Love it or hate it, there’s one thing that’s hard to deny. Bitcoin’s enjoying a highly successful year. The launch of bitcoin exchange-traded funds (ETFs) has so far been a resounding success for Wall Street’s financial powerhouses. BlackRock alone has accumulated $20 billion in bitcoin, just in the last three months since the firm opened its ETF.
And with institutional adoption surging, bitcoin’s market value has surged as well.
Extra wealth emboldens people to spend more. So, how does this impact the real estate market? By opening new pathways for buying, as people dip into their crypto stashes to buy or renovate homes. Just think. Behind every $5,000+ withdrawal from a crypto account over the past five years, one in 20 of those account holders became a first-time homebuyer.
Finance Researchers Connect the Dots
In March, the Federal Deposit Insurance Corp. received findings from a study led by university researchers. The study examined three years’ worth of financial data for a population of 60 million people.
The study found home prices especially elevated in counties with relatively high populations of crypto holders.
The researchers were also able to pinpoint withdrawals of $5,000+ from crypto platforms. They examined five years’ worth of these transactions — between 2018 and 2023. And they found a notable connection…
“For every household that withdrew $5,000 from their crypto exchange account,” said Jason Kotter, a finance professor at Brigham Young University, “One in 20 bought a house for the first time,”
Real Estate Experts, Take Note
People in real estate today are likely to run into customers who hold bitcoin or other digital assets—either as direct investors, or people whose retirement accounts hold these assets.
Real estate professionals (and real estate customers) should keep up with the answers to questions like these:
- Will a large transfer of funds from a cryptocurrency platform have tax implications for my customer?
- Must the digital wealth be converted and seasoned for two months before the lender will accept the funds for a down payment?
- Will the lender accept crypto-sourced funds for a home purchase at all?
Some borrowers are using bitcoin for the equivalent of all-cash purchases. Some are finding ways to stake their crypto accounts as collateral (although at a higher-than-normal interest rate), so they can keep holding their digital currencies.
Then there are the sellers. Are they really going to sell homes for bitcoin at this high price, you may ask — when bitcoin could drop right after the purchase agreement? That would be a high-risk move. Then again, we don’t know where bitcoin’s peak will be. Selling a house for bitcoin at its previous top in 2017 (around $20,000) led to serious profits for those who held that bitcoin all the way to its current level (around $70,000).
The Trend Ahead
All of this said, crypto real estate is still mainly a luxury market. Most participants live in Florida, New York, California, Utah or Nevada. But with its entrance into retirement funds, bitcoin is now accessible to the rest of us. Digital assets aren’t just for “bitcoin bros” any more.
Indeed, people earning the least might be motivated to invest in crypto because they have little to lose. And “winning” could be the ticket to a home deed.
Crypto investors make up a diverse population. To the extent that their digital holdings grow in value, agents have a new market segment to work with. Real estate, escrow, and title agents who gain experience in this area can win potential clients.
Note: This article is intended as a general exploration of the overlap between deeds and digital assets. Speak to your own licensed professionals for guidance suited to your financial profile and risk tolerance.
Supporting References
Rose Morrison for Chicago Agent Magazine: What’s Next for Crypto Real Estate Transactions? (May 6, 2024).
Isabelle Lee and Bloomberg for Fortune (Fortune Media IP Ltd.): Crypto Bros Eager to Buy Homes Lifted Prices as the Wealth Effect From Tokens Spilled Over to Some Housing Markets, Study Says (May 5, 2024).
And as linked.
More on topics: Outlook for blockchain in real estate, Trading tokenized shares of real property
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