Pain for home prices, commercial real estate; $50,000 bitcoin: outlook

Elevated interest rates will pull down home prices, one investor says. David McNew/Getty Images US real estate will crumble under the weight of higher interest rates, ProChain’s David Tamil says. House prices and commercial values will come under pressure for several years, he says. Mainstream acceptance of bitcoin will boost it by 66% to $50,000 by the year’s end, Tamil says.

Home prices are poised to tumble, while bitcoin could surge by two-thirds to $50,000 in under six months, the president of a cryptocurrency-investment firm says.

The Federal Reserve’s fight against inflation has centered on lifting interest rates from nearly zero to north of 5% within the past 16 months. The US central bank is likely to raise them further and keep them there, ProChain Capital’s David Tamil told Fox Business in a recent interview.

“It is going to crush some very interest-rate sensitive industries such as real estate,” he said about that prospect. “I think we’re going to see a multi-year, maybe decade-long fallout, first on commercial and then we will eventually get to housing.”

Higher rates lift mortgage rates, making it more expensive to buy a home using debt. They also raise interest costs for property developers. As a result, they tend to weaken demand for real estate, pulling down prices.

American households have been squeezed by historic inflation and higher interest payments on their mortgages, credit cards, car loans, and other debts. Yet home prices are still up about 40% since the COVID-19 pandemic struck in the spring of 2020, according to the S&P/Case-Shiller Index.

It’s only a matter of time before higher interest rates sap demand and home values fall, at least in Tamil’s view. He also spies danger in the debt-fueled commercial real estate sector, which faces the prospect of not only greater borrowing costs and lower asset values, but also a credit crunch as lenders pull back in fear of more bank runs and further declines in their bond and property portfolios.

Unsurprisingly, the crypto investor is far more bullish on bitcoin. The most popular coin’s price is likely to end the year up 66% at a two-year high of $50,000, he said.

Tamil rooted his prediction in the rising interest among asset managers like BlackRock and Fidelity in offering bitcoin exchange-traded funds (ETFs).

“This is going to be a tectonic shift for the use of cryptocurrencies to go ahead and represent ownership of assets,” he said.