iBuyers Less Competitive – Their Biz Model Holds Them Back
Successful iBuyers need a stable market, reliable automated appraisals and sellers afraid their home won’t sell quickly – and the current market doesn’t offer those.
NEW YORK – While the housing market came roaring back during the pandemic, iBuying activity didn’t.
iBuyers’ volumes and market share will likely finish 2020 at 50% less than 2019, according to real estate tech strategist Mike DelPrete, who studies iBuying activity in real estate. Meanwhile, traditional home sales for existing homes and new homes has been running above last year’s levels.
iBuyers make instant cash offers to sellers who wish to bypass the traditional MLS marketing route, often for assurance of a quicker sale. However, homeowners tend to pay higher fees for the convenience.
DelPrete’s report notes that all the major iBuyers – Opendoor, Zillow, Offerpad and Redfin – have seen a significant drop in 2020’s overall transactions compared with 2019. Opendoor, the nation’s largest iBuyer, has seen the largest drop since the pandemic, with total transactions for the year down 59% compared to 2019.
Activity dropped because many iBuyers paused operations when pandemic first struck the U.S. this spring. Still, Opendoor’s October home purchases were down more than 70% compared to a year ago, DelPrete’s report notes.
Even down, though, Opendoor continues to hold the largest market share in the iBuying business. DelPrete reports that in 2020 so far, Opendoor had a 50% market share, followed by Zillow’s 26%llow, Offerpad’s 23% and Redfin’s 1%.
“The drop in iBuyer market share and transaction volumes isn’t a failure of the model, but it is a result of the model,” DelPrete notes in the report. “The iBuyers face a slow climb back to the levels of 2019, as they conservatively ramp up operations in a new, uncertain housing market.”
Source: “iBuyer Market Share Set to Drop By Half in 2020,” Mikedp.com (Nov. 21, 2020)
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