iBuyers were all the rage in the third quarter, accounting for a record share of the housing market. But the new heights for selling and buying came at a price.
Homeowners sold 27,244 homes totaling $10.6 billion through iBuying services, according to Zillow’s iBuyer report for the third quarter, which evaluated the four largest: Opendoor, Zillow Offers, Offerpad and RedfinNow.
The period saw iBuyers account for 1.9 percent of home sales, nearly doubling their previous high of 1 percent set in the previous quarter.
As the housing market heated up, sellers often found that iBuyers were willing to pay far more than they had before. The median price of homes sold to an iBuyer was $376,000 in the third quarter, a record for the sector and a big jump from $333,000 in the second quarter.
Selling to an iBuyer may have also been more lucrative than going the traditional route, as the median price of third-quarter iBuyer purchases was 13.9 percent higher than for the market overall.
While iBuyers were spending a lot, they weren’t necessarily making a lot. The median markup was 1.8 percent, down almost 5 percentage points from the 6.7 percent median markup in the second quarter. In eight of the 36 markets analyzed by Zillow, iBuyers sold a typical purchased home at a loss; Austin saw the biggest median loss at 7.7 percent.
Phoenix emerged as a favorite housing market for iBuyers, passing Atlanta in the third quarter for the most homes sold through iBuyers. Some $1.47 billion worth of home sales there involved iBuyers, the first time a single market crossed the billion-dollar threshold. Phoenix was also one of three metros where at least 10 percent of homes were sold through iBuyers, joining Greensboro and Tucson.
The report is the first since Zillow announced its Offers service will soon cease to exist.
The company earlier this month said it had signed contracts to sell more than half the homes it had bought through Zillow Offers. It’s not clear how much Zillow is selling the homes for, but the company raised the fourth-quarter revenue estimate for its unit that includes iBuying by more than a third.
Whether Zillow’s exit from iBuying leads to a market contraction remains to be seen, as Offerpad and Opendoor look to fill the void with their own services.