A new, massive report from Mike DelPrete published this week tracks the growth of iBuyers as they jockey for market share amongst themselves in the grander scheme of the industry and also looks at how the pandemic impacted the iBuyers.
“[Real estate] is an industry of endless opinions, oftentimes unencumbered by data or facts, so that’s why having this is good, so you can understand exactly what’s going on,” DelPrete, who serves as a real estate technology advisor and is on the board or an investor in a number of real estate startups, told Inman.
“Over the past couple of years, iBuying has been one of the fastest-growing segments in the industry in an industry that’s notoriously slow to change,” DelPrete added. “It’s still niche, it’s still less than one percent of market share but it’s been doubling, so it’s moving really fast.”
The report found that iBuyers market share more than doubled in 2019, from 0.2 percent of total transactions in 2018 to 0.55 percent of total transactions. Zillow was the biggest gainer, with a 1,200 percent increase in transactions, year over year, while Opendoor grew 95 percent and Offerpad grew 43 percent.
Zillow’s growth changed the competitive landscape in 2019. The company accounted for 18 percent of total iBuyer market share in 2019, up from 3 percent in 2018.
Opendoor meanwhile went from 70 percent of total market share to 64 percent of total market share, while Offerpad went from 26 percent of total market share to 16 percent of total market share. Redfin went from 1 percent to 2 percent of total market share.
The report, which is broken down in sections, also takes a deep look at the profitability of the various iBuyers’ business models — including a dive into Zillow’s “Real Estate 2.0,” shift. Zillow, according to the report, is getting more efficient and its net loss per home is slowly shrinking each quarter.
“[Zillow’s] launch of iBuying is so aggressive, and so fast,” DelPrete said. “It’s even more shocking because it’s a huge multi-billion company.
“It gives them the resources but I don’t know, when was the last time you’ve seen a $10 billion company move that fast?”
Other sections include a look at a deep dive into the Phoenix market — which is essentially ground zero for iBuyers in the United States, and the market in which many of the platforms first launch — as well as a look at companies’ relationships with agents, offer quality and key themes to look for in 2020.
The report also dedicates an entire section to how the COVID-19 pandemic has affected the industry. The top four iBuyers all suspended buying during the pandemic due to safety concerns, which DelPrete said was sensible in an uncertain market, where determining home value was difficult.
Opendoor, which ended up laying off 35 percent of its staff during the pandemic, was the first to resume buying, followed two days later by Offerpad.
DelPrete believes the iBuyer business model is actually uniquely positioned to thrive in a world of social distancing because there is no need for open houses, they can offer self-guided home tours for homes they own without an agent present and selling to an iBuyer eliminates the necessity of homeowners having external contractors in a house to conduct pre-sale repairs.
One thing that surprised DelPrete was Opendoor’s strategic decision to slowdown buying before the pandemic hit. Opendoor’s home purchases were down 20 percent year-over-year in February and 47 percent in March, as COVID-19 began to spread.
It’s not clear what exactly led to the decision, but DelPrete said it was definitely more than just a seasonal slow down.
“Looking backward, it seems like a genius move,” DelPrete said “If you know there’s going to be a pandemic and a slowdown, that’s exactly what you want to do, so you don’t have a lot of inventory.”
Purchase the full report here.