- Zillow and Opendoor suspend iBuying activities in light of coronavirus
- Redfin, Compass and Realogy are also no longer options for sellers to sell
Potential buyers now conspicuously absent from today’s coronavirus housing markets are iBuyers.
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Redfin’s RedfinNow was the first to declare a “time out” in the iBuying segment of its business. Glenn Kelman, founder and CEO of Redfin, recently explained to his shareholders that the current coronavirus pandemic and its economic fallouts do not allow to the company to properly price its houses via its iBuying efforts.
As of last week, Compass, Realogy, Zillow and Opendoor have now followed suit by suspending their respective iBuying business models.
All of these companies, in addition to more iBuying competitors, have called similar “time-outs” due to the health concerns and health orders in nearly all-50 states. All of these companies underline their respective decisions to continue to sell homes during the coronavirus.
iBuying has enabled sellers to sell their homes more conveniently and more quickly with a date certain time frame than conventional home sales. iBuyers have algorithmically determined “fair market prices” in all cash offers that close in days rather than weeks or months when sellers agree to those fair market prices. In areas like Phoenix where relatively uniform single-family homes are the norm, iBuyers have an estimated 5%-10% market share as sellers who need to sell their houses as soon as possible have come to rely upon them.
Now, with the coronavirus pandemic essentially bringing the American economy to a halt, some potential home sellers whose earnings have come to a halt may have looked to iBuyers to bail them out from mortgages that suddenly look unaffordable. But, this iBuying option is now unavailable when it could have helped play a positive role in keeping the housing market liquid.
At this point in time, no home sales data has been released since the coronavirus pandemic struck the US. Yet, if we can look to international housing markets that have already been impacted by COVID-19, we see that home transactions dropped to almost -100% in China and to -90% in Seoul, South Korea. The only good news is that home prices did not experience similar drops, according to a recent study by Zillow.
If, according to Curbed’s Jeff Andrews, the real estate market will likely return to normal in short order when the threat of the virus spreading subsides – complete with tight supply, high prices, and probably iBuyers too.
Thanks to Curbed’s Jeff Andrews.