The cryptocurrency boom is helping some homebuyers break into a red hot real estate market.
A new survey from Redfin found that 11.6% of people buying homes for the first time said that selling investments in cryptocurrency had helped them save for a down payment. The survey of 1,500 U.S. residents planning to buy or sell homes within the next year was conducted in December.
Thanks to crypto's meteoric growth, the portion of first-time homebuyers using gains from trading digital currencies to fund down payment savings is rising: 8.8% of first-time buyers said the same in the third quarter of 2020, and 4.6% said the same in the third quarter of 2019.
It's worth noting that the data reflect generational trends. Crypto investors and first-time homebuyers both tend to skew young, with particularly big representation among millennials.
“With extra time and a lack of exciting ways to spend money, many people began trading cryptocurrencies during the pandemic,” Daryl Fairweather, chief economist for Redfin, said in a statement.
It’s also a lot more difficult to save up for a house than it used to be. According to a National Association of Realtors report, the typical down payment for a first-time buyer in 2021 was 7% of the total. So, for a $300,000 home, that would be $21,000.
Last November, one economist estimated that it was taking first-time homebuyers ten months longer to put together a down payment than it did before the pandemic, thanks to home price growth that continues to rise faster than wages. It's no wonder that some hopeful homebuyers are turning to the soaring crypto market for a boost.
“Crypto is one way for people without generational wealth to win a lottery ticket to the middle class,” Fairweather added, though she noted that “some of those investments went up in smoke.”
Bitcoin rose to record highs in 2021, gaining nearly 50% over the course of the year with lots of ups and downs along the way. (Bitcoin is actually suffering a significant drop this week.) Altcoins like Ether and Dogecoin also exploded in popularity last year as investors piled into digital currencies at record rates. Many raked in impressive returns, but remember: Digital investments are volatile and risky. While some experts expect prices to keep climbing, you shouldn’t invest any money in cryptocurrencies that you aren’t prepared to lose.
Redfin’s 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 paychecks.