iBuyers bought more houses at higher prices in Q2 2021 than in any other quarter. Plus, iBuyers’ fees are down.
iBuyer Purchase Volumes and Prices Jump to Record Highs
iBuyers, hard hit by the COVID pandemic in 2020, are rebounding. In fact, according to Mike DelPrete, a well-regarded real estate strategist and scholar-in-residence at the University of Colorado Boulder, iBuyers bought more houses at higher prices during Q2 2021 than during any other quarter ever.
In terms of iBuyer purchase activity, Opendoor bought more homes in Q2 2021 than it bought in all of 2020. At approximately 7,500 purchases in Q2 2021, Opendoor bought more homes in Q2 2021 than it bought in Q3 2019, approximately 5,800, its former quarterly purchase peak. Zillow, with approximately 3,900 purchases in Q2 2021, doubled the home purchases the company made in Q1 2021.
iBuyer Service Fees Dropping
Here’s a data point to watch over time…iBuyer service fees are dropping. In 2019, iBuyer service fees came in at 7%, according to ATTOM Data Solutions. In Q1 and Q2 2021, iBuyer service fees dropped to 5%.
iBuyer Median Purchase Price Now $350,000
It used to be that $250,000 was the steady-state median purchase price for iBuyers…the iBuyer’s “sweet spot,” if you will.
Not anymore. As of May 2021, the new iBuyer’s “sweet spot” is $350,000.
iBuyers are still purchasing the same types of homes…they’re simply paying more for them, an increase of over +40%. This increase reflects the “hotness” of the housing market and closely mirrors the median purchase price of the overall housing market.
For more specifics on this new $350,000 “sweet spot,” over the past 18 months, the percentage of homes acquired by iBuyers for under $250,000 plunged from 55% to 13%. The percentage of homes purchased by iBuyers for over $500,000 has soared from 3% to 24%.
How New “Sweet Spot” of $350,000 May Affect iBuying Economics
This uptick from $250,000 to the new iBuyer’s sweet spot of $350,000 affects everything about the economics of iBuying…revenues, financings, inventory value, gross profits, etc.
DelPrete indicates that in Q1 2020, Opendoor sold about 5,000 houses. At an average sale price of $250,000, Opendoor would have generated revenue of some $1.2B. BUT, at an average sale price of $350,000, Opendoor would have generated $1.7B instead – an increase of +40% driven by home value all by itself, not volume.
Think down the line for a few months/years…iBuyers may be looking at eye-popping quarters with record revenues.
Thanks to Mike DelPrete and ATTOM Data Solutions.
