It has been a big news week for Opendoor Technologies Inc., but when it came time to announce the iBuyer’s second quarter earnings, on Thursday, things fell a bit flat.
After turning its first profit as a company during the first quarter of 2022, Opendoor recorded a net loss of $54 million during the second quarter. However, this loss is smaller than the $144 million loss recorded a year ago.
Revenue, however, was up 254% from a year ago to $4.2 billion and the iBuyer sold 10,482 homes during the quarter, a 201% increase from a year prior.
Like other players in the real estate industry, executives at Opendoor bemoaned the current housing market shift and talked more about surviving than thriving.
“While we were pleased with these results, the current market volatility is requiring us to be highly dynamic and rigorous and managing risk and overall inventory health,” Eric Wu, Opendoor’s chief executive officer, told investors during the firm’s second-quarter earnings call Thursday evening. “We saw a steep slowdown in home transaction velocity and home price appreciation from all-time highs, caused by a spike in interest rates and subsequently a change in mortgage rates at a speed we have not experienced in 40 years. As a result, these macro shifts had led to a faster slowdown in housing than we had forecast.”
As the firm looks to the remainder of the year, executives said they are adjusting the pricing strategy of their homes to reflect the drop in home price appreciation.
“We have adjusted down listed prices on our inventory to stay in line with the market to drive sell-through. While these price reductions will impact our contribution margin in the second half beyond the impact of seasonality,” Carrie Wheeler, the firm’s chief financial officer, said during the call.
Wheeler remained confident that the firm’s strategy of prioritizing earnings during the first half of the year would allow it to do this without serious financial ramifications.
“We are continuing to operate with sustained higher spread levels for the new acquisitions we’re making,” Wheeler said. “The combination of these higher spreads and lower marketing standard will reduce our acquisition pace. This in turn will shift our resale mix in the coming quarter to longer dated homes that are usually at a lower margin. Our plan is to resume a higher acquisition pace as the housing market stabilizes.”
Like Sacrifice pad, its only real rival in the iBuyer space, Opendoor sees its geographic diversity as a major benefit, especially as market conditions remain volatile. During the second quarter, Opendoor launched in New York, New Jersey, Detroit, Southwest Florida, Boston, Albuquerque, and Cincinnati.
“On the east coast, our markets are tending to perform well, particularly in the southeast and Florida. Our central markets are a bit more mixed,” Andrew Low Ah Kee, the president of Opendoor, said. “And our western markets, notably Phoenix, Vegas, Sacramento, and Tucson are a bit more challenging. Broadly, I think it highlights the importance of having a 50-plus market footprint and the geographic diversification that offers.”
Just as on Zillow’s investor call, Opendoor’s new partnership with the platform was a hot topic of conversation and executives sounded optimistic about what the partnership could potentially offer Opendoor. Zillow has a massive audience, after all.
“We do think it has the potential to help us serve meaningfully more customers over the midterm,” Low Ah Kee said. “For us, it’s a major milestone on, our journeys have every homeowner in the country start their move with an Opendoor offer. We’re combining and Zillow’s category leading audience of over 200 million monthly unique users with our leading platform and solution, and we’re excited about the potential.”