Market Scenarios

How HEIs and $USH behave in different market conditions

The Core Design

$USH tracks U.S. residential real estate prices, moving up and down with the housing market. Investors get liquid exposure to American real estate.

Rising Markets

When home prices appreciate, $USH NAV rises in tandem. During the 2020-2022 boom when homes appreciated 10-20% annually in many markets, $USH would have tracked these gains directly. This provides the upside exposure investors seek from real estate.

Behind the scenes, the HEI portfolio performs even better. The 2x multiplier amplifies gains, though the 21.93% annual effective cost cap limits extreme upside. A homeowner seeing 20% appreciation might refinance after two years. The HEI investor receives the lesser of their 20% share or the capped amount - approximately $147,000 on a $100,000 investment after 24 months. This 21.93% annualized return significantly exceeds the underlying home price appreciation.

The excess returns flow to $sUSH stakers while $USH holders maintain pure real estate exposure. This separation allows different investors to choose their preferred return profile.

Declining Markets

$USH tracks real estate downturns transparently. If portfolio homes decline 10%, NAV falls 10%. This direct correlation provides honest exposure to real estate cycles rather than attempting to hide volatility.

The HEI portfolio demonstrates resilience even as $USH NAV declines. In a 20% decline scenario over three years:

• Starting home value: $1,000,000

• Investment amount: $100,000

• Ending home value: $800,000

• HEI investor's 20% share: $160,000

• Effective cost cap after 36 months: $181,589

• Actual payout: $160,000 (below cap)

• Return: 60% gain despite market decline

This structural advantage means the portfolio continues generating positive returns even as $USH NAV falls, supporting continued value capture (see NAV and minting) for stakers.

The 2008 Financial Crisis

The 2008 crisis provides the best historical stress test. National home prices fell 20-30%, with some markets experiencing 50%+ declines. Under these conditions:

$USH Impact: NAV would have declined 20-30%, accurately reflecting real estate values. Token holders would have experienced paper losses similar to any real estate owner.

HEI Portfolio: Even in 30% decline scenarios, the 2x multiplier ensures profitability. A $100,000 HEI on a $1 million home that falls to $700,000 still pays out $140,000 - a 40% gain. Only in extreme 50%+ decline markets would HEIs face price declines leading to paper losses against purchase price.

The critical insight: while $USH holders experience real estate volatility, the backing portfolio remains profitable, ensuring the protocol's sustainability through downturns.

Interest Rate Cycles

Interest rates affect the ecosystem primarily through homeowner behavior. High rates reduce refinancing activity, extending average HEI duration from 4.5 to perhaps 6-7 years. While individual HEIs remain profitable, the extended timeline reduces annualized returns.

For $USH, rate impacts come through their effect on home prices. High rates typically slow appreciation, leading to modest NAV growth. Low rates often accelerate appreciation, boosting NAV more rapidly.

The portfolio adapts to these cycles. During high-rate periods, fewer HEIs settle early, reducing reinvestment opportunities but maintaining steady returns. During low-rate periods, accelerated settlements allow capital redeployment into new HEIs.

Regional Dynamics

Geographic diversification ensures $USH tracks national trends rather than local volatility. While individual markets may swing dramatically — e.g., Austin +20% while San Francisco -5% — the portfolio blend creates stable NAV progression.

This diversification particularly benefits the HEI portfolio. Concentration limits (5% per zip code, 10% per MSA, 30% per state) prevent overexposure to any one market while ensuring participation in growth regions. The result: consistent portfolio returns that support reliable staking yields regardless of regional variations. Learn more about portfolio construction guidelines.

Black Swan Events

Extreme scenarios test any investment thesis. For Manifest:

• Pandemic-Style Disruption: COVID-19 initially froze real estate markets, then drove unprecedented appreciation. $USH would track this volatility while the HEI portfolio benefits from any appreciation surge.

• Regulatory Changes: Sudden restrictions on HEIs could halt new originations but wouldn't affect existing portfolio value. The protocol could continue operating with current assets while exploring alternatives.

• Currency Crisis: Dollar devaluation would likely drive real estate appreciation as a hard asset hedge, benefiting both $USH and HEI returns.

• Technology Disruption: Blockchain failures or DeFi collapse affects token liquidity but not underlying asset value. Redemption mechanisms ensure value recovery.

Long-Term Secular Trends

Several trends support Manifest's model regardless of short-term volatility:

• Housing Supply Constraints: Limited new construction in major metros supports long-term appreciation

• Demographic Shifts: Millennial homebuying and boomer aging create sustained demand

• Monetary Policy: Central bank policies favor asset price inflation over deflation

• Global Capital Flows: International demand for U.S. real estate remains strong

These factors suggest continued home price appreciation punctuated by cyclical corrections — exactly the pattern $USH is designed to track.