How Blockchain Is Enabling The Next-Generation Of Real Estate Investors

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Blockchain and real estate are familiar bedfellows, with the housing industry often cited as one of the sectors that stands to benefit most from adopting the decentralized ledger that underpins cryptocurrencies like Bitcoin. 

There’s no end of Web3 real estate projects up and running now, taking advantage of blockchain’s capabilities to provide an alternative to escrow, for example, or store property ownership records. Now, as the housing market slips into a period of uncertainty that’s greater than anything it has faced since the 2008 recession, blockchain is emerging once again as a potential tool for investors in the space. 

The real estate industry is on the rocks. Prospective home buyers have been waiting for prices to come down for several years so they can finally get a foothold in the market. But although home values finally appear to be softening, property has not become more affordable as that fall has been accompanied by rocketing interest rates. 

Mortgage rates are now at a 20-year high, and as the Federal Reserve looks to keep raising them in order to curb excessive inflation, home buyers and investors are in a bit of a quandry. They want to take advantage of the lower prices, but are put off by the higher costs of borrowing. 

Housing Market Volatility

Mortgage rates have been rising steadily since the beginning of the year because the Fed has successively raised its own key interest rate to try and put a stop to runaway inflation. This impacts the housing market, because the increased cost of borrowing means that mortgage rates inevitably increase. 

The Fed believes it has no choice but to continue increasing interest rates to try and slow down the economy, which is suffering from higher prices of oil, food and other essential goods. 

The U.S. was already facing a stark housing crisis even before higher inflation hit home. It all dates back to the onset of the COVID-19 pandemic. Then, housing prices were already high, and they began rising much more quickly as people were forced into lockdowns. With more people working from home, many realized that the ability to work remotely had some advantages, the main one being that they could work from anywhere. As a result, hundreds of thousands of Americans used this new-found freedom to relocate, moving away from the cities and into more desirable areas. 

Home buying activity soared during the pandemic, exacerbating an existing shortage of homes and pushing housing prices into new territory. As housing inventories collapsed across the country and bidding wars became commonplace, the average cost of a median home in the U.S. hit 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 NAR’s latest data. Still, with the cost of borrowing now rising, it means home buyers are seeing little benefit overall. In fact, the cost of buying is actually rising even as home prices settle. In September, the average rate on 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. That’s on top of the increased costs of energy, fuel, food and other living expenses. 

Blockchain Brings New Opportunities

Although people are more hesitant to do so, there are still good reasons to want to invest in real estate, which has traditionally always been one of the most lucrative and rewarding kinds of investments available to most Americans. Luckily, there are a number of blockchain-focused startups that are opening the door to real estate for cautious investors, even in the turbulent times. 

Oraichain Labs US is a newly launched initiative that’s focused on providing 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 argues that the traditional investment process is slow and complex and comes with high transaction costs. Further, many high-yield, illiquid asset classes are only available to institutional investors and high net-worth persons. 

Oraichain Labs US changes this dynamic using blockchain to tokenize real estate assets and streamline the investment princess, providing a new way for investors of any background to explore new opportunities in the real estate sector. In this way, it makes the real estate market more accessible, injecting new liquidity into the market and creating more incentive for everyone, including existing homeowners, small business owners, private investors and fund managers to bring more assets on-chain. Besides tokenizing real estate assets to make them more accessible, Oraichain Labs also makes use of Oraichain services such as AI Oracles and the Dino Hub AI and Data marketplace. In this way it makes it easier for investors to keep track of real estate assets in real time. 

A similar offering comes from Parcl Labs, which enables small investors the chance to invest in as little as a single, digital square foot of a home in some of the most lucrative real estate markets in the world. Like Oraichain, Parcl is all about making real estate investment opportunities available to anyone. Rather than having to buy an entire house, it provides price exposure and hedging opportunities for investors through a protocol that’s tied to the price-per-square foot of real-world assets, tracked via the Parcl Price Feed. 

The idea is that Parcl can provide more security and stability for housing market investors amid the current market chaos, while providing them with greater exposure to international real estate markets. 

Final Thoughts

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 speak of yet more interest rate rises and the slowing pace of sales. The next generation of cutting-edge blockchain technologies and the unique, up to the minute insights they provide is the perfect tonic to these turbulent times. Blockchain is paving the way for more intelligent and considered, bite-sized investments in a real estate market that can still deliver rich returns to those who exercise more caution.