Real estate, whether land, commercial or a single-family home, has long been considered one of America’s most fundamental components of financial security.
The American Dream, it’s been called.
Unfortunately for Inman readers, homeownership simply isn’t the same salve for restless nights as it used to be, especially among millennials, with the number of which who expect to rent forever nearly doubling from 2018 to 2020, according to an Apartment List study from earlier this year.
Clearly, affordability remains the tallest hurdle. And, the longer the cost of a home remains out of reach, the sooner, and more often, Americans will seek alternative forms of wealth building.
Such as Bitcoin.
An extensive study published this week by Point2Homes.com revealed detailed return on investment comparisons between one of the most popular forms of cryptocurrency and real estate. The results are staggering.
The five-year analysis’ intent was to compare the returns on equal investments in a median-priced home in the largest 100 U.S. cities based on 2017 prices with 20 percent down, against Bitcoin at $964.
The results showed that both options offered noteworthy avenues to financial gain, but the discrepancies are hard to ignore.
In 2017, the median home price in San Francisco was $1,252,543, requiring a 20 percent down payment, or initial investment, of $250,509. That initial investment would have bought 260₿.
Today, the median price of the home is up 22 percent, a gain of $270,280. If you bought Bitcoin instead, you would have realized $16.08 million.
Across the country in Manhattan, 20 percent down on the median price of $1,451,250 would cost $290,250, or 301₿. Because the median price in Manhattan has fallen since 2017 to $1 million, selling today would result in a loss of more than $450,000. Your Bitcoin, however, would be worth $18.6 million.
In a more down-to-earth market, such as Columbus, Ohio, the 2017 home would required a down payment of $27,738, or 29₿. Today, your 29₿ would be worth $1.78 million while real estate gains on your Columbus would amount to around $76,000.
Laredo, Texas? $12,000 vs. $2 million. Norfolk, Virginia? $57,000 vs. $2.5 million.
And on and on the examples go.
Granted, real estate was never intended to produce overnight wealth. Appreciation at the historic rate of inflation was typically all that was expected. Hang on to your house, pay off the mortgage and retire somewhere warm.
Real estate does offer ways to increase value throughout ownership with tactics like remodels, additions and landscaping.
But a new deck won’t do for your portfolio what a few Bitcoins can.
Cryptocurrency is still a niche currency, and several variations of it have proven to be dizzyingly volatile, Ethereum and Dogecoin currently top the list in that department, according to Yahoo Finance.
The Point2 study interviewed a well-qualified list of experts in economics and the emerging world of cryptocurrency. The consensus on its mainstream viability is mixed, but those unsure offered several qualifiers for how it can become so.
In short, it’s not as far off from becoming “common” as some may think.
In fact, you don’t have to look hard to find a financial planner who would recommend buying some crypto. The better ones will tell you to tread lightly, of course. Pacaso, the second-home investment platform, allows buyers to use cryptocurrency. Inman has reported on a number of homes purchased with blockchain-backed funds.
Ultimately, the rise of accepted alternatives to wealth building are clashing with the industry’s message that owning a home is the most tried and true method to financial well-being. Things are changing, and that message needs some massaging.
If real estate professionals continue to market their product as the quintessential American wealth builder, comparisons to cryptocurrency and alternative money makers (NFTs, anyone?) will continue to haunt it, especially among up and coming generations not in-sync with the idea of settling down.
The 2020 NAR Home Buyers and Sellers Generational Trends report said that millennials make up 38 percent of today’s homebuyers. An Inman report on Apartment List’s 2021 Millennial Homeownership Report stated “that in 2020, 18.2 percent of millennials who don’t currently own homes expected to always rent, up from 12.3 percent in 2019 and 10.7 percent in 2018.”
And guess who is most likely to invest in cryptocurrency?
Millennials make up 74 percent of today’s likely cryptocurrency buyers, according to Gemini crypto exchange’s 2021 State of U.S. Crypto Report.
The real estate industry has waited years for them to arrive, envisioning the well-paid and tech-savvy generation as an immeasurably deep trough of commission potential. Looks like cryptocurrency brokers see that potential, too.
In summary, the largest demographic in the country isn’t all that psyched on the idea of owning a home.
And more and more ways to build wealth seem to be seizing their interest. The Bitcoin is in your court.