Opendoor riding hot housing market to peak premiums

iBuyer listing homes for median 17% above purchase

National /
Mar.March 22, 2022 02:22 PM
Opendoor CEO Eric Wu (iStock, Comparably)

Opendoor CEO Eric Wu (iStock, Comparably)

Opendoor is looking to avoid the hazards that helped take down Zillow’s iBuying business, riding the wave of appreciation in the housing market.

The San Francisco-based iBuyer is listing its homes at a median premium of 17 percent above what it paid for the homes, according to data compiled by University of Colorado Boulder scholar-in-residence Mike DelPrete. The median premium works out to about a $60,000 gain on the flip, per DelPrete.

That doesn’t mean Opendoor is making precisely that much revenue on its home flips. The iBuying business involves purchasing a home from a seller before making repairs before quickly putting it back on the market, meaning a slew of expenses involved in the flip beyond the closing of the initial transaction.

Nevertheless, the premium represents a historic high for the company, according to the data collected by DelPrete, which also uses YipitData’s historical analysis. The findings are based on 1,700 listings as of March 15 and excludes Texas.

Timing couldn’t be better for Opendoor’s potential upswing into a big quarter. The company’s stock fell more than 25 percent one February morning, despite reporting revenue and earnings better than Wall Street’s expectations.

The selloff was attributed to a drop in the company’s contribution margin, which factors in the costs of carrying and selling home inventory. In the fourth quarter, it declined 9 percentage points year over year to 4 percent.

Opendoor’s net losses for the quarter, meanwhile, amounted to 13 cents per share, 5 cents better than the consensus estimate for the iBuyer. Revenue increased threefold in 2021 to $8 billion after the company sold nearly 22,000 homes during the year, more than double what it sold in 2020.

Zillow’s struggles with its algorithm and nonexistent premiums are part of what sank the company’s iBuying business. After home price growth came in below expectations, an analysis by Insider of activity in late October showed the company was listing almost 64 percent of the homes in five markets for less than what it paid for them.

At that point, the writing appeared to be on the wall for Zillow, which had already paused its iBuying operations. Days later, it was revealed the company was leaving the iBuying business for good, with plans to cut 25 percent of its staff.





    Related Articles

    arrow_forward_ios
    Related CEO Jeff Blau and 455 Tenth Avenue (Chris Martin, Google Maps, iStock)
    Related launches lodging for executives’ hybrid work
    Related launches lodging for executives’ hybrid work
    Matt Lauer with 26, 28 & 32 Actors Colony Rd (Getty, Susan Breitenbach)
    Matt Lauer finds buyer for languishing Hamptons estate
    Matt Lauer finds buyer for languishing Hamptons estate
    Barbara Russo, Danielle Englebardt, and Oren and Tal Alexander (Getty, iStock BFA)
    Ranking the top residential brokers on the Upper East Side
    Ranking the top residential brokers on the Upper East Side
    From left: PropTech's Thomas Hennessy and Joseph Beck; Appreciate's Chris Laurence (Appreciate, LinkedIn/Tom Hennessy, LinkedIn/Joseph Beck, iStock)
    Single-family rental platform Appreciate to go public in SPAC deal
    Single-family rental platform Appreciate to go public in SPAC deal
    From left: Douglas Elliman's Scott Durkin, Stephen Kotler and Avi Dan-Goor (Douglas Elliman, iStock)
    Douglas Elliman bets on Vegas in westward expansion
    Douglas Elliman bets on Vegas in westward expansion
    366 State Street and 37 Sidney Place in Brooklyn (Corcoran, Zillow)
    Passive house asking $15M tops Brooklyn contracts
    Passive house asking $15M tops Brooklyn contracts
    100 Eleventh Avenue (iStock, Rhododendrites/CC BY-SA 4.0, via Wikimedia Commons, Illustration by Kevin Cifuentes for The Real Deal)
    Lower-end listings dominate Manhattan’s luxury deals
    Lower-end listings dominate Manhattan’s luxury deals
    Wildfire, Houses
    One in five homes facing wildfire risk, report says
    One in five homes facing wildfire risk, report says
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...