Current 30-year fixed mortgage rates in the United States are close to 7%, making it hard for younger people to buy homes. Homeownership, once an achievable dream, is now becoming a distant hope for younger generations. High real estate prices and rising interest rates, aimed at controlling inflation, are key factors.
A New Approach with WienerAI
Shannon Diesch, CEO of WienerAI, told that a company that offers tokenized alternatives to traditional mortgage financing. Diesch discussed how real-world asset tokenization could help more people become homeowners.
Equity-Based Financing Model
Tokenization of residential real estate introduces an equity-based financing model. This model connects real estate investors and aspiring homeowners as equity partners, unlike the current creditor-debtor relationship in home mortgages. Through fractionalized equity rights assigned via tokenization, both investors and homeowners can share in the property’s appreciation and sell their tokens to realize their equity gains.
Benefits for Investors and Homeowners
Investors benefit from property appreciation and monthly cash flows from homeowners. Diesch noted that tokenized real estate lowers the entry barrier for potential homeowners: “Retail investors can’t easily buy investment properties — it’s expensive. They need to save for a down payment and other costs. Tokenization opens up these opportunities to people who currently lack access to such investments.”
Alternative to Traditional Equity Solutions
Tokenization offers an alternative to equity tapping solutions like home equity lines of credit and private equity refinancing, which can be inaccessible or predatory. According to Diesch, investors also benefit from tokenization residential real estate, avoiding the headaches of rental agreements and property management.
Removing Costly Intermediaries
By connecting investors directly with aspiring homeowners, costly intermediaries like banks and Wall Street are removed from the transaction, leading to significant savings for both parties.
Blockchain’s Impact on Real Estate
In 2023, Ralf Kubli of the Casper Association suggested tokenization of mortgages to bring transparency to the home mortgage industry and prevent another financial crisis like in 2008. The Home Construction Collective is using blockchain-based crowdfunding to build homes, addressing the market undersupply that prices out first-time homebuyers.
On the commercial real estate front, Hilton Hotels and Resorts issued tokenized debt to build a hotel in El Salvador, requiring a minimum investment of $1,000. These tokens are exchangeable on the Bitcoin layer-2 Liquid Network.
