What is the impact of crypto profits on the housing market? An informal report

Is the real estate market in a bubble? Is the cryptocurrency party about to explode? This informal study is fascinating because he does not come from the world of crypto. The author, Rick Palacios Jr., is the Director of Research at John Burns Real Estate Consulting. The results are surprising to say the least. Especially considering our lead. Whichever camp you find yourself in, one thing is for sure, cryptocurrencies will be a big factor for the rest of the decade. Maybe for the whole century, even.

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Palacios Jr. begins by painting the general picture of the current situation:

“Low interest rates and a world awash in liquidity set the stage for financial markets and the foaming asset value in adulthood today. As market players, we watch with a fair amount of nervousness, wondering how much time is left before the inevitable bubble cleanup.

Even if the real estate market is on the rise, “this period of fleeting effervescence is not sustainable”. He is not getting into the rampant money printing that his country lives with, but we will. Inflation is one of the effects of all those inorganic dollars coming into the market. Another effect is that people feel, perhaps subconsciously, that their money is losing purchasing power and are turning to durable goods. Before Bitcoin, the real state was the most difficult asset there was. It makes sense for the newly printed money to find its way into the housing market, raising prices.

An informal survey and its surprising results

“Trying to assess the impact of the crypto and NFT boom on the housing market.” To test his hypothesis, the researcher turned to Twitter. His question was, “Have you, or someone you know, used the profits from crypto and / or NFTs to help with the down payment on a home purchase?” In 72 hours, Palacios Jr. received 385 votes.

“To my surprise, 20% of those surveyed said yes, they had actually used the profits from crypto and / or NFTs to help with the down payment on a home purchase. Before the poll my rough estimate would have been less than 5%, probably closer to 1% or 2% if you had asked me to place a bet. Yes, the Twittersphere probably understands and uses crypto / NFT more than the general adult population, but still 20%! “

If NewsBTC were to conduct this poll via our Twitter account, such high numbers would be somewhat surprising. However, Palacios Jr.’s audience is not a crypto audience. His tweets are generally about the housing market. So these numbers are exceptional. What’s going on here?

BTC price chart for 11/25/2021 on Coinbase | Source: BTC/USD on TradingView.com

Findings on the housing market

After the investigation, Palacios Jr. turned to his real estate contacts. He found that “the percentage of homebuyers voluntarily documenting crypto accounts when taking out a mortgage has increased from nearly 0% a year ago to between 5-10% today.” In the case of down payments, however, “most lenders and builders I’ve spoken with estimate the percentage to be around 5% or less. On occasion 10-15% have been noted, especially in higher prices and / or communities geared towards younger buyers more familiar with crypto.

The phenomenon is therefore real. Also, take into account that “most homebuyers don’t disclose crypto accounts because it’s voluntary and not mandatory.” Additionally, there is still some stigma attached to cryptocurrencies. To qualify for loans and be cleared by real estate agencies, “most homebuyers liquidate crypto gains well in advance of buying a home so that funds appear ‘seasoned’ during underwriting (usually sitting down). two to three months in a traditional checking or savings account). “

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So, are the crypto and the real estate market in a bubble? They may very well be, but we cannot be sure. The conclusion of this informal study is that the cryptocurrency market is likely fueling the growth of the housing market. To what degree? That’s the million dollar question.

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