Demand for housing in booming Texas is at an all-time high, and a new Architectural Digest report has revealed a small but mighty trend rising among the state's real estate offerings: luxury tiny homes.

According to AD's report, "Which States Have the Most Luxury Tiny Homes?" published February 20, Texas has the second-highest number of luxury tiny homes on the market, right behind California. For the purpose of the study, a luxury tiny home is defined as a "freestanding home with a for-sale price of $75,000 or more" that was listed on Tiny Home Builders and Tiny House Listings.

The report found there were 81 houses specifically labeled as "luxury" tiny homes for sale in Texas in late January 2024, along with 252 non-luxury tiny home listings.

No. 1-ranking California has the highest number of luxury and non-luxury tiny homes, at 135 and 318, respectively.

Big return on investment
To get a better look at what the typical Texas tiny home looks like, AD concluded the average tiny home for sale in Texas spans 358.7 square feet with fewer than two (1.3) bedrooms, and one bathroom.

With or without the appealing luxury tagline, tiny homes can be a financially advantageous real estate option for many Texans, AD says. Texas' return on investment for a tiny home ranked No. 15 out of all 50 states, putting it on a much better track than North Dakota, which had the worst return on investment for tiny homes.

"When buying one of these small homes, consider whether it’s a worthwhile investment," the report said. "If the typical rental income is far higher than the average cost of the state’s tiny homes, they’re considered good investments."

New York has the highest return on investment in the U.S., with a rent/price ratio of 0.0046, compared to 0.003 in Texas. Meanwhile, North Dakota has the worst return on investment for tiny homes, at 0.0015, closely followed by Montana and South Dakota.

"This suggests that while tiny homes can be an affordable entry point into homeownership, their investment potential varies significantly by location," the report said. "The ROI disparity between states also highlights the importance of considering geographical and market factors when evaluating tiny home investment opportunities."

The most expensive Texas luxury tiny home
Just because tiny houses are small doesn't mean they can't get expensive.

AD found the most expensive tiny home listing in Texas as of January 2024 is a 399-square-foot, one-bedroom, two-bathroom home for $435,000. The home is located just minutes from Lake Buchanan in the Hill Country. It currently serves as an Airbnb, but it can be turned into a single-family home with ease.

The home also has a fenced and covered back patio with outdoor furniture and an inflatable above-ground pool.

This tiny home has less than 400 square feet.tinyhomebuilders.com/

The Texas house is the third most expensive tiny home in the U.S., behind tiny homes in South Carolina and Oregon listed for $827,000 and $695,000, respectively.

"Despite their compact sizes, each of these homes offers a unique blend of luxury, efficiency, and innovation," the report said.

The full report can be found on architecturaldigest.com.