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iBuyer Market Update: Opendoor and OfferPad in Phoenix


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An analysis of the major iBuyer players, Opendoor and OfferPad, in Phoenix. Focus on market traction, overall market share, sales, purchases, and customer proposition.

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iBuyer Market Update: Opendoor and OfferPad in Phoenix

  1. 1. iBuyer Market Update: Opendoor and OfferPad in Phoenix 31 July 2017 Prepared by Mike DelPrete
  2. 2. The barriers to entry for the iBuyer business model are low. Last year, we said: “Ultimately, we believe a major long-term risk to Opendoor is that the key elements of its seller customer experience -- a fast and well-priced offer -- are replicable.” And Opendoor recently had this to say: “The increase in the number of companies building a similar experience to Opendoor further validates the customer demand for an online, instant sale.” – Eric Wu, CEO
  3. 3. $30M $32.5M Instant offers marketplace Phoenix, Tampa, Las Vegas, Orlando, Salt Lake City Atlanta San Diego, Inland Empire In 2017, a number of iBuyers raised significant money and launched. What impact is increased competition having?
  4. 4. In Phoenix, the overall iBuyer market share of sales grew 48% from 2016 to 2017 YTD. 1.1% 1.6% 0.0% 0.4% 0.8% 1.2% 1.6% 2.0% 2016 2017YTD iBuyer Market Share The market is growing. No matter your personal opinion of the model, consumers are drawn to iBuyers in increasing numbers. 48% Market share is defined as total units bought and sold.
  5. 5. iBuyer market share of total transactions fluctuates by month and is growing. Slowly. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% iBuyer Market Share (Phoenix) Opendoor OfferPad Combined Linear (Combined)
  6. 6. 171 76 0 40 80 120 160 200 Opendoor Activity Per Month (Phoenix) Purchases Sales Opendoor’s home buying and selling activity in Phoenix saw a sharp drop earlier in the year. 55% drop!
  7. 7. The drop in activity was a result of a fee change, and is not necessarily a negative event. The drop in purchases corresponds to a fee increase by Opendoor during that time. The fees have since been normalized and activity levels for June are strong. Adjusting fees is a key component of Opendoor’s business. It allows them to hedge risk (in case of a market slowdown) and reduce inventory. It is not a bad event; it is Opendoor actively managing the business and its inventory levels. But we are still unsure as to the reason why fees changed.
  8. 8. 0 20 40 60 80 100 120 140 160 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Home Sales Per Month (Dallas) After a strong ramp up, home sales in Dallas have slowed. Don’t expect a hockey stick growth curve.
  9. 9. Resulting in a drop in overall home selling activity across both of Opendoor’s major markets. 0 40 80 120 160 200 240 280 320 Home Sales (Phoenix and Dallas) Phoenix Dallas
  10. 10. Compared to the same period in 2016, average home purchases per month are up 57%. 84 97 17 62 0 40 80 120 160 200 H1 2016 H1 2017 Average Home Purchases Per Month (Phoenix) Opendoor OfferPad
  11. 11. While average monthly home sales are up 129%, with the market share of both iBuyers growing. 59 12516 47 0 40 80 120 160 200 H1 2016 H1 2017 Average Home Sales Per Month (Phoenix) Opendoor OfferPad
  12. 12. The iBuyer market is growing. It’s clear that the overall market in Phoenix is growing. The addition of new competition (OfferPad) is growing the overall market, not taking market share away from Opendoor.
  13. 13. Aside from the recent dip, Opendoor is seeing strong sales compared to last year. 0 40 80 120 160 200 Opendoor Home Sales (Phoenix) 2016 2017
  14. 14. And even with the Q1 dip, the number of homes purchased by Opendoor is up over last year. 47 122 142 152 62 132 0 40 80 120 160 Q1 Q2 Q3 Q4 Opendoor's Average Home Purchases Per Month (Phoenix) 2016 2017
  15. 15. Opendoor’s early 2017 sales lift corresponded to a drop in overall market share. 0.0% 0.5% 1.0% 1.5% 2.0% 0 40 80 120 160 200 Opendoor Sales and Market Share (Phoenix) Sales Market Share Opendoor’s Q1 sales were strong and reflective of an especially strong market.
  16. 16. Only a small portion of Opendoor’s sales occur off the MLS, in part by emailing homes to agents. 2016 2017 9% 95 sales 6% 41 sales Non-MLS sales are in part driven by Opendoor emailing new homes to agents to give their buyers early access.
  17. 17. Lastly, it’s interesting to note that the iBuyer marketing message is saving money and time.
  18. 18. A note on data sources and accuracy. The original data sources for this analysis are the Phoenix (Pinal and Maricopa) County Recorders, which record all property transactions that occur both on and off the MLS, in addition to MLS sources for Dallas. Accuracy is not guaranteed, of course, but the public records are generally trusted and accurate.
  19. 19. Mike is a former tech entrepreneur, strategy director, and head of corporate development with broad expertise in online real estate tech. He has travelled the world talking to and working with leading property portals and real estate tech startups, gathering first-hand knowledge and insights on industry trends and themes. He enjoys working with startups, advising founders and executives, and working on challenging entrepreneurial projects. About the author: Mike DelPrete