How Blockchain is Enabling the Next Generation of Real Estate Investors

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

There is no end to Web3 real estate projects underway now, taking advantage of the blockchain’s opportunities to provide alternative to depositfor example, or store property records. Now, as the housing market slides into a period of uncertainty greater than any it has faced since the 2008 recession, blockchain is re-emerging as a potential tool for investors in the space.

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

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

Volatility in the housing market

Mortgage rates have risen steadily since the beginning of the year as the Fed has successively raised its own key interest rate to try to stop the runaway inflation. This affects the housing market, because the increased borrowing costs mean that mortgage interest rates inevitably rise.

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

The US was already facing a severe housing crisis even before higher inflation kicked in. It all dates back to the beginning of the COVID-19 pandemic. By then house prices were already high and they started to rise much faster as people were forced to foreclose. 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 newfound freedom to move, moving away from the cities and into more attractive areas.

Home buying activity increased during the pandemic, exacerbating an existing housing shortage and pushing home prices into new territory. As housing inventories collapsed across the country and bidding wars became common, the average cost of a home in the U.S. reaching a record high of $413,800 in June 2022, according to the National Association of Realtors

House prices are now slightly lower, averaging about $403,000 according to NAR’s latest data. Yet, with borrowing costs now rising, it means homebuyers see little benefit overall. In fact, the cost of buying is increasing, even as house prices settle. In September, the average interest rate on a 30-year fixed-rate mortgage was 6.29%, which equates to an extra $600 per month on the cost of a monthly mortgage payment. That comes on top of the increased costs of 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 traditionally been one of the most lucrative and rewarding 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 these turbulent times.

Oraichain Labs USA is a new initiative formed by the Oraichain project that is 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 claims that the traditional investment process is slow and complex and comes with high transaction costs. Furthermore, 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 process, providing a new way for investors of all backgrounds to explore new opportunities in the real estate sector. In this way, it makes the property market more accessible, injects new liquidity into the market and creates more incentive for everyone, including existing homeowners, small business owners, private investors and fund managers to bring more assets onto the chain. In addition to tokenizing real estate assets to make them more accessible, Oraichain Labs also uses 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 the real estate assets in real time.

A similar offer comes from Parcl Labs, which gives small investors the opportunity 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 about making real estate investment opportunities accessible to everyone. Instead of having to buy an entire house, it provides price exposure and hedging opportunities for investors through a protocol that is linked to the price per square meter of real-world assets, tracked via the Parcl Price Feed.

The idea is that Parcl can provide more security and stability for investors in the housing market amid the current market chaos, while also giving them greater exposure to international property 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 talk about yet more rate hikes and slowing sales. The next generation of cutting-edge blockchain technologies and the unique, up-to-the-minute insights they provide are the perfect tonic for these turbulent times. Blockchain paves 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.