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.
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.