iBuying transactions fall by half as traditional home sales accelerate

Home sales might be up during the COVID-19 pandemic, but iBuying companies are still suffering from a lack of activity. Indeed, it’s looking likely that the market share of iBuying activity will be around 50% less than what it was in 2019, according to one analyst.

iBuyer companies such as Opendoor operate a business model that involves making instant cash offers for a seller’s home, allowing them to bypass the traditional MLS listing route and sell their home faster. However, they usually have to pay higher fees for the convenience of a quick sale.

Unfortunately for iBuyers, that model no longer makes much sense for sellers in today’s market, where homes are selling faster than ever, and often for much more than the owners paid for them.

Tech strategist Mike DelPrete, who studies the iBuying in real estate industry, has just posted research that shows how all of the major iBuyers, including Opendoor and its rivals Zillow, Offerpad and Redfin, have seen a substantial drop in transactions in 2020 compared to the previous year. Opendoor, which is the biggest iBuyer by number of transactions, has seen its total number of deals fall by 59% so far this year.

One reason for the reduced transactions this year is that most iBuyers briefly paused their business operations back in spring as the pandemic first struck. But that’s not the only reason, because Opendoor’s home purchases in October were down 70% compared to one year ago, DelPrete said.

Opendoor still retains the largest market share in the iBuying industry, accounting for almost 50% of all such transactions in 2020. Zillow is in second place with 26%, Offerpad has 23% and Redfin commands just a 1% share.

DelPrete said the drop in iBuying transactions doesn’t mean the model has failed, but said it is a result of the model.

“The iBuyers face a slow climb back to the levels of 2019, as they conservatively ramp up operations in a new, uncertain housing market,” he said.