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With a shortage of labor and materials pressing on timelines to renovate and resell homes, Zillow announced it would stop signing new contracts with its iBuying program Zillow Offers for the remainder of 2021. That set off a wave of status checks for other iBuyers in the space—are other companies still making offers or are they also finding themselves overextended?
iBuyers purchase homes directly from sellers with instant cash offers and then relist the homes. In a booming housing market where homeowners have the opportunity to sell quickly, possibly with a bidding war, does iBuying still offer a viable alternative?
So far, no other major iBuyer has announced an intent to pause acquisitions this year, The Wall Street Journal reports.
Opendoor, the largest iBuyer in the space, said in a statement issued after Zillow’s announcement that it was still “open for business and continues to scale and grow. We know how important certainty and convenience are to homeowners seeking to move, and we’ve worked hard over the past seven years to ensure we can continue to deliver our experience at scale.”
Opendoor purchased nearly 8,500 homes in the second quarter and entered into contracts in the third quarter to purchase another 8,200, according to the company.
Zillow Offers acquired more than 3,800 homes in the second quarter. The company said it would continue to work through its current backlog of properties but would not acquiring further inventory in 2021.
“We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation, and closing spaces,” Jeremy Wacksman, Zillow’s chief operating officer, said in a statement. “We now have an operational backlog for renovations and closings. Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory.”
RedfinNow, the iBuying arm for Redfin, says it will continue to make offers in all 29 of its markets, including the 11 markets it has expanded into this year. “We are confident in our ability to meet demand from our customers who want a convenient and flexible homeselling option, despite challenges with the construction labor market and supply chain,” a Redfin spokesperson told RISMedia.
iBuying activity has increased in the second quarter of this year compared with any previous quarter as iBuyers purchased more homes at higher prices, according to research from Mike DelPrete, a real estate technology strategist who studies iBuying patterns. Sellers still appear to be drawn to the certainty and ease of closings, he says. However, iBuying overall still makes up a very small share of the housing market, about 1% of sales.
The iBuying companies’ process to decide which homes to buy and how many is fueled by high-tech algorithms and large pools of capital, often backed by Wall Street. “iBuyers have access to a tremendous amount of data; they can see months into the future and plan their inventory,” DelPrete told CNN. “So the fact that Zillow didn’t see this coming and wasn’t able to make adjustments before it had to resort to an iBuying lockdown is pretty surprising. … There is only so much that technology can do. At the end of the day, you need people to process a lot of transactions.”