iBuyers purchased just 0.2% of homes sold across 418 U.S. metros in 3Q because, “The hotter the market, the less attractive it is for home sellers” to use an iBuyer.
SEATTLE – The nation’s top iBuyers purchased about 1,800 homes in the third quarter, according to the latest analysis on the iBuying market by Redfin – just 0.2% of homes sold in the 418 U.S. metros tracked by the analysis.
Year-to-year, that’s about an 80% drop in iBuyer sales, following a temporary shutdown at the start of the coronavirus pandemic. However, iBuyer purchases did increase quarter-to-quarter. In the second quarter of 2020, iBuyers purchased about 800 homes.
The MLS and public records data search for iBuyers includes most of the well-known companies, including RedfinNow, Opendoor, Zillow and Offerpad.
The term “iBuyer” (short for instant buyer) describes real estate companies that purchase houses from homeowners in quick, cash transactions. They typically charge sellers a higher fee than a traditional real estate agent, but sellers receive a cash offer with a flexible move-out day. They also help sellers avoid home prep, showings and open houses.
After the sale, iBuyers make necessary improvements and resell the homes. They base their sales offer on algorithms that evaluate a property’s worth based on comparable market data.
While the iBuyer market saw a downturn, the overall real estate market is hot. Home prices are up as much as 15% nationally.
“The hotter the market, the less attractive it is for home sellers to let an iBuying company take a cut of the sale,” says Redfin Lead Economist Taylor Marr. “With home prices and demand surging, many sellers figure they can sell their home quickly without having to give away any of their profits.”
Sabrina Archolecas, an asset manager for RedfinNow in Texas, says that iBuyers are still ramping back up after putting business on hold at the beginning of the pandemic. They began reopening iBuying programs in May and June as housing demand started rebounding.
“We’re still playing catch up from the spring, when we stopped buying homes for a few months,” says Archolecas, who helps RedfinNow sell homes once the company has bought and renovated them. “We’re working on building up the inventory of homes that we can sell.”
iBuyer Market Share Was the Highest in Phoenix
Phoenix was home to the highest iBuyer market share, with iBuyers purchasing 1.5% of homes that sold there in the third quarter. Still, that’s down from 5.3% a year earlier. It was followed by Charlotte, N.C., with a market share of 1%, and Raleigh, N.C., at 0.9%.
iBuyers Sold Homes More Quickly Than They Did In 2019
Nationally, iBuyer-owned homes found a buyer after being listed on the market for a median of 13 days, down from 48 days a year earlier and 17 days in the second quarter. By comparison, the typical non-iBuyer home spent 33 days on the market, down from 39 days a year earlier and 37 days in the second quarter.
iBuyers Bought Less Expensive Homes Than Last Year
iBuyers bought homes for a median of $251,000 in the third quarter, down 2.3% year over year. By comparison, the median purchase price for the typical American homebuyer was $312,000, up 11.4% year over year.
The full report is posted online.
© 2020 Florida Realtors®
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