Opendoor Technologies says it’s cutting prices on its inventory after buying more homes than it sold during the second quarter, putting the company back in the red, but the company expects the homes it’s buying now will perform well.
The iBuying giant dramatically boosted home sales during the second quarter, generating $4.2 billion in revenue, but racked up a $54 million net loss. That’s a turnaround from the first three months of the year, when Opendoor posted its first profitable quarter, with net income of $28 million.
Opendoor’s inventory balance swelled by 143 percent in April, May and June, to 17,013 homes valued at $6.6 billion, as it bought more homes (14,135) than it sold (10,482), the company said Thursday in reporting second quarter earnings.
In letter to shareholders, co-founder and CEO Eric Wu said Opendoor is “prioritizing inventory health by reducing the price of our existing inventory in line with the market.”
While Wu said those price reductions will cut into profit margins, “these actions will enable strong financial performance beyond this period of market transition. And, for the homes we are acquiring today, we expect those to perform well and in line with expectations.”
Opendoor also announced Thursday that it has entered into a multi-year partnership with Zillow, to allow home sellers on the Zillow platform to request offers from Opendoor. Zillow shut down its own iBuying program, Zillow Offers in November.
On Monday, the Federal Trade Commission (FTC) announced a $62 million settlement with Opendoor to resolve allegations that the company “pitched potential sellers using misleading and deceptive information” that suggested they would make more money by selling to the iBuyer than they would on the open market.
During the second quarter, Opendoor expanded into six new markets — New York and New Jersey, Detroit, Southwest Florida, Boston, Albuquerque, and Cincinnati — bringing the total number of markets served to 51, up 31 percent from 39 markets a year ago.
Opendoor’s recent expansion has coincided with the collapse of Zillow’s iBuying operation and the rise and newfound profitability of rival Offerpad, which posted its second consecutive profitable quarter in the first three months of 2022.
“We are pleased with these results, and our long-term vision remains clear,” Wu said. “As we look ahead, current volatility in the housing market is requiring a highly dynamic and rigorous approach to managing risk and overall inventory health.”
For the third quarter, Opendoor said it expects revenue of $2.2 billion to $2.6 billion, and an adjusted loss of between $125 million and $175 million (earnings before interest, taxes, depreciation and amortization, or EBITDA).