Opendoor has become a poster child for a housing market slowdown.
The San Francisco-based iBuyer reported a net loss of $928 million in the third quarter — more than 17 times what it lost in the second quarter, the company said Thursday in an earnings release.
Most of that loss was attributed to a $573 million writedown in home values, the firm said in a letter to shareholders, describing the adjustment as a “conservative forward view.”
The firm is operating under the assumptions that “current trends” of home prices dipping “will continue and potentially worsen,” Daniel Morillo said on a Thursday earnings call.
Opendoor anticipated a slowdown, but transactions have halted and prices have dropped “much faster and sharper,” than its forecast, the firm wrote in its shareholder letter.
Opendoor reported revenues of $3.4 billion — up almost 50 percent from the third quarter of last year, but nowhere near the $4.2 billion in revenues the firm reported last quarter.
Opendoor’s home purchases have also drastically slowed, with the company buying about 8,400 homes in the third quarter, compared to more than 14,000 the prior period. In the fourth quarter, the firm is expecting to sell more homes than it buys, Wheeler said.
Over the last few months, Opendoor has been scrambling to save cash, most recently disclosing it would lay off about 18 percent of its workforce, or about 550 people. On the Thursday earnings call, CEO Eric Wu called the cuts “necessary” for the firm’s long-term health, with CFO Carrie Wheeler calling its cost cuts “aggressive.”
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“We do not feel capital constrained,” Wheeler said on the call. But the firm’s losses are creeping up on the firm’s balance sheet: Opendoor had about $1.5 billion in cash in the third quarter.
It was revealed in September that Opendoor was selling homes at a loss, due to rising mortgage rates and uncertainty around the economy.
Opendoor has stuck to iBuying — using technology to buy and sell homes — over the last two years, while others have exited the market altogether. Zillow announced last November it would no longer buy and sell homes, citing market volatility and a flawed algorithm. Since then, the company partnered with Opendoor to allow sellers on the platform to request an offer from Opendoor to purchase their home.
Home sales aren’t expected to pick up anytime soon — the Fed raised rates by a further 0.75 percent on Wednesday and mortgage rates have already surpassed 7 percent.