A young couple moves into their new home.
Big home-flipping companies like Opendoor and Redfin are struggling as the housing market cools.
Opendoor is slashing prices on homes, while Redfin shut down its home-flipping business.
But their struggles could lower home prices in some areas, giving homebuyers reprieve.
The pandemic-era housing boom is over.
The Federal Reserve’s aggressive fight against soaring inflation has seen mortgage rates climb to levels not seen in years, resulting in far lower demand for homes, slower sales, and cooling home prices.
The cooling effect on the market is forcing iBuyers — deep-pocketed institutional house flippers that use algorithms to buy and sell homes — to either slash their asking prices, slow down purchases, or get out of the business of flipping homes completely.
Last week, national real estate brokerage Redfin announced that it will be shutting down its home-flipping business, RedfinNow, and laying off 13% of its staff. In addition to the job losses, Redfin is slashing prices on its homes for sale in various markets — a sign that they anticipate a sharper decline in homebuyer demand.
“We’re sitting on $350 million worth of homes for sale that we bought with our own money, or worse, bought with borrowed money,” Redfin CEO Glenn Kelman told Fortune. “What we always told investors is that we would protect our balance sheet by acting quickly. We don’t have hope as a strategy. We immediately started marking down things.”
Redfin isn’t alone, however. In a move to offload some of the homes in its inventory, Opendoor has slashed prices and offered bonuses to buyers’ agents. Not even slashing prices can save some iBuyers: Zillow shut down its Zillow Offers home-flipping business last fall after it overpaid for too many homes.
iBuyer home flipping is flopping in Phoenix
With the housing downturn intensifying, more companies could soon follow in their footsteps — that could mean steeper price cuts for fatigued homebuyers.
It’s already happening in Phoenix.
Jason Lewris, a data scientist and co-founder of real estate platform Parcl Labs, a company that combs and analyzes data on iBuyer activity in the Phoenix area, told Insider that in the city, if iBuyers sold their active inventory at their current asking price, “they would lock in significant losses.”
That’s because Parcl found that there is more than a 10% gap between the current asking price and original purchase price for the 1,912 active properties owned by Phoenix’s …read more
Source:: Business Insider