iBuyers look to ramp up home purchases

Several tech companies are looking to purchase more American homes:

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“Our financial goal is to drive rapid growth at scale with sustained improvement in our profitability,” Opendoor, the industry pioneer, wrote in its letter to shareholders this week. After going public last year, Opendoor has now expanded into more than 40 markets and purchased 8,500 homes in the second quarter, more than any other quarter by almost 50%. The company, which is reportedly searching out a new $2 billion revolving credit facility, also announced this week that it is now willing to purchase the majority of homes in every one of its current markets.

Zillow announced similarly ambitious plans during its recent earnings call. While it bought only 3,800 homes in the second quarter, Zillow is gearing up to scale massively through the rest of 2021, saying that it expects its Homes division to bring in around $1.4-1.5 billion in revenue next quarter, roughly double what the division made this quarter…

iBuyers say that in exchange for money they offer convenience, quickly offering a number to homeowners who, if they accept, can then pick their exact move-out date, avoid showing their home, and use the money to immediately go house hunting. (Zillow says its goal is become a “housing market maker.”)…

Still, it’s difficult to deduce at this early moment whether adding high-tech firms to the real-estate market will be a net positive or negative for the typical American family, said Roberto G. Quercia, a professor of city and regional planning at the University of North Carolina at Chapel Hill. Residential real estate remains the dominant form of wealth for such families, making up roughly 70% of median household net worth, so the answer could have potentially enormous ramifications for the country.

The biggest factor seems to be the marriage of tech capabilities and money. There are other actors in the market who have plenty of cash to use. There are plenty of websites and apps for real estate. Does putting them together offer unparalleled convenience or particular knowledge through algorithms and real estate data?

There are multiple sets of consequences to figure out. As the article notes, it is not clear if these new home selling options benefit consumers. More options or more competition could be good. What do other actors like lenders, developers, and realtors think about this? Additionally, many communities might have concerns about institutional buyers who can leverage technology and scale but do not necessarily have local knowledge or concern about local markets. Could these actions drive up prices beyond what regular buyers could afford?

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