The crypto-windfalls of low-income Americans boost their dreams of homeownership

According to a report published by the Office of Financial Research on Nov. 26, a US Treasury Department-affiliated research group, low-income households are using crypto earnings as a way to become homeowners.

Samuel Hughes, Francisco Ilabaca Jacob Lockwood and Kevin Zhao carried out the research based upon tax data. The study provides a critical look at how cryptocurrency is shaping the financial behaviors of economically vulnerable communities.

Home and car loans

This report highlighted the increase in “high-crypto&#8221Areas, which are defined by zip codes in which over 6% households have reported holdings of cryptos on their tax returns. The mortgage and auto lending activity in these regions has increased significantly, which coincides with the significant gains made by crypto markets.

Low-income families in these areas with high crypto experienced an increase in the number of mortgages between 2020 and 2024. In these high-crypto areas, low-income households experienced a surge in mortgage activity between 2020 and 2024.

Crypto windfalls may have helped many families secure bigger loans to enter the housing markets.

This report states:

“For low-income households, average mortgage debt balances and mortgage-holding rates sharply increased in zip codes with high crypto exposure. This indicates that low-income households may be using crypto gains to take out new mortgages and to take out larger mortgages.”

This report sheds some light on the auto loan trend in these regions. Auto loan balances increased most dramatically in regions with high cryptography among low-income families. Intriguingly, delinquency rate increased for zip codes with low and medium crypto, but declined in areas where there is high crypto. This suggests that households are managing auto loans more efficiently with crypto income.

Single-family homes have never been able to recover from the 2008 financial crisis that led to defaults. However, since Bitcoin’s inception in 2009 figures have continued to rise. The correlation does not necessarily indicate causation. However, it’s interesting that both the bull market in 2021 and the subsequent bear-market of 2022 saw an increase and decrease of new single family homes.

Risques

The researchers caution that, despite the positive trend of low-income families with significant crypto exposure, they may be at risk due to an increase in debt.

Although delinquencies are low in general, economic downturns and a crash on the crypto-market could cause financial instability. These risks could be amplified by the concentration of exposure among systemically important institutions.

Researchers conclude:

“An important takeaway for future monitoring is the increased debt balances and leverage among low-income households with crypto exposure. Rising distress in this group could cause future financial stress, especially if exposure to these types of high-leverage, high-risk consumers is concentrated in systemically important institutions.”

Postings in: Bitcoin, US Adoption, Cultural, Featured The Author

Oluwapelumi Adejumo

Journalist at CryptoSlate

Oluwapelumi believes in the potential of Bitcoin. He gives insights into a variety of topics, including DeFi hacks, culture and mining, while highlighting its transformative potential.

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Liam ‘Akiba’ Wright

Editor at CryptoSlate

Also referred to as “Akiba,” Liam Wright, Editor-in Chief at CryptoSlate is also the host of SlateCast. He is a firm believer that the decentralized technologies have the power to bring about positive changes.

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