Tiny homes—those typically under 600 square feet—are facing increased demand as housing affordability remains a growing issue. While many home buyers have looked to supersize their homes during the pandemic, other buyers are finding homeownership may be more attainable by downsizing into a tiny home.

Eighty-six percent of aspiring first-time home buyers during the pandemic say they would consider buying a tiny house as their first home, mostly due to affordability, efficiency, and eco-friendliness, according to a survey from IPX 1031. Availability is there too: More than 1.4 million homes are listed as “tiny.” Millennials appear to be the most drawn to tiny homes due to their price, the flexibility of location for remote work, and eco-friendliness, according to a new study from Porch.com, a home improvement website.

Study: Tiny Homes Offer Big Insurance Savings

On average, a tiny home costs $52,000—87% cheaper than a regular-sized U.S. home, according to the study. In Massachusetts, tiny homes cost 91% less than a regular home, which is the largest price difference compared to any other state, according to Porch.com’s analysis.

However, nationwide, tiny homes may tend to be cheaper but are 62% more expensive on a per square foot basis when compared to a full-size home, the study finds.

Overall, tiny homes are the cheapest in North Dakota ($28,000). Arkansas, however, has the lowest price per square foot of a tiny home at $109 per square foot, according to Porch.com.

On the other hand, Hawaii has the most expensive tiny homes in the U.S., averaging more than $149,000, or $490 per square foot.

More homes are coming onto the market and as they do, home buyers are eager to snatch them up.

Existing-home sales—completed transactions that include single-family homes, townhomes, condos, and co-ops—increased 2% in July compared to June, reaching a seasonally adjusted annual rate of 5.99 million, the National Association of REALTORS® reported Monday. Sales are up 1.5% compared to a year ago.

As more homes enter the marketplace, opportunities for prospective buyers continue to increase in regions across the country, said NAR President Charlie Oppler. Housing inventories increased 7.3% in July compared to June, reaching 1.32 million homes for sale.

“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” said Lawrence Yun, NAR’s chief economist. “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”

But home prices continue to surge. The median existing-home price for all housing types in July was $359,900, an increase of nearly 18% compared to a year ago.

“Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve,” Yun said. “In the meantime, some prospective buyers who are priced out are raising the demand for rental homes and thereby pushing up the rental rates.”

Here’s a closer look at additional housing indicators from NAR’s July housing report:

Days on the market: Properties typically remained on the market for 17 days in July, down from 22 days a year ago. Eighty-nine percent of homes sold in July were on the market for less than a month.

First-time buyers: First-time buyers comprised 30% of sales in July, down from 34% in July 2020.

All-cash buyers: All-cash sales accounted for 23% of transactions in July, up from 16% in July 2020. Individual investors or second-home buyers comprise the majority of cash sales. They purchased 15% of homes in July, unchanged from the 15% seen in July 2020.

Regional Breakdown

Here’s how existing-home sales fared across the country in July:

• Northeast: Existing-home sales remained steady in July compared to June, but posted a 12.1% increase from July 2020. Median home price: $411,200, up 23.6% from a year ago.
• Midwest: Sales increased 3.8% in July month over month, a 1.4% decline from a year ago. Median home price: $275,300, a 13.1% increase from a year ago.
• South: Sales increased 1.2% in July compared to June, reaching a record high annual rate of 2.63 million. That marks a 1.2% increase from a year ago. Median home price: $305,200, a 14.4% from a year ago.
• West: Sales increased 3.3% in July compared to June and equal to a year earlier. Median home price: $508,300, up 12.5% from July 2020.

Apartment rents are on the rise, but not everywhere. That said, “finding a cheap apartment often feels like winning the lottery,” notes Apartment Guide, a listing and resource for apartments nationwide, in a recent study.

Renters Are Facing Bidding Wars Too

Single-Family Rents Post Sharpest Increase Since 2005

Apartment Guide identified areas throughout the country where rent is affordable and less than the nationwide average of $1,711 per month for a one-bedroom apartment. For example, Maryland, Alabama, and Michigan have seen significant decreases in average rents over the past year. Also, some of the cheapest apartments tend to be near city centers and often along the East Coast, according to the study.

The 30-year fixed-rate mortgage held near last week’s average and continues to average near historical lows and under 3%.

“Mortgage rates stayed relatively flat this week,” says Sam Khater, Freddie Mac’s chief economist. “Housing is in a similar phase of the economic cycle as many other consumer goods. While there is strong latent demand, low supply has caused prices to rise as shortages restrict the amount of sales activity that otherwise would occur.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 19:

• 30-year fixed-rate mortgages: averaged 2.86%, with an average 0.7 points, down slightly from last week’s 2.87% average. Last year at this time, 30-year rates averaged 2.99%.
• 15-year fixed-rate mortgages: averaged 2.16%, with an average 0.6 points, increasing from a 2.15% average. A year ago, the 15-year rate averaged 2.54%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.43%, with an average 0.3 points, dropping from last week’s 2.44% average. A year ago, 5-year ARMs averaged 2.91%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront cost of obtaining a mortgage.

The decrease in new-home construction affects the overall housing market, including the rental market, says Lawrence Yun, chief economist of the National Association of REALTORS®.

Housing starts in July dropped 7%, and single-family home construction within that fell 4.5%, the Commerce Department reported Wednesday.

“Rents will be soaring in the coming months, especially for apartment units, as homebuilding retreated in July,” Yun says. “There was a housing shortage before the pandemic, and the shortage has been exacerbated during the pandemic.”

