Mike DelPrete maps the growth of tech-enabled real estate brokerages and iBuyers from 2018 to 2020 at Inman Connect in New York.
The real estate industry moves slowly, but it’s never moved as quickly as right now, according to Mike DelPrete, a real estate tech adviser, professor and member of Zavvie’s board of directors. There’s no greater evidence in the voracious market share growth of tech-enabled brokerages and iBuyers, DelPrete said, during a morning session titled, “Mike DelPrete’s State of the Industry,” at Inman Connect in New York at the Marriot Marquis.
In 2019, Compass and Redfin, two of the largest tech-enabled brokerages, roughly doubled their market share growth, according to DelPrete. The two companies accounted for approximately 3 percent of transactions in 2019, up from 1.5 percent in 2018. He predicts that number could grow to 4 percent in 2020.
“That’s moving fast,” DelPrete said.
Redfin’s growth has been steady and took roughly 14 years to reach its current point, while Compass has reached that point in only six years – in part because they’re well-funded by venture capital money. Compass’ growth resembles more of a “hockey stick,” according to DelPrete, while Redfin’s has been slow and steady.
“I couldn’t draw a straighter line with a ruler,” DelPrete said, describing Redfin’s growth.
The two companies don’t have a ton of competition in the space of tech-enabled brokerages, in terms of market share, but there are still learnings that can be drawn from those companies, like Door, Redefy, and others, according to DelPrete. Particularly the high attach rates they report for ancillary services like mortgage. Some of those companies report attach rates as high as 80 percent, in an industry where the average is around 25 percent.
“These [compaies] are small volume, but it’s worth paying attention to them, especially as people talk about ancillary services as a path to profitability” DelPrete said.
The iBuyer model is also growing fast, with Opendoor, Zillow, Offerpad and Redfin leading the way. IBuyers, in 2019, more than doubled their market share to close 60,000 transactions and account for 0.5 percent of total market share, according to DelPrete. Roughly 8.7 billion worth of homes were purchased by iBuyers in 2019, he said.
DelPrete also provided some insight into how the iBuyer market share is being divided amongst the top players in the space. In total, Opendoor accounted for 64 percent of total homes purchased by an iBuyers, down from 72 percent the year before. Zillow accounted for 18 percent of homes purchased, up from 3 percent the year before. Offerpad dropped from 25 percent to 16 percent and Redfin stayed steady at 1 percent year-over-year.
And while Zillow was the only one that gained a large percentage in terms of the portion of market share captured, every iBuyers grew significantly in 2019. Opendoor roughly doubled, Offerpad was up 43 percent, Redfin climbed 300 percent and Zillow rocketed up a whopping 1,200 percent – the latter two off an admittedly small market share in 2018.
But that market share growth accompanying a widening, not deepening market, according to DelPrete.
“Over 70 percent of that growth has come from new markets based on purchase volumes,” DelPrete said. “If you think about iBuyers expanding, this is breadth, this is launching into new areas, it’s not necessarily depth.”
Nearly 50 percent of homes sold to iBuyers came in four markets: Phoenix, Atlanta, Dallas and Houston.
“Atlanta is moving really fast in the iBuyers space,” DelPrete said.
DelPrete also analyzed the totality of iBuyer purchase and re-list transactions to find that iBuyer median offer was 98.6 percent of the re-listed home’s automated valuation model (AVM).
“That implies a market discount of 1.4 percent or $3,800 on a $200,000 home,” DelPrete said.