lifestyle changes also factored in, and though it isn’t considered a top motivator, eco-friendliness was another selling point for alternative housing, with 5% of homeowners saying the environment played a role in their decision. 

Although these homeowners were interested in ways to become more connected with nature – expressing interest in living off the grid, living off the land and protecting the environment – most were unwilling to sacrifice on comfort and convenience to achieve these goals.

Although the craftiest of home buyers may be open to forms of alternative housing they can build themselves – especially if it means saving money – research showed that the majority desire a home that is ready for them, with 33.7% of alternative homeowners buying their home move-in ready and 23.7% buying, then renovating, a fixer upper. Only 14.7% said they purchased materials and built the alternative home themselves.

The median purchase price of these alternative homes was between $70,000 and $90,000, though of course the precise cost depends on the specific type of property. For example, the average cost of a tiny home is $30,000 – $60,000, while vehicle homes like a converted van or RV can run anywhere from $20,000 to $130,000, according to House Digest. The majority of these purchases were made with savings (60.8%), demonstrating that alternative homes may be a more attainable option for prospective buyers than traditional homes, which often require financing to obtain.

Expectation Vs. Reality: Do Alternative Home Buyers Know What They’re Getting Into?

In seeking to understand the long list of factors that drive prospective home buyers to consider alternative housing, one might wonder if the benefits of these homes are too good to be true –as it turns out, alternative home buyers seemed to have accurate expectations for their new living situations, as the top 5 reasons these buyers sought after alternative homes were also described as the top 5 advantages of actually living in said homes. Alternative homeowners particularly noted enjoying the benefits of affordability and increased space and privacy.

This implies that homeowners got what they wanted from their alternative homes – but that’s not to say that living in these homes is without its challenges. When asked about the biggest functional challenges faced in their alternative house, 16.1% of homeowners cited the cost of gas as the biggest pain point, while 15.9% referenced the increased distance from stores and resources and 15.3% complained about maintenance and repair costs. On the emotional side, 26.8% of homeowners said the distance from family and friends was challenging and 10.8% said that while privacy is a benefit of alternative living, the lack of personal space from others in the home can be a downside.

But it’s important to note that the majority of alternative home owners (85.8%) utilize their nontraditional housing as a secondary or vacation property, which may make dealing with these challenges a bit easier. When asked about their primary residences, 79.1% of alternative home owners said they live in a house and 6.8% live in an apartment or condo. Meanwhile, only a small portion of alternative home owners view the home as their primary residence, with 4.8% in a tiny home, 4.2% on undeveloped land and 2.2% in a converted van or RV.

When it comes to secondary residences, undeveloped land was the most popular choice at 47.4%, followed by 18.7% of alternative home owners owning a converted van or RV and 17.7% owning a tiny house.

17.4% of Alternative Homeowners Purchased Their Home in 2020

Whether due to rising home costs, increased remote work opportunities or lifestyle changes made mid-pandemic, alternative homes have risen in popularity in recent years. As the most popular alternative housing option, tiny homes have seen a particular lift in demand – and experts don’t expect this to slow down anytime soon, with the tiny home market predicted to grow by $3.57 billion between 2021 and 2026.

Living in a converted van or RV – or “van life” as it is referred to colloquially – is also increasingly popular. According to Moneybarn, a vehicle financing company, searches for van life increased by 216% from 2018 to 2021.

These trends align with our survey results, with the percent of alternative homes purchased by year averaging around 4.06% between 2012 and 2017 followed by a dramatic jump up to 11.2% in 2018 and 17.4% in 2020. Post pandemic, this number seems to have stabilized, dropping back down to 11% in 2021.

The added worry of living near others may have been a driving force behind these trends throughout the pandemic, with homeowners turning to alternative housing as a solution to better protect themselves and their families. Of those that purchased their alternative home in 2020, the biggest motivators were space and privacy.

So, what does all of this mean for the future of homeownership? Though the majority of American homeowners continue to live in traditional housing, alternative homes are increasingly popular and seem to be one solution for rising housing costs, interest rates and other financial constraints.

Methodology

To better understand alternative homes, Rocket Homes surveyed 500 alternative homeowners over the age of 22. Participants who indicated they do not have an alternative house – including tiny homes, shipping container homes, boat houses, tree houses, yurts, converted vans and RVS and land – as their primary or secondary home were screened out. This survey was conducted in July 2022.