The perfect recipe for a gigantic real estate crisis is currently on the table. In America, mortgage rates on loans with a term of 30 years have risen to the highest level in more than 20 years (red line). At the same time, sales of new homes are declining dramatically (blue line).
If a crisis were to break out now and people MUST sell their houses en masse, what do you think would happen to prices?
Blow for the housing market?
People are logically not selling their houses at the moment, because the extremely high interest rates make it difficult for people to take out new mortgages. People who currently have a relatively low interest rate at the bank are fine with it and remain comfortable in their current accommodation.
For that reason, we are also seeing a significant decline in “existing home sales”. This is now at the lowest level since 1989 in the United States.
Currently, this is especially unfortunate for people who want to buy a house, but are unable to do so due to high interest rates.
It only really becomes a problem for the economy when unemployment starts to rise and many people HAVE to sell their homes at the same time because they can no longer pay the mortgage. That is the moment when you discover that a house is not liquid when you really need it.
What does that mean for Bitcoin?
Bitcoin and real estate are both a form of scarcity and for that reason you could compare them as investments. In this area we see a cautious advantage of Bitcoin compared to real estate.
Namely that you can in principle always sell Bitcoin and therefore that Bitcoin is a lot more liquid. You may think that your house is worth 500,000 euros, but if you can’t find buyers, you… really need money; then that can create a very difficult situation.
Most of the time this is of course not a problem, but during the global financial crisis of 2008, for example, we saw this happen. Many wealthy people also suddenly saw their homes as a financial prison that was dragging them into the abyss.
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