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Amid a slower market and an internal pivot, iBuying giant Opendoor on Tuesday announced that it was laying off 22 percent of its workforce.
In total, the company cut 560 positions, according to a statement Opendoor provided to Inman. The cuts, which were announced internally Tuesday morning, primarily focused on operations roles. In the statement, a company spokesperson described the move as a “very difficult decision” but said that it comes as “we’ve been weathering a sharp transition in the housing market.”
“We’re taking these actions now to better align our operational costs with the anticipated near-term market opportunity, while maintaining our critical technology investments that will continue to drive the business long term,” the statement added. “While this was a hard decision, it was necessary to ensure that we can continue to deliver on our mission and serve our customers for years to come.”
The statement goes on to cite last year’s historic rise in mortgage rates as driving “an approximately 30 percent decline in new listings from peak levels last year.”
Opendoor didn’t specify how many employees remain. But 560 is 22 percent of about 2,545, meaning the company should have around or just under 2,000 workers remaining after the cuts.
Workers whose positions were cut will receive severance, extended healthcare benefits and job transition support. The statement further notes that “our biggest priority is supporting our people.”
The layoffs come amid a bruising time for the broader housing industry. After two years of record low mortgage rates during the coronavirus pandemic, the Fed’s efforts to combat inflation last year sent rates soaring. That tamped down demand for new loans, and existing home sales ultimately fell every month in 2022.
That trend reversed course in February of this year, with sales spiking 14.5 percent compared to January. But even with that reversal, sales in February of this year were still 22.6 percent lower than at the same time in 2022.
The fallout from this situation has been dramatic, with thousands of workers in mortgage companies, brokerages, tech firms and other real estate sectors losing their jobs. Big-name companies including Zillow, Compass, Keller Williams and many others have all cut workers over the last year.
In Opendoor’s case, the company previously cut about 550 jobs — or 18 percent of its workforce at the time — in November.
Both the November layoffs and those announced Tuesday hint at the challenges facing iBuyers right now. Though the concept has been among the buzziest in real estate for years, higher rates and slower home price growth over the last year has made it increasingly challenging to buy, renovate and sell homes for a profit.
As a result, Opendoor suffered a net loss of $399 million in the final quarter of 2022, as well as a loss of $1.4 billion for all of last year. On average, Opendoor lost $28,000 per home it sold in the final three months of last year. That’s a stark reversal from the $16,000 in profit it made on average from each home sale in the final three months of 2021.
However, during the company’s most recent earnings report CEO Carrie Wheeler did say that homes purchased more recently were “outperforming our expectations” — suggesting Opendoor’s greatest challenge in early 2023 was simply to offload homes bought during headier times in the past.
Other iBuyers have similarly wrestled with challenging conditions. In November, Redfin announced the end of its own iBuyer program, following in the footsteps of Zillow that made a similar move one year earlier.
Offerpad, Opendoor’s chief remaining rival, lost $121.1 million in the fourth quarter of 2022, and $148.6 million for the entire year. The company additionally burned through $24,100 for each home it sold during the fourth quarter of 2022, and is currently under the threat of being delisted from the New York Stock Exchange if it can’t improve its share price.
Among other things, Opendoor has responded to the changing housing landscape with a new marketplace dubbed Exclusives. The marketplace is meant to connect buyers and sellers, with Opendoor collecting a fee for acting as a middleman between the parties. The marketplace represents a potentially more nimble and asset-light business that doesn’t require the company to spend huge sums on buying and renovating properties.
Opendoor has also struck up a partnership with erstwhile rival Zillow.
Though Wheeler didn’t speak out Tuesday about the layoffs, she has in the recent past struck a bullish tone of Opendoor’s prospects despite the challenging market landscape. In February’s earnings report, for example, she ultimately concluded that “we are focused on operating with excellence and leaning into our core strengths.”
“We’re energized,” Wheeler added in a February call with investors,”about our future.”
Update: This post was updated after publication with additional information on Opendoor’s layoffs, recent business, and partnerships.