Opendoor has been losing big lately in Sacramento since the market shifted. I thought it would be interesting to take a look at their activity over the past few months since I’m getting so many questions about them. This is not about throwing shade, and I’m not writing as a fanboy either. This is objective analysis to help parse what is happening. Enjoy if you wish.
UPCOMING (PUBLIC) SPEAKING GIGS:
8/25/22 State of Housing Brunch & Learn (sold out)
9/08/22 SAFE CU “Stats & Mimosas” (sold out)
9/15/22 Market update in Midtown (details TBD)
10/07/22 Market update with SAR (Sign up here – On Zoom)
THE MARKET SHIFT HASN’T BEEN KIND TO OPENDOOR:
When looking at Opendoor listings and current pendings, they’ve clearly been struggling in Sacramento over the past few months since the market shifted. I think the general public and real estate community has been in tune with this because we’ve all seen lots of properties listed below their acquisition price. On average the current list price is down about $12,000 from the acquisition price. This doesn’t seem like much, but it also DOESN’T include future real estate fees, credits offered to buyers, the cost of improvements, additional price drops, etc… In short, Opendoor is poised to have an ugly third quarter since 65% of their current actives are listed below the acquisition price.
- The company did much better before the market shifted (see below).
- Opendoor had a few unicorns where they were able to sell for substantially more after buying from an owner. The highest difference over the past few months was $192,000 between acquisition and resale. This means a few owners sold to them WAY BELOW market value.
- Their closed sales spent about 40 days longer on the market compared to other sales in the region.
- The median price has ticked down about $40,000 since May in the region, and that’s been brutal for Opendoor’s profitability.
- Opendoor routinely has a higher percentage of price reductions compared to the rest of the market.
- Opendoor was struggling to get offers on their listings, but that appears to be picking up. For instance, a few weeks ago 83% of what they had on the market was active, but now that number is 71% in light of more properties getting into contract.
- A mom-and-pop flipper couldn’t sustain losses like this, but a tech company with massive financial backing might be able to pivot.
Here is a sample of Opendoor active listings right now in the Sacramento region. They currently have almost 250 active listings, and this portion is representative of the trend.
Here is a different way to look at Opendoor listings. Anything above the zero percent line is still listed above the acquisition price, whereas anything below is currently below acquisition.
GRAPHS FROM TRAVIS WRIGHT:
I shared Opendoor data with Travis Wright, who I know from Twitter. I asked him if he wanted to collaborate on this post, and he said yes. So, here is what Travis came up with to help show days on market trends and potential profitability has gone down over time. These visuals divide the closed sales price into the acquisition price, so it’s a potential return. In other words, the images do NOT consider real estate fees, credits, holding costs, repair costs, etc…. Thanks Travis.
OPENDOOR DID BETTER BEFORE THE MARKET SHIFTED:
On average Opendoor came out about $25,000 above their acquisition price when considering sales since May. Does this mean they were profitable? Well, it’s hard to speak to that without knowing their numbers. I’ll just say this looks really tight when considering the gross figure doesn’t account for the following yet: real estate commissions, holding costs, improvements made, and credits. The part that really stands out to me is an average of 155 days from acquisition to closing, which means Opendoor has been holding properties for about five months. If someone has specific insight on profitability, you are welcome to comment below.
Here is a look at the difference between the acquisition and closed price for sales between May and August so far. This looks much different compared to what is happening with their listings right now. Anything above the zero line represents properties that sold for more than their acquisition price. Again, this doesn’t automatically mean the company was profitable.
OPENDOOR HAS BEEN STAYING ON THE MARKET TOO LONG
Properties took an average of 18 days to get into contract over the past few months in the region, but Opendoor listings took an average of 59 days. Some have wondered if staying listed longer is a marketing strategy to keep the sign in the yard longer. Whatever the case, it’s been blatant in my opinion that they’ve had an issue lingering on the market for too long. I suspect listing at a lofty level worked a little easier during an appreciating market where value could maybe catch up to a higher list price. Can it work in a changing market today with less demand? We’ll see.
Opendoor has been trying to crack the code, and the market shifting in recent months has been a monkey wrench in their operation to say the least. The median price dropped a little more than 6% since May in the Sacramento region (about $40,000), and this type of market change has dealt a massive blow to Opendoor’s current holdings at least.
It’s easy to bash Opendoor because they’re trying to challenge the traditional model, but I wouldn’t write them off yet because they recently partnered with Zillow, they’re spending a ton of money on marketing, and they have a war chest of greenbacks at their disposal. In fact, Mike DelPrete states “Opendoor’s advertising spend has skyrocketed this year, higher during the first six months of 2022 than ALL of last year.” Don’t get me wrong, it’s well-publicized that this company has lost over a billion dollars thus far. I’m just saying the future hasn’t happened yet, so it’s important to keep watching.
Are things starting to turn? Opendoor was struggling to get into contract, but it looks like they’re starting to attract more buyers to their listings. For instance, a few weeks ago 83% of what they had on the market was active, but now that number is 71%. Are price reductions making a difference? Or is it the $3,500 incentive they announced a few weeks ago? We need time to understand.
Let’s keep watching, and I’ll keep reporting stats and perspective. If this post does well, I’m glad to follow up again.
- Mike DelPrete puts out the best iBuyer data. I highly recommend subscribing to his blog. Mike was kind enough to trade some emails with me this week. Here’s his latest talk (WTF 2022).
- Tyler Okland puts out lots of Opendoor analysis. In fact, he recently wrote about Opendoor’s struggle in Phoenix. I follow him on Twitter, and a few weeks back Tyler affirmed Opendoor numbers were lackluster in Sacramento.
I hope this was helpful.
Thanks for being here.
Questions: What stands out to you the most above about Opendoor? What did I miss? Anything else to add?