Why Tokenized Real Estate?
Last updated
Last updated
Baskets make it easier than ever for on-chain funds to be diversified into a safe, yield-generating source of value with historic track record of appreciation.
With many global fiat currencies seeing a rapid devaluation, assets like real estate can be critical to maintaining wealth.
The past 15 years have seen an unprecedented rise in monetary supply. From Q1 2008 to Q3 2023, the monetary base has increased by nearly 7x with almost half of that growth occurring in just the past three years. The primary consequence of this extraordinary printing of money has been the debasement of the currency and inflation.
The US dollar has declined in value by sixfold over the past 50 years. If in 1973 we value the dollar at $1, by 2023 the value has dropped by 86%, below $0.14. This decline in buying power has taken place over periods of primarily low inflation, with inflation running at under 4% per year for the past 30 years.
With few exceptions, the price of real estate appreciates over time. In part, this is easily attributable to the expansion of monetary supply above. The more money in circulation, the more things cost, including real estate. And this ignores the scarcity and value creation of real estate. While not completely insulated from temporary declines in value, real estate has been one of the most dependable asset classes in existence.
The average sales price of a home in the United States has grown from $32,800 in Q1 1973 to $513,400 in Q2 2023. This is a nearly 1600% increase, with growth that has been steady through various periods of economic expansion and contraction.
When the real estate held is yield-generating, it becomes a substantially more powerful asset. Take this example below using the seasonally adjusted Case-Shiller U.S. National Home Price Index. The blue line represents real estate value accrual in the U.S. since 2000. Property values are up 3x in that time.
However, when factoring in a 6.5% compounded annual yield on top of the real estate value accrual, the gains are nearly 12x in the same time, on a relatively low-volatility asset. This is the power of Baskets, returning long-term value to holders in safe, permissionless, highly-liquid asset.
As fiat money becomes worth less and less, real estate becomes significantly more valuable, preserving and building wealth for its holders.
When significant drawdowns have occurred in real estate, the event takes place over an extended period of time. During the housing market crash of “The Great Recession,” the average price of a single family home dropped by ~20%. However this drawdown occurred over a two year period, from the peak in Q1 2007 to the bottom in Q1 2009. Compared to cryptocurrencies, fiat currencies and most other commodities, real estate is one of the most stable stores of value in existence.
For many around the world, real estate ownership becomes less and less attainable with each passing year. Market demand, inflation and wage stagnation create a system imbalance where only a small fraction of the population is able to own real estate in many countries. As household savings hit their lowest numbers in 15 years while housing prices increase, many do not have the ability to save the required downpayment on a new home.
In the United States, the median price of a single-family house has increased by nearly 40 percent over the last three years. Normal buyers have been almost completely priced out. And the impact of rising rates only exacerbate the affordability crisis.
Easy, democratized entry to the real estate market has never been more necessary. Tokenized real estate, available to anyone, anywhere with no minimum entry is an important first step to enabling wealth preservation for an entire generation of buyers being left behind by the housing market.
