If you’ve ever contemplated investment opportunities, you’ve probably pictured the following scenario.
It’s 2017, and you’re in a financial position where you can either invest in real estate, or in Bitcoin. Fast-forward to 2021, would you have been better off making a 20% down payment on a house, or spending that equivalent on a crypto-currency?
Lost opportunities only make themselves apparent in hindsight. The same can also be said about financially disadvantageous decisions. In a recent study, Point2 analysts aim to shed light on this matter by taking a retrospective glance at how Bitcoin and house price fluctuations would have affected your investment gains.
The 5-Year Picture
To put matters into perspective, let’s start by taking a look at how the prices of real estate and Bitcoin have changed between 2017 and 2021.
In terms of real estate, the nationwide median house price has increased from $320,500 in July 2017 to $404,700 in July 2021. In spite of early fluctuations, house prices have seen a steep upward curve especially since the dawn of the pandemic. Prices soared by almost 25%, from $322,600 in April 2020 to $404,700 in July 2021.
Created in 2009, it was only in 2017 that Bitcoin breached the $1,000-mark. In just five years, the price has appreciated by 6,319%. The downside, however, is the highly volatile nature of this asset. We’ve seen drastic fluctuations in a short amount of time, with the price dropping from $63,225 in April 2020 to $31,875 in July 2021, before soaring back up to $65,986 in October 2021.
Prospecting Gains vs Losses on the NYC Market
The median house price may have increased on a national level, yet this growing trend has been far from even when you look at the five boroughs. Here’s how the median prices have changed between 2017 and 2021.
- Bronx: home prices increased by 150%
- Brooklyn: home prices increased by 98%
- Queens: home prices dropped by 2%
- Staten Island: home prices dropped by 8%
- Manhattan: home prices dropped by 31%
It’s worth pointing out that the 31% drop in median house prices in Manhattan is by far the steepest, not just in NYC, but also on a nationwide level.
Crunching the numbers
Considering these figures, as well as taking Bitcoin price changes into account, would it have been better to invest in real estate in 2017, or invest the same amount in Bitcoin?
Let’s take the Bronx, for example. A 150% house price appreciation promises a hefty reward five years later, but does this prognostic hold water? Back in 2017, when the median house price was $126,250, the 20% down payment would have required an investment of $25,250, or the equivalent of ₿26. In 2021, your financial gains from investing in real estate would be $188,750, whereas the gains from Bitcoin would be $1.62 million.
At the other end of the spectrum, you have Manhattan and its 31% price drop. With the median house price clocking in at $1,451,250 in 2017, the 20% down payment would have been $290,250, or ₿301. If you were to sell that property in 2021, you would actually be losing $451,250. Had you invested in Bitcoin, your gains would now reach a whopping $18.63 million.
The scales are tipped in the favor of Bitcoin investments even in Staten Island. A median house price of $664,319 in 2017 would have required a down payment of $132,864, the equivalent of ₿138. Five years later, the 8% price drop would have resulted in losses of around $54,320 if you wanted to sell the house. Meanwhile, investing in Bitcoin would have boosted your crypto wallet by $8,53 million.
The Bottom Line
Both Bitcoin and the median home price have increased since 2017. However, while home prices have increased steadily since the second quarter of 2020, the price of Bitcoin has seen drastic fluctuations in 2021 alone. And therein lies the danger, especially if you’re skeptical about cryptocurrencies.
Real estate may require a higher initial investment, yet it’s a timeless, tangible asset that provides long-term returns and multiple investment opportunities. Bitcoin is decentralized as well as inflation-resistant, and although it’s a speculative financial asset, it has the potential to be a high reward investment in spite of the high risks.
Banner Image: Bitcoin and Blockchain Technology. Image Credit – Mohamed Hassan