The nation’s top iBuyers purchased about 1,800 homes in the third quarter, according to the latest analysis on the iBuying market by technology-powered real estate brokerage Redfin. The leading iBuying companies (including RedfinNow, Opendoor, Zillow and Offerpad) purchased just 0.2% of homes that sold across the 418 U.S. metros tracked in the analysis, down nearly 80% from a year earlier. Purchases did increase from the second quarter, when iBuyers bought about 800 homes.
The Redfin analysis of MLS and public records data identifies home purchases and sales made by the most well-known national iBuyers. The term “iBuyer” (short for instant buyer) is used to describe real estate companies that purchase houses from homeowners in quick, cash transactions by using algorithms to evaluate a property’s worth based on comparable market data. iBuyers typically charge sellers a higher fee than a traditional real estate agent would, given the certainty of a cash offer with a flexible move-out day and the convenience of avoiding home prep, showings and open houses. These companies then make any necessary improvements and resell the homes.
The slowdown in iBuying comes as the rest of the real-estate market is red hot, with home prices rising 15% nationally and pending sales up twice as much.
“The hotter the market, the less attractive it is for home sellers to let an iBuying company take a cut of the sale,” said Redfin Lead Economist Taylor Marr. “With home prices and demand surging, many sellers figure they can sell their home quickly without having to give away any of their profits.”
Phoenix, Arizona was home to the highest iBuyer market share, with iBuyers purchasing 1.5% of homes that sold there in the third quarter. Still, that’s down from 5.3% a year earlier. It was followed by Charlotte, North Carolina, with a market share of 1%, and Raleigh, North Carolina, at 0.9%.
Sabrina Archolecas, an asset manager for RedfinNow in Texas, said that iBuyers are also still ramping back up after putting business on hold at the beginning of the pandemic. Real estate firms including Redfin, Zillow and Opendoor announced in March that they were pausing iBuying as the coronavirus pandemic began to take a toll on the economy. They began reopening their iBuying programs in May and June as housing demand started rebounding amid record-low interest rates and an increase in relocations made possible by remote work.
Many of the homes that RedfinNow is currently focused on purchasing are owned by families who don’t have time to do renovations themselves, and need to sell quickly so they can buy their next home, she said.
