Real Estate Blockchain Investors Look Ahead
As the main reserve currency of central banks around the world, the US dollar dominates the global market. The USD dollar recently hit a 20-year high in value against numerous currencies around the world. Given the recent increase in interest rates, US Federal Reserve Chair Jerome Powell said “We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t.” Powell went on further to say that “a relatively modest increase in unemployment and a soft landing would be very challenging. And we don’t know. No one knows whether this process will lead to a recession or if so, how significant that recession would be.”
Uncertainty on the future extent and severity of international and domestic recessions has investors around the globe seeking to hold stable, fixed income in USD. Furthermore, treasury bonds have become more appealing to international investors given that the United States Federal Reserve has increased interest rates to combat inflation.
A currency that is strong in value is generally considered positive. However, higher interest rates aren’t always a black-or-white situation given the push-and-pull nature of economics. For instance, American mortgage rates dipped low in response to worries about the national economy being affected by the coronavirus. However, the increase in buyers and investors jumping in to capitalize on lower interest rates only increased demand amidst the pre-existing shortage in housing supply.
Now, higher interest rates have translated to higher mortgage rates, which have caused a dip in the real estate market. Buyers and investors aren’t as eager to purchase given the higher cost of loans, and construction builders aren’t as eager to build given low revenue and profit expectations. These changes affect every part of the industry, from raw materials to labor, including contractors and architects, to appliances and other categories of purchases that typically coincide with home purchases.
In times of economic uncertainty or weakness, derisking is to be expected along with lower overall consumer demand for goods and services. However, some investors may be looking ahead to the recession while hoping for beneficial gains from potential future recovery.
While increased mortgage rates can sour one’s outlook on real estate, there are alternatives to traditional real estate investing that do not involve a mortgage. Fractional real estate investing is an alternative to traditional real estate investing where investors buy and sell shares that represent fractions of a property. This does not require the commitment to buy a property in its entirety. RealT is a blockchain-powered marketplace for fully-compliant, fractional, tokenized ownership in real estate properties.
Cryptocurrencies are digital assets that are decentralized from traditional institutions like banks and regulators. Often referred to as digital gold, cryptocurrencies rose in prominence with the speculation that their decentralized nature could be hedged as assets against macroeconomic forces like inflation.
The all-or-nothing scenario of a downpayment and mortgage along with housing prices has made traditional real estate investing and purchasing a challenge for many, whether there is a recession or not. Investing in fractions of a property rather than in its entirety makes real estate much more accessible than traditional opportunities.