“If a slacker employee was mysteriously transformed into a house for sale…”
“What happens when the market turns?”
It would be charitable to argue that the iBuyers actually thought this mishegoss would work. Perhaps that’s so: They’re flippers, except they are very bad at every part of the flipping process. And they’re pawnbrokers – buyers of last resort – except they buy first, not last, paying top-dollar for the honor, then cling to their assets like precious prodigal sons.
Brokering real estate works for almost nobody, but it only works because the broker does not own the asset. Owning non-producing assets as “investments” is insane. It can only work if you buy at deep, deep discounts – like flippers and pawnbrokers do, and like OpenDoor apparently cannot do.
So: Closed Sale Price compared to Original List Price, on average: April -$9,537, May -$16,935, June -$31,698.
Those are from Phoenix. Perhaps they’re doing better in other cities, but this is their primal market and ground zero for all things iBuyer. I think we’re seeing how they work.
The trend on Days-on-Market is not great, and I would expect it to get a lot worse: April 41, May 40, June 48. By June the market had well and truly turned, but in April they should have been moving everything in single-digit DOMs. That they were not – and that they score so few winners in pricing, amidst so many huge losers – tells you how they will do, going forward.
The problem, as I have been saying for years, is that even if they bought right, which they don’t, and even if they rehabbed and marketed right, which they don’t, they would still own the “investments” far too long, resulting in killer carrying costs.
The delusion in iBuying emerged from two ploys from the Federal government, suppressing interest rates for home-buyers and also for Wall Street. Yippee! Practically-free money to buy assets that seem only to go up in price…
Ahem.
Imputed losses per “investment” will get uglier by the day – and I’m not even taking into account the inversion of both erroneous signals, with housing prices falling as borrowing costs rise: April -$50,310, May -$56,695, June -$75,215.
Sometime soon, I’ll take on a dozen Closed listings in sequence, to explore everything they are doing wrong. But if you peer into my spreadsheet for this post, you can bespy many six-figure losers – not including the carrying costs.
The iBuyers are the poorest marketers in every market. We are all about to discover just how poor…
