When home prices were rising, the iBuyer made “easy profits,” but some think its losses now – 42% of its Aug. sales – mirror Zillow’s failed iBuying venture.
NEW YORK – Home-flipper and iBuyer Opendoor Technologies lost money on 42% of its transactions in August, with especially hard losses in key markets like Los Angeles and Phoenix, according to YipitData reports.
Opendoor has already warned investors that it expected to lose up to $175 million in adjusted earnings before interest, taxes, depreciation and amortization in the third quarter.
Opendoor’s losses closely mirror the pricing problems that ended Zillow Offers, Zillow Group’s iBuying business, last year, according to Mike DelPrete at the University of Colorado Boulder.
Although this attrition may not doom the company, DelPrete speculates that September’s numbers may be even worse.
Opendoor racked up easy profits when home prices were soaring earlier in the year, before diminished affordability and high mortgage rates shut out would-be buyers. By June, median home prices had started falling in some areas, especially in Sun Belt markets. This forced Opendoor to offload thousands of properties it had agreed to buy when prices were increasing. The company elected to honor the offers, telling investors in August that the decision was an investment in the company’s brand.
Opendoor will eventually finish selling through the inventory acquired before the market changed, giving it an opportunity to stem its losses and resume profitable home sales.
Source: Bloomberg (09/19/22) Clark, Patrick; Kane, Elizabeth
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