After two years of steady price appreciation, the real estate market across the globe has begun to abruptly decelerate — and there is little consensus on what’s to come.
This industry is more volatile and fast-moving than ever, with market segments shifting as much as 30% in a matter of weeks. For many people, buying a home can be incredibly difficult — or even impossible.
This was the impetus for Parcl, the blockchain-based real estate platform that, via the Parcl Protocol, enables users to invest in a digital square foot of real estate in the most lucrative neighborhoods around the world.
Benzinga sat down with Trevor Bacon, CEO and co-founder of Parcl, to gain insight on how to monetize current real estate market volatility through cutting-edge blockchain solutions.
In the face of market volatility, blockchain-based real estate investing platform Parcl offers a powerful use case for blockchain investing that provides security, stability and hedging opportunities.
Bacon will speak at Benzinga’s Future of Crypto conference on Dec. 7 in New York City.
BZ: In a volatile market, how can blockchain provide investors security and stability?
Bacon: Institutional real estate buyers are pricing out individual buyers because they're buying homes in record amounts. There’s a supply shortage in housing overall, creating housing inflation. Interest rate volatility is creating more real estate volatility — we haven’t seen a rate hike like this in over 50 years.
At Parcl, our mission is to create a platform that lets everyone have access to real estate. Parcl provides price exposure or hedging opportunities versus actually taking a physical house and putting it onto the blockchain. Parcl is tied to real-world assets’ price per square foot that is tracked through the Parcl Price Feed (PPF) and the Parcl Protocol.
This offers security and stability amidst larger market chaos, giving homeowners and developers an opportunity to hedge their real-world investments while giving investors exposure to the global real estate market, rather than just one specific home.
BZ: What are the financial benefits of uniting traditional investment strategies and novel technology?
Bacon: The real estate volatility seen over the last three years demonstrates the importance of having a platform that provides liquid price exposure to real estate.
The market moves faster than it ever has — in both directions!
Real estate is known to be among the most consistent investments, but the barriers to entry are very high and getting higher every day. Using blockchain and a synthetic real estate format, we are lowering the barriers to gaining access to the asset class.
Past models — like fractionalization — require significant capital up front and then time to close, which limits scale.
BZ: Since the start of the COVID-19 pandemic, we've seen volatility increase across the real estate market, but the many current metrics are notoriously slow and delayed in its data delivery. How accurate is the data coming out now about the real estate market? Do you see an alternative for tracking real estate prices with timely information?
Bacon: The current data standard is far too lagged and does not accurately capture major trends that have emerged in the real estate market over the last five-plus years.
It is disturbing that key policies and decisions are being made on such poor-quality data that track a fundamentally different market than what’s actually occurring today.
Parcl Labs is our data and AI effort. We believe our data is the most accurate and timely available on the market. It updates daily and tracks all activity occurring on the ground within any geographical boundary.
For context, benchmarking standards like the Case Shiller leave out upwards of half or more of the data that should determine residential real estate pricing. For example, over the past five years, the typical turnover time of homes has been cut in nearly half, with much of the market turning over in six or fewer months. This is due to an influx of new, active players such as institutional buyers. The Case Shiller leaves these transactions out of the index.
The Case Shiller is a lagged indicator of single-family homes only.
It updates at the end of the month for two months prior. At the end of October, we will finally see numbers from August.
Traditional methods of analysis that rely on out-of-date and incomplete data sources are leading to inaccurate pictures of the housing market. We see the ramifications of this with data points such as the CPI and OER (owners equivalent rent) which present the state of housing prices and rental rates from late 2021/early 2022.
The most consequential financial policy decisions in the world are being made on this data. To us, that isn’t acceptable.
This story is part of the Benzinga Future of Crypto 2022 summit-related content. Bacon is among the speakers at Benzinga’s inaugural crypto conference Dec. 7.
Cover: Ilona S from Pixabay.
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