🏡 Tiny Homes, STR Performance in a Housing Recession, and Dataflik

Tiny Homes. Small Solution to a Big Problem

Tiny homes seem to be having a moment. Again.

At least recent headlines suggest that’s the case. Maybe it’s a reaction to the jump in median US home prices in the last few years ($420,000), the keen competition for starter homes, a growing desire to live a simpler life, or an effort by the country’s largest retailers to move some big-ticket items.

Consider these products that are now on the market, some that ready to be delivered to your door:

• Walmart is selling a 19-by-20-foot prefab home for $15,900 that has space for bedroom, living room, dining room and kitchen areas. (No room dividers, plumbing or electrical included.)

• Home Depot offers tiny preface homes ranging from around $20,000-40,000, but read the fine print: these prices generally only include the steel-frame kits.

• A luxury prefab tiny home from Amazon can be had for $17,000, and this one includes a bath and a shower. (However, it’s currently unavailable and there is no word when it will be back in stock.)

• Wayfair lists a variety of tiny homes for sale, ranging from bare bones sheds for a few hundred dollars, to a few thousand dollars for “playhouses” and “cottages,” and up to $13,289 for a 16-foot by 14-foot “Ranch house” made of red cedar. (This one looks like a person could live in it.)

Calling these tiny homes — which the International Residential Code (IRC) defines as a dwelling with a maximum floor area of 400 square feet, excluding lofts — is a stretch, as many of these prefab units more closely resemble garden or tool sheds. 

In some cases, the prices to add all that is needed to make the structure habitable can be three or four times the sticker price of the unit, plus land is needed to put it on.

Vail Gardner told WRAL News in Raleigh earlier this year that she considered Home Depot's tiny home kit when she was going to add a second home on her Durham property.

"The shell looks very inexpensive on the screen and then you start thinking about fixtures and sinks and toilets and cabinets and faucets; and by the time you add all that up, it wasn’t any less expensive than having someone build it," Gardner said.

Given that the US is some five million homes or so short of demand, is there any chance that a garden shed revolution would solve the problem? There is a long way to go: There are about 10,000 tiny homes in the United States, about 0.36% of the total residential listings.

Tiny Homes Have Been Here For a While

Sears, the Amazon of its day, had a business selling “kit homes,” and launched its Modern Homes catalog in 1908. There was a variety of home architectural styles and blueprints needed to build them, and Sears shipped pieces for buyers who could construct the houses themselves or hire builders to do it. (These kits included a lot more than the garden shed frame retailers are offering now.)

Only a few of these homes would have qualified as tiny homes, with about 500 square feet or so, and many were elaborate models with two stories.

Were the first tiny homes the caves prehistoric men and women took shelter in away from predators and the elements? Or was Thoreau’s 150-square-foot cabin on Walden Pond the origin story for the tiny home movement?

Early adopters of living small include Lloyd Kahn, author of Shelter (1973), a writer, editor and pioneer of the green building movement who died in 2022; Lester R. Walker, a professor of architecture at City College of New York who published Tiny Houses in 1987; and Sarah Susanka, whose revelation about the growing size of houses in the mid-1990s led her to start the “counter-movement” for smaller houses. She wrote about this in her best-selling first book, The Not So Big House (1997) and has led to a series of books on the subject.

Jay Shafer, a University of Iowa professor, made news in 2000 when his tiny house (about 100 square feet) was featured in the Des Moines Register.

“Home Sweet Hut” showed readers a different way of living. At a time when the average American home was more than 2,000 square feet, Shafer’s tiny house probably looked like a walk-in closet to some readers.  

“The article was the start of what we call the modern-day movement of tiny homes — what looked like a small version of traditional homes,” said Gary Johnson, one of the early proponents of the tiny house movement. “He was living in what looked like a fancy garden shed.”

Johnson, Shafer and other tiny housing advocates got together for a meeting in 2002 and decided to start an association, the Small House Society, which is still (sort of) active today. Appearances on Oprah and NPR stories in 2006-07 brought the tiny house movement to the mainstream. 