Homebuilding needs to “greatly” increase as the job recovery takes hold, Yun adds.

But builders blame supply-chain disruptions, rising material costs, lags in getting approvals for land lot development, and labor shortages for stifling home construction. Buyer demand for new homes is strong, they say, but the challenges and cost rises have become too great to meet it.

Read more: Flooded With New Orders, Builders Limit Sales

Builders are slowing construction activity as costs rise, says Danushka Nanayakkara-Skillington, the National Association of Home Builders’ assistant vice president for forecasting and analysis. “Starts began the year on a strong footing but in recent months some projects have been forced to pause due to both the availability and costs of materials,” Nanayakkara-Skillington says.

Home prices for both new and existing are surging. The median price of a newly built single-family home was $361,800 in June; the median existing-home price of a sold home in June was $363,300.

“With home prices having risen by record amounts over the past year, home buying will become an increasing challenge, and a good number of households may simply decide to rent,” Yun says. “In addition, the jobs recovery is enticing people out of their parents’ homes to seek their own housing.”

Rental demand remains strong. Yet, new multifamily construction, which includes apartment buildings and condos, fell by 13% last month, the Commerce Department reports.

“With an inadequate supply of available homes, rents will be strengthening and adding further pressure to overall consumer price inflation,” Yun says.

Vacation homes are in demand since the pandemic, but which hot spots are consumers targeting that offer some of the best investment potential?

Vacasa, a vacation rental management platform, released its 2021 Top 25 Best Places to Buy a Vacation Home report, identifying the top U.S. destinations for purchasing a vacation rental property. Among other factors, researchers factored in average cap rate or yearly rate of return in determining the rankings.

“Market conditions are always shifting, but the accelerated and lasting adoption of short-term rentals during the pandemic has had a clear impact on second-home sales,” said Shaun Greer, vice president of sales and marketing at Vacasa. “The spike in guest demand and preference for new, more remote destinations is changing where prospective buyers can find the best investment properties.”

Gatlinburg, Tenn., topped this year’s list, climbing four spots from 2020. Newcomer cities claimed more than half of the spots in 2021, including Deep Creek Lake, Md., Cle Elum, Wash., Litchfield Beach, S.C., and Twentynine Palms, Calif.

The following are the top 25 places to buy a vacation home in 2021, according to Vacasa’s rankings:

1. Gatlinburg, Tenn.: $320,111 (median home sale price)
2. St. Augustine, Fla.: $365,576
3. Gulf Shores, Ala.: $402,905
4. Dauphin Island, Ala.: $382,699
5. Norris Lake, Tenn.: $343,907
6. Blue Ridge, Ga.: $290,934
7. Palm Springs, Calif.: $539,370
8. Deep Creek Lake, Md.: $439,367
9. Seaside, Ore.: $466,086
10. Ludlow, Vt.: $346,950
11. Big Bear, Calif.: $372,667
12. Rockaway Beach, Ore.: $330,831
13. Cle Elum, Wash.: $551,586
14. Big Sky, Mont.: $850,000
15. Twentynine Palms, Calif.: $263,897
16. Killington, Vt.: $317,336
17. Bear Lake, Utah: $383,734
18. Litchfield Beach, S.C.: $499,259
19. Pagosa Springs, Colo.: $361,320
20. Banner Elk, N.C.: $331,290
21. St. George Island, Fla.: $471,501
22. Ellijay, Ga.: $281,402
23. Florissant, Colo.: $367,000
24. Corolla, N.C: $608,953
25. Holden Beach, N.C.: $580,847

View more information on each place as well as the cap rates at vacasa.com.

Even in this ultra-hot competitive market, there’s a limit to what home buyers are willing to pay. Some home sellers are starting to see their listings linger on the market, and those sellers may face the prospect of a price cut.

Realtor.com®’s July housing data showed that about 45 cities of the country’s 300 largest had an increasing number of homes with price cuts. “For buyers, these trends hold the promise of a less frenzied market, with more choice and better prices,” says George Ratiu, realtor.com®’s senior economist.

Still, home prices are still rising by double-digit margins in many cities—even those posting more price cuts. Price cuts occur in even the healthiest of housing markets, realtor.com® notes.

“Price cuts could signal a turning point in the market, but they may also just be a sign of sellers getting ahead of buyers in pricing,” Danielle Hale, realtor.com®’s chief economist, said. “There seems to be some markets where it’s a local custom to price real estate that way.”

Realtor.com®’s researchers reviewed monthly listing data to identify the markets with the highest percentage of markets with price reductions. For geographic diversity, they limited their list to one city per state. The following cities topped their list with the highest share of price cuts:

1. Des Moines, Iowa

• Median list price in July: $193,050
• Percentage of home listings with price cuts: 32%

• Median list price in July: $330,050
• Percentage of home listings with price cuts: 28%

3. Toledo, Ohio

• Median list price in July: $117,050
• Percentage of home listings with price cuts: 26%

4. Metairie, La.

• Median list price in July: $359,050
• Percentage of home listings with price cuts: 24%

5. Philadelphia

• Median list price in July: $289,050
• Percentage of home listings with price cuts: 22%

6. Portland, Ore.

• Median list price in July: $550,050
• Percentage of home listings with price cuts: 20%

7. Anchorage, Alaska

• Median list price in July: $315,050
• Percentage of home listings with price cuts: 19%

View the full list at realtor.com®.