Now you see them, now you don’t… and now iBuyers are back again?
iBuyer companies like Opendoor and Zillow Offers were buying and selling homes at a fast pace in 2019 here in North Carolina. It seemed like they were going to be a huge problem for local Realtors as they continued to gobble up market share. Then they disappeared.
In my local markets of Raleigh and Charlotte, North Carolina, iBuyers are red-hot buying as many homes as they possibly can and gobbling up market share. These North Carolina markets were two of the top three spots for iBuyer purchases in 2019. They took 7.3% market share of all purchases in Raleigh – compare that to 5.9% market share in Phoenix and 5.2% in Charlotte.
The reason North Carolina is such a popular place for iBuyer companies is thanks to the affordability of homes and the growth Raleigh and Charlotte are experiencing. Some local Realtors were so convinced iBuyer companies were the future that they decided to join them.
If things were going so well in 2019, why did they totally disappear in early 2020?
iBuyers quickly turned into “iSellers” at the first sign of economic trouble in light of the COVID-19 pandemic.
In fear of a housing market upheaval, iBuyer companies decided to completely halt their home buying operations and chose to unload the inventory of homes at steep discounts, selling everything they could.
A real estate agent on my team helped a client close on a home owned by Opendoor that was originally listed for $200,000 and closed at $185,000. This is the type of offer Opendoor never would have accepted in the past, however, in light of the economic impact felt by the initial rush of COVID-19, they wanted to unload their inventory.
Stories like this help to confirm that the iBuyer companies are quick to react to any sort of economic downturn in fear of holding too much inventory. They’d rather sell at a loss or minimal profits to ensure they aren’t stuck holding too much inventory which can be a quick way for them to go under.
For a month or two, many people thought this was the end of iBuyer companies like Opendoor and Zillow Offers.
In March and April, they had completely stopped purchasing homes. People wondered how these cash-burning companies would survive in 2019. In 2020, many thought this was the nail in the coffin for iBuyer companies.
Then, they came back.
In early May, Opendoor announced they would resume operations in two markets, Raleigh and Phoenix. Additionally, Zillow Offers announced it would resume operations in four markets Raleigh, Charlotte, Phoenix and Tucson, Arizona.
Questions remain though: Are they back for good? Can they survive a true economic downturn? These are questions that will need to be answered over the course of time because they are simply not profitable companies at the moment and continue to struggle to find ways to provide ancillary services to offset their expenses.
Through this, we learned how iBuyer companies respond to any sort of economic downturn. They totally stop buying homes and look to quickly unload as much inventory as possible at steep discounts.
Holding too much inventory could be a huge problem for these iBuyer companies and they’d rather take a loss on the sale than be stuck holding too much inventory.