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Blockchain and real estate are familiar companions, with the housing industry often cited as one of the sectors that will benefit the most from adopting the decentralized ledger that underpins cryptocurrencies like Bitcoin.
There is no end of running Web3 real estate projects, leveraging blockchain capabilities to provide a alternative to escrowfor example, or store property records. Now, as the housing market slips into a period of greater uncertainty than it has faced since the 2008 recession, blockchain is once again emerging as a potential tool for investors in the space.
The real estate industry is on the rocks. Potential buyers have been waiting for several years for prices to drop so that they can finally gain a foothold in the market. But although home values finally appear to be softening, property has not become more affordable as this fall has been accompanied by a spike in interest rates.
Mortgage rates are now at their highest level in 20 years, and as the Federal Reserve seeks to keep raising them to curb excessive inflation, homebuyers and investors are in a bit of a bind. They want to take advantage of the lower prices, but are put off by the higher borrowing costs.
Housing market volatility
Mortgage rates have been rising steadily since the start of the year as the Fed has successively raised its own key rate in an attempt to curb runaway inflation. This has an impact on the housing market, as the rising cost of borrowing means that mortgage rates inevitably rise.
The Fed believes it has no choice but to keep raising interest rates in an attempt to slow the economy, which is suffering from rising prices for oil, food and other essentials .
The United States was already facing a severe housing crisis even before rising inflation hit home. It all goes back to the start of the COVID-19 pandemic. Then house prices were already high and they started to rise much faster as people were forced into lockdown. With more people working from home, many have realized that the ability to work remotely has certain advantages, the main one being that they can work from anywhere. As a result, hundreds of thousands of Americans have used this newfound freedom to relocate, away from cities and into more desirable areas.
Home buying activity has soared during the pandemic, exacerbating an existing home shortage and pushing house prices into new territory. As housing inventories plummeted across the country and bidding wars became commonplace, the average cost of a median home in the United States reached a record high of $413,800 in June 2022, according to the National Association of Realtors
House prices are now slightly lower, averaging around $403,000 according to the latest NAR data. Yet with the cost of borrowing currently rising, that means homebuyers see little benefit overall. In fact, the cost of buying increases even when house prices stabilize. In September, the average rate for a 30-year fixed-rate mortgage was 6.29%, which translates to an extra $600 per month on the cost of a monthly mortgage payment. This is on top of rising costs for energy, fuel, food and other living expenses.
Blockchain offers new opportunities
Although people are more hesitant to do so, there are still good reasons to want to invest in real estate, which has always been one of the most lucrative and rewarding types of investments available to most Americans. Fortunately, there are a number of blockchain-focused startups that are opening the door to real estate for cautious investors, even in turbulent times.
Oraichain Labs United States is a new initiative formed by the Oraichain project that aims to provide asset tokenization services for traditional assets. Its vision is to modernize and increase access to capital markets through asset tokenization, which enables a kind of fractional ownership of assets such as real estate. Oraichain Labs claims that the traditional investment process is slow and complex and comes with high transaction costs. In addition, many high yielding illiquid asset classes are only available to institutional investors and high net worth individuals.
Oraichain Labs is changing this dynamic by using blockchain to tokenize real estate assets and streamline the investment princess, providing a new way for investors of all backgrounds to explore new opportunities in the real estate industry. In this way, it makes the real estate market more accessible, injecting new liquidity into the market and creating more incentives for everyone, including existing owners, small business owners, private investors and fund managers. , to bring more assets to the channel. Besides tokenizing real estate assets to make them more accessible, Oraichain Labs also uses Oraichain services such as Oracle AI and the AI and data marketplace Dino Hub. In this way, it is easier for investors to follow real-time assets in real time.
A similar offer comes from Parcl Labs, which allows small investors to invest in as little as a single digital square foot of a home in some of the world’s most lucrative real estate markets. Like Oraichain, Parcl aims to make real estate investment opportunities accessible to everyone. Rather than having to buy an entire home, it provides price exposure and hedging opportunities for investors through a protocol linked to the price per square foot of real-world assets, tracked via the Parcl price feed.
The idea is that Parcl can offer property market investors more security and stability in the current market chaos, while providing them with greater exposure to international property markets.
For many people, the decision to invest in real estate is proving to be a major headache at a time when the only stories they see are of even more interest rate hikes and the slowing of the economy. pace of sales. The next generation of cutting-edge blockchain technologies and the unique, up-to-date insights they provide are the perfect tonic for these turbulent times. Blockchain is paving the way for smarter, more thoughtful investments in a real estate market that can still offer rich returns to those who are more cautious.