The Bitcoin Path to Homeownership

A Financial Revolution

In recent years, the idea of purchasing a home solely through saving in Bitcoin has captured the imagination of many. With Bitcoin's volatile yet upward trajectory in value, coupled with the traditional rise in real estate prices, this strategy presents an intriguing opportunity for prospective homeowners. In this post, we will explore how saving in Bitcoin can pave the way to homeownership, using data from December 2018 to December 2023 in the United States to illustrate its potential.

Let's begin by examining the conventional approach. In December 2018, the median home price in the US stood at approximately $321,500. Over the subsequent five years, real estate prices experienced a steady increase, reaching a median price of around $349,000 by December 2023. This represents a total percentage increase of approximately 8.6% over the five-year period. With a standard 20% down payment, you would have needed $64,300 in 2018 to buy a home and that amount would grow to $69,800 in 2023. But then you also have a mortgage and all the pressure that goes along with that, including the potential of losing your home if you lose your job and can’t make the payments, like what happened to a lot of folks during the Global Financial Crisis, which I wrote about here recently:

In expensive coastal markets, good luck finding a home for that price, and of course the rate of inflation in home prices in those areas is much higher than the national average.

Now, let's juxtapose this with the Bitcoin approach. In December 2018, the closing value of Bitcoin was approximately $3,800 per Bitcoin. Fast forward to December 2023, and Bitcoin's value had surged to approximately $45,000 per Bitcoin. Calculating the home price in terms of Bitcoin, we find that in December 2018, the home would have cost roughly 84 bitcoins, whereas by December 2023, it would have only cost around 7.76 bitcoins. This reflects a staggering total percentage decrease of about 90.8% in the price of the home when measured in Bitcoin terms over the same five-year period.

Updating the Bitcoin price to the current date, we find that as of April 2024, Bitcoin's value has further appreciated to approximately $69,000 per Bitcoin. Consequently, the cost of the home in Bitcoin terms has decreased even more, making it an even more attractive prospect for those who have been saving in Bitcoin. Here’s another way to look at the change in the value of real estate (the XLRE real estate ETF), which is down over 92% in Bitcoin terms over the past five years:

The implications of this analysis are profound. While conventional wisdom might suggest that saving in fiat currency is the prudent path to homeownership, the reality painted by the data suggests otherwise. By saving in Bitcoin, individuals can potentially see their purchasing power grow exponentially over time, making homeownership more attainable than they might have previously imagined. In fact, the dream of “paying cash” for a home can become a reality for many, not just the ultra-rich!

A Brief Word on Taxes

While this all sounds great, as much as I don’t like them, I do need to mention taxes. If you live in a jurisdiction where you have to pay taxes on the sale of your Bitcoin, you would need to factor that in to the net amount of fiat you would need in order to buy a home. Assuming you have been HODLing for over a year, the long term capital gains tax rate in the US (0%, 15% or 20% depending on your income) is a lot lower than the tax on ordinary income and there are currently nine states that don’t have a capital gains tax at all, including Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire and Tennessee. In the few jurisdictions where Bitcoin is legal tender like El Salvador, this is of course not an issue. More on Bitcoin taxation here if you’re interested:

Indeed, perhaps paying in Bitcoin would also make a homebuyer more discerning about what type of home they want to buy when parting with the best money we have ever seen. There is a movement within the Bitcoin space to bring back better quality / craftsmanship in construction (“Bitcoin Urbanism”), which I find both fascinating and incredibly exciting. Check out this great short talk by Tuur Demeester:

Moreover, owning Bitcoin offers a range of other benefits. Bitcoin operates on a decentralized network, free from the control of any single entity, making it resistant to censorship and manipulation. Its limited supply of 21 million coins ensures that it cannot be devalued through inflationary measures, unlike fiat currencies that can be printed at will by central banks. Additionally, Bitcoin transactions are secure and transparent, offering a level of financial sovereignty and privacy that traditional banking systems cannot match.

In conclusion, the idea of purchasing a home by saving in Bitcoin presents a compelling alternative to the traditional approach. Through careful analysis and consideration of the data, it becomes evident that Bitcoin's potential for appreciation far exceeds that of traditional fiat currencies, making it a viable option for long-term wealth accumulation and financial planning. As Bitcoin continues to gain mainstream acceptance and adoption, the path to homeownership may indeed run through the digital realm of Bitcoin.

Not financial or legal advice, for entertainment only, do your own homework.  I hope you find this post useful as you chart your personal financial course and Build a Bitcoin Fortress in 2024.    

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