Some of the most fascinating buildings are on a steep slope, straddling boulders or some other location that might startle the viewer. I can think of no more interesting a house than one perched across a stream with glass flooring.
The issue is, that you need some kind of foundation under your house, and an inexperienced person could find building in such a location extremely challenging. Also, Frank Lloyd Wright did his "Falling Waters" house in just such an extreme location, and now they are spending many times the original cost of the house to correct the mistakes this great architect made, as well as the ravages of time in such a location. If Frank can foul it up, think what you can do.
If you are truly going to make a small house, there should be no reason that you cannot find a nice flat spot in even a dramatic location where you can site the house. Even in a featureless location, you should be thinking about a place where the land falls away from the house in all locations. A high spot on a flat lot is always possible, and even a few inches can make the difference between a rotting sill and solid forever. You can raise your foundation slightly and use the excavated material from the prep work to make a slope all round the foundation. Even pressure treated lumber will not save you forever. If you are building to last you through your last few years of life, or a few years while you do a temporary job or attend university, then...just keep the water out of the house and don't worry about it. But, if you are twenty to sixty, that is a long time for an ill sighted house to withstand moisture. Even masonry has water problems...Ask anyone in England with "rising damp".
One could conceivably, run a couple of huge "I" beams across a gorge or from boulder to boulder on a forest location. Just drill holes in the rocks and put cemented in or epoxied in bolts down to secure the beams to the rock.
If you live in the northern tier in the US or in Canada, You will want to go down about four feet. This will get your foundation below the frost line.
When the ground freezes in the winter, it will freeze right down into the earth. The water in the earth expands and will lift a house right off the ground. You might of course build on skids or on rocks or blocks directly in the ground. A building will just float on the freezing and unfreezing soil. There are problems with this though. If you have systems that go into the ground, your house may be moving in relation to pipes, electrical wires, septic/sewer pipe, or anything else you may have. All of this may crack or stretch, causing more and more problems as the house ages. A very small house might be made rigid enough to survive such movement, but lumber, as it gets longer, may flex or crack. You may never notice this in your foundation, but you would eventually see your doors and windows going out of square and refusing to open and close with time.
Your little poet's pavilion will probably be just fine resting on the ground or on pads or blocks, but anything larger will have to be on a good foundation.
One option is to build with a minimal foundation when you have no money and need to get shelter, and then just drag your tiny house onto a great foundation when you can afford one. This will work, and it was certainly not uncommon. My uncle had a series of beach cottages joined together and placed on foundations after they had been around for years to make a large house. The only issue is that a building can be dragged out of square in the moving and plaster board, plaster and tile can all be ruined as they flex. Plank paneling, on the interior can take a lot of flex however. I hate wood interiors myself, but it might be just the thing for many people. I do like nice wood paneling...that is raised paneling like in the colonial period. Even knotty pine is beautiful when done this way. I will discuss colonial interior finishes later. Note the post on Feather Edge Paneling under "Making Space Saving Partition Walls" that follows this one.
Dig down four feet for the entire perimeter of the house. Remove even huge stones if the bottom of the stone is above the four foot mark. It may rise with the frost and crack your foundation. Check with your town or with a county extension office to see what foundation depths your area may need.
Make certain that the bottom of the trench is broad and flat. Weight of a building may drive a pointed bottom deeper into the soil. Build a wooden or a foam double wall on top of the footing, and pour concrete into it. Alternatively you could use concrete blocks, field stone, brick or dressed stone to raise the walls of the foundation. It should rise several inches above ground level at least. Local codes may dictate how far above the ground it may need to be. Colonial period houses were not very high off the ground, but wooden sills at the time were often more than a foot thick and resisted rot for centuries. Back fill the excavated soil, trying to return the subsoil to the deeper areas and the topsoil to upper levels. Plants will love you if you do not try to plant them in subsoil.
Specifics of dimensions and method will be discussed later.
Note that unreinforced masonry, in brick, blocks and stone will literally fall apart in earthquakes. You may think your area is immune to such events, but don't you believe it. Some of the seemingly most stable areas are most at risk. The lower Mississippi Valley, New England, etc. may be ticking time bombs. Poured foundations may crack, but they are less likely to turn to mounds of debris.
The first colonials just arranged their post and beam house frames on a number of large stones. Again, sills were enormous, and Post and Beam frames are exceptionally flexible, as are all the interior and exterior finishes. Planks and shingles glide past each other much easier than plywood. Plywood is a great stabilizer, good in many applications, but it has it's drawbacks.
In the period, a large stone was situated beneath each post in the house frame as that was where the weight was concentrated. A great drawback was that the building was raised off the ground. This exposes the underside of the house to cold and vermin. I often thought this would be overcome by screwing overlapping aluminum to the underside of the floor and filling the cavities with insulation.
Another drawback is the difficulty of getting all the stones at the same level. Do not "Bank" your house with bales of hay or straw, or attach tar paper or plastic around the foundation of the house as many people did in the north when I was a child. This traps moisture against the building and could rot your house sill and lower portions of wall studs.
A modern dimensional lumber building, would need to have the concentrated points of weight identified and supported, and the sills would have to be thicker than average to remain stiff over the gaps between the stones. I will eventually discuss Post and Beam construction in detail. If you love being the consummate craftsman and are patient, this could be a wonderful alternative for you.
Remember too that your wood does not need to be in contact with the soil to rot. It is also easy to initiate deterioration just from the splash of rain, even if the wood dries soon after getting wet. Rain falls and the drops hit the soil. Soil is a diverse mix of elements. It can be sand, gravel, any number of minerals, but what we see on top is usually a compost of vegetation that accumulates over the centuries. In that vegetatation are all sorts of funguses, bacteria(both good and bad) etc.
When the raindrops hit the soil, they Splash, and over time, those splashes will transfer some of those funguses, etc. to your wood. ROT!
I have included a picture in my crude sketching style of a colonial solution to this issue. Of course the higher off the ground that you build, the less likely this is to be a problem.