iBuyers like Opendoor (NASDAQ: OPEN), Offerpad, and other similar companies took a notable step back during the pandemic -- but now, according to new data, they’re diving back in with full force.
A report from real estate brokerage Redfin shows that iBuyers purchased 4,383 homes in the first quarter of the year -- a jump of over 20% compared to 2020’s last quarter.
iBuying volume is technically still down from a year ago (by about 6%), but it’s still a huge jump up from pandemic days. In the second quarter of 2020, iBuyers bought a mere 825 homes across the U.S. In Q3, it was just under 1,800.
Redfin’s Lily Katz calls it “a sign that iBuyers are continuing to ramp up after pausing business at the beginning of the pandemic.” But what does it mean for investors? Especially with for-sale inventory as strapped as it is? Let’s dive in.
Are iBuyers making the supply worse?
The housing market is woefully short on supply. In fact, a recent report from the National Association of Realtors shows that we need nearly 7 million more homes to fully meet demand.
The shortage is driving up home prices, causing near-constant bidding wars, and making it harder than ever for buyers (investors included) to find a home. So now that iBuyers are back in the game, will it make the market even more challenging?
While it might seem that way, the uptick in iBuying actually represents a very small blip on the market’s radar. iBuyer purchases accounted for a mere 0.5% of homes sold in the U.S. last quarter -- hardly enough to make a huge impact on overall supply.
That’s not to say iBuyers couldn’t make an impact in certain markets, especially ones where more than one iBuying company is present. But remember: iBuyers aren’t in the business of keeping homes once they purchase them. The properties they do purchase will be rehabbed, flipped, and relisted a few weeks (or even days) down the line. Granted, they’ll be relisted at a premium, which will probably do more for local home prices than supply.
This is most likely in markets like Raleigh, North Carolina, where iBuyers purchased nearly 3% of all homes in the first quarter of the year. Nearby Charlotte and Durham also have high rates of iBuyer purchase (2.7% and 2.6%, respectively), as do Tucson, Arizona, and Phoenix.
The bottom line
It seems iBuyers are finally getting back into the game following a pandemic-fueled slump in 2020. Fortunately for investors, it shouldn’t have too much impact on supply -- at least nationwide. It could, however, influence certain markets, particularly those with a larger-than-average iBuyer presence.