Our Take: Get Ready to Downsize. And No Long Hot Showers

Think of all those #Vanlife photos that proliferated on Instagram a few years back. Beautiful couples, yoga poses, golden sunrises and sunsets …

But the reality is you are living in a van. No bathroom. No hot water. No hot water pressure for a shower. Nowhere to put your stuff. Shoes. Clothes. Jackets. Books. And if you are sharing the space with your boyfriend or girlfriend? Not easy on a relationship.

For those truly committed, it’s a way of life that must be freeing. Plenty of people in big cities like New York, Tokyo, London, etc., make do with 300 square feet or less. We at proptext.co like a little more space to stretch out — a 1,000 square foot apartment, minimum — and we think the purpose of buying a house is well, you know, more space.

Torrone Law, a firm in Tacoma, Wash., is blunt with couples who plan to go the tiny house route.

“The allure of tiny house living may be enticing, yet it’s crucial to know that 44% of homeowners experience regrets related to size, and 50% of tiny house homeowners end up divorcing or splitting within a couple years of purchase.”

So downsize and take it on the road (many tiny homes are portable) if that’s the life for you. It’s not likely that tiny homes are about to make a dent in the US housing shortage any time soon.

How a Housing Recession Could Impact Short-Term Rentals and the Broader Market

The short-term rental (STR) market has transformed the landscape of travel and housing, offering new income opportunities for homeowners and reshaping how people vacation. However, as the market expands, so do the risks. With talk of a potential housing recession where prices could decline by as much as 30%, the fate of the STR sector—dominated by platforms like Airbnb and VRBO—faces uncertainty. Will the influx of properties flood the market, exacerbating a downturn? Or could the growing STR segment serve as a buffer, stabilizing housing and travel industries through turbulent times? We explore the evolution of the STR market and examine what might happen if we enter a housing recession for the first time post Airbnb.

The Rise of Short-Term Rentals Since the Great Financial Crisis

The Great Financial Crisis of 2008 left an indelible mark on the real estate industry, but it also paved the way for innovation. Airbnb, founded in 2008, and VRBO, which launched even earlier in 1995, were initially seen as alternatives to traditional lodging. However, it wasn’t until after the financial crisis that they experienced exponential growth. With homeowners looking for additional income streams amid economic uncertainty, the platforms became a popular way to monetize extra space. By 2022, Airbnb reported over 1.4 billion guest arrivals, a far cry from its early days as a niche offering.

The success of STRs can be attributed to several factors:

1. Income Diversification: As mortgage rates remained low post-2008, homeowners were incentivized to buy properties and turn them into STRs, generating supplementary income.

2. Tech-Enabled Growth: With the proliferation of mobile apps and digital payment systems, platforms like Airbnb and VRBO made it easy for homeowners to list their properties and for travelers to book them seamlessly. This actually expanded the hotel total-addressable market similar to the Uber effect on taxis.

3. Changing Consumer Preferences: Many travelers prefer the unique, localized experiences that STRs offer over standardized hotel accommodations. This shift has led to an increase in demand, particularly in urban centers and vacation destinations.

By 2024, the short-term rental market had grown to an estimated $106 billion industry, with Airbnb alone accounting for a substantial share. Yet, this expansion hasn’t come without challenges. Regulatory scrutiny, market saturation, and shifting consumer preferences are already testing the resilience of the STR model. A potential housing recession could be the next major test.

What Happens to Travel in a Moderate Recession?

Historically, travel demand is closely tied to economic health. During periods of recession, discretionary spending, including travel, tends to decline. According to Adam Sacks of Tourism Economics, a 1% drop in GDP typically results in a 4% decline in hotel room demand. This correlation can be seen in past economic downturns:

• 2001 Recession: U.S. hotel demand fell by 6.5%, as the dot-com bubble burst and consumer spending tightened.

• 2008-2009 Financial Crisis: The Great Recession led to a staggering 15.7% drop in hotel occupancy rates, with RevPAR (Revenue Per Available Room) plummeting across all property types.

In a moderate recession, where GDP contracts by 2-3%, we could expect an 8-12% decline in travel demand based on historical patterns. However, the impact on short-term rentals might differ from traditional hotels due to the flexibility and localized nature of STR offerings. In urban areas like New York City, where regulatory changes have already impacted Airbnb listings, the effect could be amplified. Meanwhile, rural and vacation destinations might fare better, as travelers seek more budget-friendly and secluded options.

