The so-called iBuying industry is facing its biggest challenge yet in the face of the COVID-19 pandemic, and it has responded by purchasing fewer homes than it has done in the last three years, according to research by Redfin.
iBuying giants including Opendoor and Zillow Offers largely stopped making instant cash offers on homes when the coronavirus outbreak began in the U.S.
However, those companies began resuming their buying activity in select markets in May, and had more or less returned to normal by the end of the summer. iBuyers say they’ve seen a rebound in demand for homes, and some are even engaging in bidding wars against each other as homeowners look to make a quick and profitable sale during the pandemic.
That wasn’t the case in the second quarter though, as iBuyers bought a combined 880 homes in the period, amounting to just 0.1% of all homes sold across major U.S. metros. That’s down 88% from the 7,410 homes they purchased in the same period one year ago, a 0.6% market share.
Redfin’s analysis is based on MLS and public records data of iBuyers like RedfinNow, Opendoor, Zillow, and Offerpad. It said iBuyers spent $195 million buying homes in Q2, compared to $1.6 billion a year earlier. Phoenix, Raleigh, N.C., and Las Vegas saw the largest drops in iBuying activity in the second quarter.
iBuyers have found a niche in providing some homeowners with the option for a quick sale by making an instant cash offer for their off-MLS listings. However, homeowners usually have to pay higher transaction fees for the convenience.
With the industry now gaining traction again, many iBuyers are reporting an uptick in demand.
“One trend that has ramped up since the pandemic began is the iBuyer bidding war,” says Jason Aleem, vice president of RedfinNow. “Homeowners are seeking out offers from multiple iBuyers so they can feel confident they are getting the best possible price in this blazing hot market without a bunch of foot traffic coming through. As a result, iBuyers are making more competitive offers.”
During the second quarter, iBuyers purchased homes for a median of $241,000, which is down from $250,000 a year earlier, Redfin’s data shows. iBuyers tended to purchase homes for less than the metro area’s median price, except in Riverside, Calif.