Low-income households in the United States are leveraging crypto profits to achieve homeownership, a recent report from the Office of Financial Research (OFR) reveals. The study, conducted by Samuel Hughes, Francisco Ilabaca, Jacob Lockwood, and Kevin Zhao using tax data, provides insights into how cryptocurrency is influencing financial behaviors in economically challenged communities.
The report highlights the emergence of “high-crypto” areas, where more than 6% of households report holding crypto assets in their tax filings. These regions have witnessed a notable increase in mortgage and auto loan activities, coinciding with significant gains in the crypto market.
In these high-crypto areas, low-income households have witnessed a surge in mortgage applications between 2020 and 2024. The number of consumers with mortgages has grown by over 250%, with average mortgage balances increasing from $172,000 in 2020 to $443,000 in 2024, representing a 150% rise. This trend suggests that crypto windfalls are enabling many families to secure larger loans and enter the housing market.
The report indicates that low-income households in high-crypto areas are using crypto gains to obtain new and larger mortgages. Additionally, auto loan balances among low-income households have seen a significant increase in high-crypto regions. Interestingly, while delinquency rates have risen in low- and mid-crypto zip codes, they have declined in high-crypto areas. This pattern suggests that crypto earnings may be helping some households manage their auto loan payments more effectively.
Since the 2008 banking crisis, single-family home ownership has struggled to recover. However, the rise of Bitcoin since 2009 has coincided with an increase in new single-family homes. While this correlation does not imply causation, it is noteworthy that the 2021 crypto bull run and subsequent market downturn in 2022 also saw fluctuations in new single-family home constructions.
Despite these positive trends, the researchers caution against potential risks associated with growing debt and leverage among low-income households heavily exposed to crypto. While delinquency rates remain low currently, any economic downturn or a crypto market slump could lead to financial instability. Concentrated exposure in systemically important institutions could exacerbate these risks.
The researchers emphasize the importance of monitoring the increased debt balances and leverage among low-income households with crypto exposure. Any distress within this group could result in future financial challenges, particularly if exposure to these high-leverage, high-risk consumers is concentrated in systemically important institutions.
As low-income households in high-crypto areas navigate the path to homeownership using crypto profits, it is essential to strike a balance between leveraging these gains responsibly and managing potential risks associated with increased debt and market volatility. By staying vigilant and monitoring these trends, policymakers and financial institutions can better support vulnerable communities in their pursuit of financial stability and homeownership.