The cryptocurrency boom is helping some homebuyers break into the hot real estate market.
A new survey by Redfin found that 11.6% of first-time homebuyers said selling investments in cryptocurrency helped them save for a down payment. The survey was conducted in December of 1,500 US residents planning to buy or sell homes over the next year.
Thanks to the rapid growth of cryptocurrencies, the proportion of first-time homebuyers using gains from cryptocurrency trading to fund down payment savings is on the rise: 8.8% of first-time buyers said the same in Q3 2020, and 4.6% said the same in Q4 The third of 2019.
It is noteworthy that the data reflect generational trends. Cryptocurrency investors and first-time homebuyers tend to skew away from the young, with a particularly large representation among millennials.
“With the extra time and lack of exciting ways to spend money, many people have started trading cryptocurrency during the pandemic,” Daryl Fairweather, chief economist at Redfin, said in a statement.
Also, saving for a home is more difficult than it used to be. According to a National Association of Realtors report, the typical down payment for a first-time buyer in 2021 is 7% of the total. So, for a $300,000 home, that would be $21,000.
Last November, one economist estimated that it took first-time homebuyers more than ten months to accumulate a down payment than it did before the pandemic, thanks to home price growth that continues to rise faster than wages. No wonder some bullish homebuyers are turning to the surging crypto market for a boost.
Fairweather added that “cryptocurrency is one way that people without generational wealth can win a lottery ticket for the middle class,” although she noted that “some of these investments have gone up due to smoke.”
Bitcoin soared to record highs in 2021, gaining nearly 50% over the year with plenty of ups and downs along the way. (Bitcoin is already experiencing a major drop this week.) Altcoins like Ether and Dogecoin have also gone viral last year as investors piled into cryptocurrencies at record rates. Many have reaped amazing returns, but remember: digital investments are volatile and risky. While some experts expect prices to continue to rise, you should not invest any money in cryptocurrencies that you are not prepared to lose.
The Redfin survey found that the old-school way of saving for a down payment was still the most popular: 52% of people said they set aside money directly from their paycheck.
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