Two Possible Scenarios: The Impact of a 30% Housing Price Decline

If we experience a housing recession where prices decline by 30%, the STR market will likely face significant challenges. However, the outcome could go in one of two directions: a surge in foreclosures due to over leveraged hosts or a stabilizing effect from increased rental demand.

Two Possible Scenarios: The Impact of a 30% Housing Price Decline

One possible outcome of a sharp decline in housing prices is a wave of foreclosures, particularly among STR investors who are heavily leveraged. During the pandemic, many investors flocked to the STR market, capitalizing on low interest rates to purchase additional properties. Data from AirDNA suggests that the number of active Airbnb listings increased by 20% year-over-year during the peak of the pandemic, driven largely by new investors seeking high returns.

However, with mortgage rates now averaging above 7%, many hosts are facing higher monthly payments. In a recessionary environment, where travel demand drops, these hosts may struggle to cover their mortgage and operating costs. According to data from Airdna, 12-15% of Airbnb hosts currently rely on high occupancy rates to remain cash flow positive. If occupancy rates decline by 10-20%, as seen in previous recessions, many of these investors could be pushed into negative cash flow, increasing the risk of default.

A downturn in property prices would exacerbate this risk, leaving over leveraged investors with underwater mortgages. In this scenario, the influx of distressed properties could flood the market, pushing housing prices even lower and triggering a wave of foreclosures similar to the 1990-1991 recession, where two-thirds of U.S. hotels went bankrupt. Further, many of these rentals were acquired with short-term rental underwriting, meaning a pivot to a long-term lease will not cover the base holding costs alone in most cases. Finally, certain areas have become saturated in short term rentals. We cover this in more detail in the full report.

Scenario 2: Influx of Short-Term Rentals Insulates the Market from Foreclosures

Conversely, the expansion of the STR market could act as a stabilizing force during a housing recession. Despite the risks of oversupply, STRs offer flexibility that traditional long-term rentals and hotel markets do not. In the event of a recession, some investors might pivot from nightly rentals to longer-term stays, capitalizing on demand from remote workers and displaced families seeking temporary housing. This adaptability could help maintain occupancy rates and generate steady income, even as travel demand softens.

Moreover, STRs in rural and vacation destinations may continue to see robust demand, as budget-conscious travelers opt for cheaper, more secluded accommodations over expensive hotels. According to Airbnb, rural hosts earned over $3.5 billion in 2021 alone, highlighting the growing popularity of these locations. This shift could provide a lifeline for investors who own properties outside of major urban centers, where competition and regulatory pressures are highest.

Additionally, the diversification of income from STRs could support overall housing stability. A significant portion of Airbnb hosts—approximately 90%, according to Skift—are individual homeowners, not large-scale investors. For these hosts, the ability to generate supplemental income through short-term rentals could be a crucial factor in avoiding foreclosure.

Closing Thoughts

The future of the short-term rental market in the face of a potential housing recession is uncertain, but the stakes are high. The next downturn will test the resilience of Airbnb and VRBO hosts, many of whom have never navigated a recession with such a large portfolio of STR properties. Whether the influx of short-term rentals exacerbates a downturn or provides a cushion against falling prices will depend on a multitude of factors, including travel demand, regulatory changes, and the adaptability of investors.

For those interested in a deeper dive into this analysis, our full report provides comprehensive data, scenario modeling, and strategic recommendations for investors and homeowners.

Stay tuned—our complete, in-depth report will be available soon exclusively to our subscribers.

Hershey, Pennsylvania

Hershey presents an appealing opportunity for short-term rental investors. While Hersey claims it’s "The Sweetest Place on Earth," prop.text could not independently verify this claim. Hershey draws in 3.2 million visitors annually.

The central tourist draw in Hershey is Hershey park, a large amusement park established by Milton S. Hershey in 1906. Other attractions include: Hershey's Chocolate World, Giant Center and other tourist attractions.

The average single family home in Hersey stands at $385,783. An “average” airbnb brings in $47,231 / year–giving investors a potential 12% yield.

However, local regulations govern STRs in Hershey. Derry Township, where Hershey is located, has specific ordinances around short-term rental usage, especially in residential areas. Investors should research zoning regulations and the specific registration or permitting requirements.

