August Cromford Report & Opendoor Homes For Sale

Aug 22 – There is currently an interesting difference between the strategies of the two main iBuyers in the Greater Phoenix area.

Opendoor has roughly 2,520 homes in inventory and only sold 151 in July. That means they have almost 17 months of inventory. Holding costs start to mount when you have that much in stock, to say nothing of the interest on the money tied up. You can see that they are motivated to sell, because they are disposing of many homes well below cost and giving some buyers substantial closing concessions.

For the 47 homes sold since August 10, the average gross profit made (the difference between the purchase price and the sale price) was -4.4%. The average concession was 0.61% and the average buyer broker’s compensation was 2.24%. This means an overall gross margin of -7.25%. This does not allow for the fee charged to the seller, which is not public information.

In the same period, we saw only 7 sales by OfferPad since they seem to be less willing to take a write-down on their homes for sale. We calculate that they have roughly 495 homes in inventory, which represents 11 months of supply at their July sales rate of 45. However, this strategy means their sales volume in August is very low. The average profit made on homes that sold since August 10 is more healthy at +5.8%. They are being more generous with their buyer broker compensation at an average 2.75% and less generous with their buyer concessions at 0.27%. Overall their gross margin stands at about +2.8% – still positive.

So based on affidavits filed since August 10, OfferPad are making positive gross margins but not recording many closings. Opendoor are closing far more but are doing so by accepting substantial negative gross margins.
OfferPad is achieving an average 95.7% of their original list price while Opendoor is only achieving 87.9%. This is because Opendoor cuts prices more aggressively and more frequently. Their average hold time is 130 days and average days on market is 76. OfferPad has an average hold time of 105 days and 63 average days on market. These figures only count homes that closed, not homes that are for sale or in escrow.
We see signs that both iBuyers are getting far less aggressive with their buying and expect to see them get far more aggressive with their selling. With over 3,000 homes owned and almost 2,100 active listings, the iBuyers represent 11% of the active listings on ARMLS. They only represent 3% of ARMLS closings. They will probably be trying to get those percentages to be closer to each other in future.

Aug 21 – The bad trends for sellers that have prevailed since April appear to be running out of momentum.

New listings have dropped sharply over the past few weeks, with fewer than 10,000 appearing in the last 28 days. The peak was 12,246 per 4 weeks (on June 28) and the last time we had fewer than 10,000 was April 21. The 4-week count is down 2.7% compared with the same time in 2021. The weekly total is 9% below last year so this downward trend in new supply appears to gaining strength. A shortage of new supply is great news for sellers, though with demand so low, we are still seeing a slight build-up in available inventory.

However, demand is showing signs of life at last – not in the sales counts which will remain awful for some time – but in the rate of listings going under contract. In the 7 days that started on Sunday August 7, we saw 1,803 newly accepted contracts. This is the highest weekly total since June 12 and far more encouraging than the dismal 1,429 for the week beginning July 3. We would describe these developments as the first signs of a possible improvement in market conditions.
Aug 20 – The rate of arrival of new listings continues to drop while demand has stabilized at a subdued level. This means we are seeing only a modest rise in active supply – up only 132 in the last week. The is less than half the rise during the previous week and dramatically lower than a month ago.
Some cities have even seen supply fall during the last 7 days, including Fountain Hills, Cave Creek, Maricopa, Chandler, Glendale and Tempe. This new trend, if it continues, will substantially reduce the recent downward pressure on pricing.
Aug 19 – The overall market (all areas & types within the ARMLS database) has seen its Cromford® Market Index fall below 110. This is the first time the CMI has dropped below 110 since February 17, 2015.
We officially declare the market to be balanced. It will remain so while the CMI lies between 90 and 110.
Things vary a lot between segments however. Locations such as Surprise, Gilbert, Tempe, Maricopa, Litchfield Park, Buckeye, Queen Creek & San Tan Valley are buyer’s markets, while Fountain Hills, Paradise Valley, Scottsdale and Cave Creek are seller’s markets.