Take home pinball rides up US home prices after Zillow rumble
(Bloomberg) — Months after slowing home price appreciation of Zillow Group Inc.’s tech-driven flipping operation, the company’s one-time rival is getting a boost from a hot U.S. housing market.
The largest of the so-called iBuyers, Opendoor Technologies Inc., is listing homes for 17% more than they paid, according to data compiled by Mike Delpreet, a scholar-in-residence at the University of Colorado Boulder.
In a recent example, the company purchased a three-bedroom, three-bathroom house south of downtown Phoenix on March 1 for $458,700 and listed it eight days later for $561,000 — a 22% increase.
It can take several months from the time Opendoor agrees on a price to buy the home to the time it actually closes on the purchase. In the case of Phoenix Property, the seller accepted the company’s offer in January, a company representative said.
With prices skyrocketing, the gap worked in the company’s favor.
“Opendoor is basically making a bet on what the future value of that house will be,” Delprete said. “It so happens that right now, the bet is cashing in a lot because the housing market is appreciating.”
Opendoor, like its iBuying competitors, buys a home, makes minor repairs and puts the property back on the market. For the model to work, iBuyers would have to estimate how long it would take to sell a home, and what price they might get – a complex task made more challenging in a record-hot pandemic market.
Zillow spotlights how tough business can be. The company accelerated buying in the second half of last year. But when prices rose more slowly than expected, the online real estate giant was forced to sell homes at a loss. It announced in November that it was closing an operation known as Zillow Offers.
Opendoor’s 17% listing premium is based on 1,700 homes that went up for sale on March 15. The average markup for the company is at a historic high, Delprete said, citing research from the firm YipitData. The homes it is listing now are expected to sell in the second quarter.
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