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For the first time, Opendoor is selling homes at a loss

Tuesday, September 20, 2022   /   by Dave Magua

For the first time, Opendoor is selling homes at a loss


After outpacing the competition, market conditions have finally caught up with the iBuyer, forcing it to prove that its model still works — even in a downturn.


 


Opendoor’s buy-to-sale premium — the difference between the purchase and resale price of its homes — has reached a record, negative low


Why it matters: For the first time in its existence, Opendoor is entering territory, where, in aggregate, it is selling homes for less than their purchase price.


• This certainly puts the company (and business model) under pressure, and is reminiscent of the situation faced by Zillow last year.

Go back: Opendoor outperformed Zillow during the dark days of 2021 (when Zillow Offers imploded); its buy-to-sale premium never dipped below zero percent.


• At the time, this demonstrated that Opendoor’s pricing operation was a powerful competitive advantage.

 


But 2022 is different; transposing Zillow’s performance in 2021 to Opendoor in 2022 shows a similar deterioration in the buy-to-sale premium.


• Even Opendoor’s pricing operation can’t keep up with the rapidly changing market (or perhaps this was a calculated risk Opendoor was willing to take).


Some perspective: Opendoor is selling around 2,000 houses per month with an average sale price of $400,000. A buy-to-sale loss of two percent amounts to a $16 million loss.


 


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Dave Magua
21065 Powerline Rd C-7
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