August 25, 2020
With low-interest rates here to stay, pockets of suburbs and trendy exurbs have started to heat up the real estate market. Urbanites have been escaping the close confines of COVID infected cities to enjoy social distancing in the greener pastures of suburbia. As the U.S. economy grapples with a major recession and social unrest, real estate appears to be one of the best assets to survive the slowdown.
With mortgage interest rates on the downward trend, U.S. real home prices have risen 45 percent from February 2012 through May 2020 according to the S&P/CoreLogic/Case-Shiller National Home Price Index. Considering the backdrop of the coronavirus pandemic, these trends definitely make real estate an enticing investment.
But before we take out our wallets, Nobel laureate, Robert J. Shiller warns us of not letting history repeat itself. In a recent NYT Economic View piece, Shiller noted, “It would be easy to assume that the boom times for housing will go on forever, but that would require ignoring the disaster that led to the most recent great financial crisis, a little more than a decade ago.”
Let’s bring out the history book. From February 1997 to December 2005, real home prices rose a staggering 75 percent. Seemingly unaffected by the stock market decline of 2000 to 2002 and the U.S. 2001 recession, investors flocked to the real estate market. But just as the delusions of an impenetrable mortgage-backed security spread, housing prices crashed 36 percent from 2005 to February 2012, plummeting the U.S. stock market with $8 trillion lost between late 2007 and 2009.
The impact of the Great Recession highlighted the illiquidity of real estate assets. From slow transactions, settlement, and verification processes that include many intermediaries, to dispersed and isolated databases, the corporate real estate ecosystem revealed itself as an opaque, illiquid asset class.
However, with the evolution of digital assets on the blockchain, real estate has become a forerunner in demonstrating the many benefits of tokenization. By unitizing real estate assets on the blockchain, the benefits of an immutable, transparent, and tamper-proof audit trail provide clearer asset valuations and better market efficiency. In April, these benefits came to fruition as real estate tokens increased at an average of 4.27 percent, while top securities tokens suffered losses for the month.
There’s no doubt that tokenization can provide enhanced liquidity and democratizes investment opportunities, but we must recognize that it is only part of the solution. Currently, there exist no information rails that provide investors with insights to see the value of the underlying token asset in real-time. Unlike mutual funds or traded stocks, token assets have no NAV, 10K filings, or quarterly financials reported.
With a mission to not repeat the same mistakes that led to the 2008 financial crisis, Intain’s Asset Value Blockchain (AVB) addresses this knowledge gap by providing real-time asset-value insights to token holders. As real estate tokenization grows, it will be essential for investors to have a holistic insight into each token asset’s valuation. Intain’s AVB does just this by providing a token-specific ‘NAV’, giving real estate token holders the ability to track their token assets in real-time.
With this added layer of transparency, Intain’s AVB technology presents itself as an exciting development within the token real estate market. By combining the success of tokenization with the much needed token ‘NAV’, Intain’s AVB provides token holders with the liquidity that their digital securities are missing.