The past year—or at least the second half of it—wasn’t too kind to large-scale iBuyers, and it showed as its two most prominent players, Opendoor and Offerpad, continued to struggle financially during the final three months of 2022.
In its latest earnings report, Opendoor posted a 25% decline in revenue in the fourth quarter last year, reeling in $29 billion. The company also suffered a net loss of $399 million, nearly double its losses in the same period the year before.
While that is much lower than Opendoor’s Q3 2022 showing—when it posted nearly a billion dollar net losses—it serves as another example of how the company and the iBuying sector as a whole fared as the shifting conditions took hold of the housing market last year.
In her first investor call since taking over leadership of the iBuying company, Opendoor CEO Carrie Wheeler acknowledged the company’s challenges in the second half of the year, but seemed optimistic for Opendoor’s future as the housing market stabilizes.
“While navigating a major housing cycle has not been easy, we never lost sight of our vision,” Wheeler said Thursday afternoon. “Challenging times like these have the benefit of increasing urgency, demanding focus, and putting teamwork front and center that’s energizing and part of why I decided to take the CEO role.”
Opendoor’s losses have primarily been attributed to the shifting housing market’s impact on the values of the homes it had on hand. They were under contract to buy before interest rates rose.
The company sold 7,512 homes in Q4—down 23% from Q4 2021—and pulled back on buying homes in the fourth quarter. The iBuyer acquired 3,427 properties—down 64%—and ended the quarter with 1,011 homes under contract to purchase.
Despite the turbulent second half of the year, Opendoor managed to wrap up 2022 with a substantial increase in its full-year earnings. The company reeled in $15.6 billion last year, marking a 94% increase from 2021.
Opendoor sold 39,183 properties last year, up 80% from 2021 when it offloaded more than 21,700 properties. Despite the annual increase in sales, the company also suffered a net loss of $1.4 billion in 2022, nearly double the $662 million losses it tallied for 2021.
Part of the issue came from the change in the value of the company’s cache of properties. Opendoor reported an average of $28,000 lost on each home it sold in Q4 versus the $16,000 profit it made on each home in the fourth quarter of 2021.
Even on the full-year scope, Opendoor went from earning a $24,000 profit on each home in 2021 to earning $13,000 on average.
During the Thursday call, Wheeler stressed that Opendoor is “highly focused on stabilizing our core business and ultimately returning to positive free cash flow.”
“We are making solid progress,” she said, highlighting that the company sold—or was in contract to sell—two-thirds of its “loss-making homes” purchased before the housing market shifts.
Wheeler also expressed optimism for the company’s future as the market stabilizes, touting Opendoor’s efforts to diversify its demand funnel. That includes Opendoor Exclusives and its partnership with Zillow, which recently launched its collaborative product allowing homeowners in Atlanta and Raleigh to request a cash offer from Opendoor on Zillow.
Opendoor expects its first quarter revenue to range between $2.45 billion and $2.65 billion.
Offerpad experienced similar challenges in the fourth quarter.
The company posted a 22% decline in revenue, earning $677.2 million in Q4 while also reporting a $121.1 million net loss compared to the same period last year when Offerpad reported a net income of $12.8 million, hitting profitability after going public in 2021.
The decline in revenue came as Offerpad dialed back acquisitions of new homes by 82% during the final three months of the year, buying just 539 homes.
Offerpad sold 1,865 homes during the fourth quarter, representing a 23% decline from a year ago. The company also lost an average of $24,100 on each home it sold during Q4, a significant shift from the $29,000 profit it made on each home sold in 2021.
“Last year was truly a tale of two halves with the striking difference in market conditions from the first to the second half of the year,” said Offerpad CEO and Chairman Brian Bair in a Wednesday conference call.
Like Opendoor, the first half of 2022 proved a boon for Offerpad as the company increased its full-year revenue by 91% to $4 billion. However, the Arizona-based iBuyer also posted a $148 million loss for the year compared to the $6.5 million the company earned in 2021.
“Still, we had some remarkable accomplishments in 2022,” he continued. “However, the historic interest rate increases and decline in affordability left us with two significant challenges in the fourth quarter. First was selling inventory acquired prior to the market shift; second was securing additional capital to strengthen our balance sheet. I’m happy to report we made significant progress on both.”
Offerpad sold over 10,000 homes last year—a first for the company—while it purchased 9,034 homes.
Bair noted in a Wednesday statement that the company is nearing the end of its “legacy inventory disposition” as it has tried to offload the remainder of the homes it purchased before the housing market and home value shifts.
Offerpad executives said they expect to sell 1,300 to 1,450 homes during the first quarter of 2023. Revenue is expected to come in between $480 million and $540 million.
“In 2023, we expect to accelerate our acquisition volume with a focus on increasing penetration in more affordable markets,” Bair said.
Bair also indicated in a Wednesday statement that Offerpad’s gameplan for the year is to “retain and build our foundational cash offer and listing service, responsibly grow our business with an increased focus on existing market penetration and expand our capital-light business-to-business partnerships and services.”