Property Size, Competition and Amenities

240 Clark Road

This amenity rich home already features a hot tub, pizza oven and outdoor space. It’s less than a mile from downtown Hershey. With 6 beds and 4.5 baths this property is waiting for the next investor scoop up this chocolaty deal.

The Investment Thesis

→ Take this amenity rich property to the next level with a pool
→ Redesign the interior with a dedicated game room for those rainy days
→ Touch up some of the dated color to pop on Airbnb
→ Invest in an outdoor kitchen to integrate the pizza oven and grill into a cohesive unit

 Property Details

 Financial Projections

Interested in Learning More?

*Appreciation based on 4.5% growth rate. 

Doug Brien - From NFL to Real Estate Pioneer

Doug Brien had no idea he was destined for a 12-year career as NFL kicker while he was playing soccer at De La Salle High School High School in Concord, Calif. At the urging of his dad, he tried out as a kicker for the football team his senior year.

He went to University of California at Berkeley as a walk-on, kicked for the Bears from 1991-93, and still ranks number two in field goals (56) in Cal football history. Selected in the third round by his hometown San Francisco 49ers, Brien kicked for their Super Bowl XXIX winning team, but was cut his second season after missing a game-winning kick. He went on to play 12 seasons in the NFL for seven different teams.

His career in real estate — he founded Waypoint Homes in the wake of the 2008 housing crash and took the company public in 2014 — was more purposeful.

“I used the Super Bowl check to finance the first house I bought — I think back in those days we (the winners) got 80 grand,” Brien said. His dad had enlisted he and his brother to help fix up properties when he was younger so he was familiar with the pattern: buy a house that needs work, renovate it, and sell for a profit. Then buy the next house.

“I liked how tangible it was,” he said. “I grew up renovating homes and I felt like I could find a house in a good location and renovate and make it more valuable.”

While playing for the New Orleans Saints, he earned his MBA from Tulane University. During this period, he got involved in an office condo project at one time which he said didn’t work out so well. (These days, he owns 50 or so doors — homes and apartments — that are all on long-term leases.)

After Waypoint merged with Starwood, he served as CEO of Starwood Waypoint Residential Trust from 2014-16, then founded Mynd in 2016. The company built a platform for retail and institutional investors to own and manage individual investment properties in the US. Back in May, Mynd merged with its competitor Roofstock and Brien took on the role as president. 

Brien thinks real estate offers financial benefits that are hard to replicate through investments in the stock market.

“I really appreciate the after-tax returns and the value increase from appreciation,” he said. “Real estate pays a hefty dividend and you can take advantage of favorable tax policies.”

This interview has been edited and condensed for clarity.

What is your special real estate power?

I think I’m just kind of a jack of all trades. There is not one thing I’m extremely good at but i have vision and I know how to get things done and when to make a move.

What was the hardest lesson you learned early on in your real estate journey, and how did you overcome that and persevere?

I learned it’s best to only invest in things you really understand. Someone can have the best investment in the world but if you don’t understand it or don’t have the time to learn about how it works then it’s not for you. When I’ve leveraged someone else’s knowledge for an investment, those things went south. (see condo project mentioned above.)

Things that I could control I did better at. I prefer to do my own deals — when I’ve understood what the investment was and I’ve been in control I’ve never lost money. I’ve had trouble when it was some combination of I did not understand it well enough or did not have enough control.

Wrong time, wrong place, and if someone else is in charge you’re in trouble.

What advice would you offer to somebody looking to get into real estate or grow a portfolio?

You gotta start somewhere, and start making some offers. Start firing some bullets. You’ll learn more from deals that you don’t get than deals you do get. Then when the right investment comes along, you feel better about leaning in and you’ll get it. Only by getting on the playing field can you make it happen. Some investors just sit on the sidelines. You have to get out on the field, start making some offers.

Among the strategies a property owner could pursue — long-term rental, mid-term rental or short term, (Airbnb), co-living — what works best for you, and why?

To me, holds are the best way to go because once you do all the work to buy the house and you get it right, you should hold onto it and realize all the profit from rental income. Location really drives the lease duration and you should choose the lease duration — short-term or long-term — based on the location data. A lot of work goes into getting a house ready to rent so it doesn’t make sense to me to sell.

