Is Massive iBuyer Opendoor Closing Their Doors?

is massive iBuyer Opendoor closing their doors?


This Week's Top Headlines:


U.S. Foreclosure Starts Increase 15% in First Half of 2023
foreclosure filings were up the first half of 2023 compared to the same time last year, and up 185% from the same time period two years ago... yipes!
 
New Home Sales Rise as Buyers Run Out of Options in the Resale Market
An ongoing and persistent lack of homes in the resale market is pushing more home buyers into new construction, which caused sales to surge for the second month in a row...
 
US Existing Home Prices Suffer Largest Drop Since December 2011
The median price for an existing home fell 3.1% from last May to $396,100 this year. The drop is the largest since December 2011, when home prices dropped 3.9%...
 
U.S. Residential Asking Rents Still Close to Record High in June
rents don't typically fall much even when renter demand pulls back. Instead of lowering rents when business is slow, many landlords offer perks like a free month's rent or discounted parking, which tends to be less of a hit to profits....

 

Hey gang, if you know anything about me you probably know that there are two companies in the real estate space that....... well let's just say I'm not a fan of them (you can insert your own colorful expletives I'm trying to keep this newsletter PG!): one is zillow the other is opendoor. 

 
even saying their names makes me shudder...


Irregardless of my feelings about those companies, in general I'm not a fan of big companies buying houses and then selling them for above market value because they can afford to hold the prices until they get enough market saturation to influence the market.

They can do this because they can get billion-dollar loans at interest rates around 1.4% so they can tack on an extra $5,000 to $20,000 to the purchase price of every home, while getting the house at the same actual cost as a typical homeowner.

Not only does that make it harder for John and Jane Q Citizen to afford homes, but they're also able to outbid other buyers with cash, which makes it harder for John and Jane to buy the house in the first place, and then they're holding onto many tens of thousands of these homes (and likely will never sell them), so that tightens an already record-low inventory, making it even harder for John and Jane to become homeowners.... like ever.

It's like they're trying to create an entirely new class of indentured servants... and it makes me feel all icky inside.

so when I saw opendoor in the news again I went to go pop my popcorn to watch the show until I saw this...


 


and I was all...

 


so what happened??? how did they jump from 8Bn in revenue to over 15Bn in revenue?

I think the answer is in losses. they're actually losing a lot of money... 664M in 2021 and 1.4Bn in 2022

so I guess enough investors still believe in this model of selling convenience to homeowners in exchange for equity. kind of like how amazon, uber, and a lot of the other "market disruption" businesses run on massive losses for many years. 

Some of these companies have investors convinced if they just keep their doors open long enough, eventually it will pay off big. And Opendoor's goal is to take significant market share from the trillion dollar per year residential real estate industry.

So it seems that for now Opendoor's doors will stay open a little while longer.

Whether those investors are right or wrong is TBD. Personally, I think it's telling that Zillow, a more established company than Opendoor by far, failed so colossally in their endeavor to remove real estate agents from the equation.

Perhaps there are some industries that it truly pays to have an actual person guiding you through the process.



<cough cough shameless self-plug cough cough>



sorry, had something stuck in my throat there. that was weird.



As always, my promise to you each and every week is to act as your personal assistant and help you understand what's happening in the world of real estate.

If there's something you'd like me to include in a future newsletter, please let me know!:o]

until next week!

-realtor josh

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