How Do Crypto Profits Impact The Housing Market? An Informal Report

Is the housing market in a bubble? Is the cryptocurrency party about to blow up? This informal study is fascinating because it doesn’t come from the crypto world. 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 how early we are. Whatever camp you’re in, one thing’s 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 current situation’s general picture:

 “Low interest rates and a world awash in liquidity set the stage for financial markets and asset-value froth as an adult today. As market participants, we watch with a healthy dose of nervousness, wondering just how long we’ve got until the inevitable bubble-bursting cleanup ensues.”

Even though the housing market is on the rise, “this period of ephemeral effervescence isn’t sustainable.” He doesn’t get into the rampant money printing that his country is living with, but we will. Inflation is one of the effects of all of these inorganic dollars entering the market. Another effect is that people feel, maybe subconsciously, that their money is losing purchasing power and turn to hard assets. Before Bitcoin, real state was the hardest asset there was. It’s only logical for the newly printed money to make its way to the housing market, raising prices.

An Informal Survey And Its Surprising Results

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

Trying to gauge crypto & NFT boom impact on housing market. Have you or someone you know used profits from crypto &/or NFTs to help with down payment on home purchase?

— Rick Palacios Jr. (@RickPalaciosJr) September 4, 2021

“To my amazement, 20% of respondents indicated yes, they had indeed used profits from crypto and/or NFTs to help with the down payment on a home purchase. Heading into the survey, my ballpark estimate would have been below 5%, probably closer to 1% or 2% if you’d asked me to place a bet. Yes, the Twittersphere likely understands and uses crypto/NFTs more than the general adult population, but still, 20%!”

If NewsBTC ran this poll through our Twitter account, numbers this high would be somewhat surprising. However, Palacios Jr.’s audience is not a crypto audience. His tweets are usually about the housing market. So, these numbers are outstanding. What’s happening here?

BTC price chart for 11/25/2021 on Coinbase | Source: BTC/USD on TradingView.com
Conclusions About The Housing Market

After the survey, Palacios Jr. turned to his contacts in the real state business. He found out that “the percentage of home buyers voluntarily documenting crypto accounts during mortgage underwriting has gone from almost 0% one year ago to between 5% and 10% today.” In the case of down payments, though, “most lenders and builders I spoke with estimating the percentage at roughly 5% or less. On occasion, 10% to 15% was noted, namely in higher price points and/or communities skewing toward younger buyers more familiar with crypto.”

Over the last few months I’ve spoken with dozens of real estate & mortgage industry executives, trying to gauge what impact (if any) #crypto is having on the #housing market. Here’s what I’ve concluded. (1/) https://t.co/cNdaPrMSdY

— Rick Palacios Jr. (@RickPalaciosJr) November 16, 2021

So, the phenomenon is real. Also, take into account that “most home buyers don’t disclose crypto accounts, as it is voluntary and not required.” Also, there’s still some stigma attached to cryptocurrencies. To qualify for loans and to get cleared by real state agencies, “Most home buyers are liquidating crypto gains well ahead of purchasing a home for the funds to appear “seasoned” during underwriting (typically sitting two to three months in a traditional checking or savings account).”

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So, are crypto and the housing market in a bubble? They may very well be, but we can’t be sure. This informal study’s conclusion is that the cryptocurrency market is probably feeding the housing market’s growth. To what degree? That’s the million-dollar question.

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