Housing innovation focused on building smaller for a variety of reasons, mostly to provide an affordable product to many buyers who needed a different price tag. And, even though there are many micro-housing products now available, there still are many hurdles to overcome.

TV shows like "Tiny House, Big Living," "Tiny House Nation" and "Tiny House Hunters" have glamorized the small-home lifestyle and helped gain appeal among those looking to live with less.

Yet the reality for many is that in cities where a tiny home may work best — high density, amenity-rich areas — it may not be economical because high land costs limit resale potential.

"In the Washington, D.C., market it is hard to justify the land costs and the construction costs on tiny houses. A tiny house has such a limited market," said Sue Goodhart, real estate agent, The Goodhart Group at McEnearney Associates in Alexandria, Virginia.

"If the goal is to save money, I would have to say tiny home investors would need to go to areas where land prices are low, which means not located near major commuter routes."

Read More