Opendoor, the largest and oldest iBuyer, is still struggling to adjust its business model to a more restrictive, sluggish market but is carefully watching the recent National Association of REALTORS’® (NAR) settlement as the company ramps up home purchases and looks for profitability “across seasons and market environments.”
On an earnings call yesterday, Opendoor CEO Carrie Wheeler characterized changes made by the settlement as “neutral to positive” for the company, saying that lower commissions or less transactions on the MLS could bring more consumers back to iBuyers.
“We believe that Opendoor stands to benefit consumers rethink(ing) how they buy and sell homes,” Wheeler said. “(D)uring a time when the industry has the potential to undergo a major change in how consumers are thinking about how to sell or buy their home, we are very well positioned.”
Change is something that iBuyers like Opendoor are hungry for. With revenue down 62% year over year, clocking at $1.2 billion, and reporting a net loss of $109 million (up from $101 million), Opendoor has fallen far from its pandemic peak, when the instant buying market grew exponentially as home prices shot up and consumer demand ran red-hot.
That all ended relatively swiftly, as the Federal Reserve hiked rates and both home sales and home price appreciation stalled in 2022. Several iBuyers, including Zillow and Redfin, got out of the business altogether, while Opendoor and others cut costs to survive.
But here early in 2024, the company is pointing toward a continued success in moving homes as evidence there are better days ahead, with just over 2,600 properties in their portfolio under contract to purchase at the end of Q1 2024 (up 130% from a year ago), even before the NAR changes, which Opendoor explicitly said it expects will lower agent commissions.
Executives are also touting the ability to make those transactions profitable, with Opendoor taking in 4.8% in profit on average per sale in Q1, as CFO Christy Schwartz said the company is confident it can continue to make 5% to 7% per home over the coming year, and expects to significantly increase the number of homes it purchases.
“We remain on track to increase acquisitions on a year-over-year basis each quarter in 2024 while delivering annual contribution margin in our target range and operating efficiently, which should substantially decrease our adjusted net income losses for the year,” she said.
As far as the NAR settlement, though, Wheeler seemed to see plenty of long-term opportunities for her company—though she emphasized that Opendoor thinks the agreement is an “important positive change” for the industry at large, and predicted it would drive transaction costs lower (which the company might pass on to consumers).
“We also believe this settlement could result in more transactions as commissions decrease, which may encourage more consumers to transact directly, including through…Opendoor’s platform instead of listing on the MLS,” she said.
Wheeler also fielded multiple questions from investors on potential further evolutions in how real estate transactions are regulated or approached by consumers.
In response to one investor who wondered if the MLS system “was potentially starting to wane” with looming further disruptions by the Department of Justice, Wheeler pivoted to praise MLS platforms as “a great thing” and “democratic.”
“We want to give the consumer total agency to do what is right for them in whatever way they want to do it, including if they want an agent to come with them,” she said. “So my (earlier) comments were not about…the MLS. We’re supportive of the MLS, but really about enabling consumers to go direct.”
Another investor asked Wheeler to “entertain…an extreme scenario” where the NAR settlement resulted in a large decrease in agents as consumers bypassed traditional representation, and if Opendoor would need to adjust its own model in those circumstances.
Short answer: no, said Wheeler.
“We provide something that you can’t get in a traditional transaction,” she said. “To the extent that our broker commissions come down…ultimately, it’s probably a pass-through. It’s probably neutral…we’ll see how the market responds post-July and we’ll be prepared to respond in kind.”
