Housing market affordability is so strained that Home Depot is selling tiny homes for $63,000

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In response to the escalating strain on housing affordability, Home Depot, a leading home improvement retailer ranked No. 20 on the Fortune 500 list, has continued to launch a range of tiny homes and Accessory Dwelling Units (ADUs) on its website.

Among the offerings is a 444-square-foot two-bedroom rose cottage priced at $63,000. Dubbed as a "DIY Assembly Office Guest House ADU Rental Tiny Home," the package includes necessary components delivered in parts, comprising the steel frame, siding, roof materials, exterior doors, and windows. Delivery is slated as soon as May 13th.

However, it's crucial to note that purchasing a home kit from Home Depot does not guarantee legal installation rights. Some local municipalities are advocating for more ADUs to alleviate housing constraints, while others maintain stringent restrictions.

The concept of do-it-yourself homes isn't exactly novel. Sears famously sold over 70,000 mail-order homes between 1908 to 1942 .Sears catalog homes (see image below) were pre-cut and ready-to-assemble houses offered as affordable and convenient housing options to Americans during the early 20th century.

The return of mail order homes does underscore the mounting housing affordability stress in the U.S. as buyers have spent years contending with limited inventory, rising house prices, and spiked mortgage rates.

Back in the summer of 2022, Rick Palacios Jr., director of research at John Burns Research & Consulting, told me that due to Dodd-Frank reforms, the spike in mortgage rates during this cycle would translate into a smaller uptick in adjustable-rate mortgages compared to previous cycles.

Palacios was right.

For the week ending March 29th, adjustable-rate mortgages (ARMs) accounted for just 7.0% of mortgage applications. This figure represents an increase from 3.4% during the same week in March 2021—when the average 30-year fixed mortgage rate still remained around 3%. However, it still remains significantly below March 2006, when ARMs were 28.5% of mortgage applications.

The lack of variable mortgage debt is one of the things that makes the U.S. housing market unique.

Click here to view an interactive version of the chart below

Earlier today, ResiClub PRO members got an article titled “6 economic reasons why national house prices tend to be sticky.”

This weekend, ResiClub PRO members will get an inventory update for 800 metros and 3,000 counties. What’s happening to inventory varies A LOT by local market right now.