Dataflik

DataFlik is a rapidly growing player in the real estate technology space, bridging cutting-edge AI tools and comprehensive data-driven solutions tailored for investors and property managers. Launched in 2020, DataFlik has quickly established itself as a trusted partner for over 2,000 real estate investors. The company’s focus on predictive analytics and market insights is setting a new standard in the industry. It offers investors a streamlined way to identify and secure off-market properties before they hit the open market.

From Friends to Founders: A Journey Rooted in Real Estate

DataFlik was founded by Ty Garrett and Rami Eid, childhood friends who shared a vision of transforming the real estate industry. Recognizing the growing need for reliable, data-backed insights in real estate, they set out to solve one of the industry's biggest challenges: inconsistent and fragmented data. 

“We knew there had to be a better way to source and utilize data for real estate transactions,” says Ty Garrett. “The industry was flooded with disjointed information, and we wanted to create a platform that could unify and make sense of it all for investors.”

Transforming Real Estate with AI-Driven Solutions

At the heart of DataFlik’s offering is a robust AI engine designed to analyze a vast array of data points, spanning property characteristics, demographic trends, financial records, and more. This comprehensive approach allows DataFlik to offer a suite of products tailored to meet the needs of modern real estate investors:

1. Predictive AI Data: Leveraging advanced machine learning models, DataFlik’s AI engine processes over 42 billion data points from more than 6,000 sources. The result? Accurate predictions on which properties are most likely to sell off-market. This capability gives investors a significant edge, allowing them to identify high-potential properties before they become widely available.
   
   

2. Investor Score: DataFlik’s proprietary scoring system ranks homeowners on a scale of 0-100 based on their likelihood to sell off-market. This metric helps investors prioritize their marketing efforts and target the most promising leads, optimizing both time and resources.
   
   

3. Skip Tracing: With its advanced skip tracing technology, DataFlik acquires reliable contact information by cross-referencing public and private data sources. This feature ensures that investors can connect directly with potential sellers, increasing the chances of securing deals faster.
   
   

4. Market Map: DataFlik’s interactive Market Map provides investors with comprehensive insights into investor-friendly neighborhoods. From buy box finders to rental market analytics, this tool offers a detailed look at the factors that matter most when selecting a property.
   
   

5. Pay Per Lead Service: For those looking to streamline their lead generation, DataFlik’s Pay Per Lead service delivers pre-vetted, data-enriched leads directly to investors. This feature allows users to focus on closing deals rather than spending time searching for them.

A Technological Edge in a Competitive Market

DataFlik’s approach to real estate data is transformative. By integrating AI and machine learning into every aspect of its platform, the company offers predictive capabilities that far exceed traditional data providers. The platform’s ability to predict over 60% of off-market transactions—rising to 71% in more recent analyses—demonstrates the power of DataFlik’s technology. This level of accuracy has positioned the company as a leader in the industry, providing an unparalleled advantage to its clients.

“Our mission is to give real estate professionals the tools they need to succeed in a competitive market,” says Rami Eid. “We believe that by leveraging the right data at the right time, we can help investors unlock hidden opportunities and drive better outcomes.”

Real-World Impact: Testimonials from Industry Leaders

DataFlik’s innovative approach has garnered praise from real estate professionals across the industry. April Crossley of Crossley Property Group shared her experience: “We struggled for so long with leads, and it was all data-related. Finally, we switched to DataFlik, and in the last six months, we’ve closed more deals than any full year we’ve had.”

Similarly, Wes Pittman from Reno Area Home Buyers noted significant improvements in marketing efficiency: “Since partnering with Rami and his team, our cold call and mail marketing has significantly improved using their predictive lists.”

These testimonials highlight the tangible impact DataFlik has had on its clients’ success, underscoring the platform’s ability to deliver real, measurable results.

How to Get Started

If you’re an investor looking to gain a competitive edge in finding off-market deals, or a property manager interested in leveraging advanced data tools, DataFlik offers a range of solutions to fit your needs. Schedule a demo today to see firsthand how DataFlik can transform your approach to real estate investing.

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