Hot Real Estate Market in San Antonio Keeps iBuyers Waiting

On May 13, Silicon Valley tech company Opendoor bought its 1,550th home in San Antonio: a four-bedroom, 3.5-bathroom home at the end of a cul-de-sac in the gated community. from Sueños to Cibolo Canyons near TPC San Antonio Golf. Classes.

At a time when the typical home for sale in the metro area spent 33 days on the market, Opendoor held that home for 295 days, or nearly 10 months, according to county property records.

Like other iBuyers — tech companies that use algorithms to buy and sell homes — Opendoor prides itself on speed. If you’re looking to sell, the company will make you an instant offer so you don’t have to worry about fixing the house, arranging a viewing, or hiring a real estate agent. Typically, the company takes a 5% commission, makes light repairs, and then seeks to sell the house for a profit.

Still, the company and competitors such as Offerpad don’t always sell San Antonio homes as quickly as they buy, according to an analysis of Bexar County Clerk’s Deeds.

A median of 105 days elapses between when the county registers Opendoor’s purchase of a home and the sale of the home, records show. In other words, it usually takes three and a half months for the company to sell a house it has purchased. For Offerpad, the median is similar, 101 days.

For Zillow, which unloaded its local properties after announcing last fall that it was quitting the home-flipping business, the median is 94 days.

Opendoor has seen 198 homes take at least 200 days to sell since the company entered the local market in 2018, records show.

The delays mean hundreds of homes have likely stood empty, at least for a while, in a housing market where an ever-tighter supply of homes for sale is pushing prices to record highs nearly every month.

In March, the median price of a home sold in the San Antonio metro area rose to $326,500, a 22% increase from $267,200 a year earlier, according to the San Antonio Board of Realtors. The average home spent 34 days on the market, compared to 45 the previous year.

That 34-day time frame is “on par with our monthly average” for the time between when Opendoor lists a home for sale and when the sale is pending, a spokesperson said. the company in response to a list of questions sent by e-mail.

When asked if Opendoor is holding on to the homes so they go up in value, she referred to the company’s letter to shareholders from the fourth quarter of last year. He notes that company management expects “fourth quarter holding periods to get longer” due to “seasonal softness” in the resale market.

On top of that, “extended home repair times” have forced the company to keep the homes longer, the letter says.

“By the end of the year, our repair times had returned to historical norms on new acquisitions, and we enter 2022 with greater operational capacity to meet the higher demand we anticipate,” the letter said.

Shortages

Opendoor uses local sellers to make repairs to homes it buys in San Antonio, the spokesperson said.

“There is a shortage of labor and materials across the country. Despite these challenges, Opendoor has continued to operate and deliver homes for our customers,” she said. “The homes we buy are generally in good condition – we usually do small jobs, light repairs, so getting the homes ready for resale doesn’t require specialist labour.”

Offerpad did not respond to a request for comment.

Generally, it’s in iBuyers’ best interest to sell their home quickly, because otherwise they’ll rack up expenses to maintain the home and pay interest on the debt used to buy it, said Mike DelPrete, researcher in residence at real estate technology at the University. from Colorado Boulder, which has been following the industry since 2015.

Still, there was at least one instance in which Opendoor appeared to deliberately hold homes off the market, he said. At the end of 2020, the company let a month pass in which it continued to buy homes but did not list any new ones for sale, he said.

“If you want a pandemic analogy, it’s like I go there and I still buy toilet paper every week, but I don’t use it,” he said. “It’s storage. It’s storage.

Buyers have three main sources of income, he said: the appreciation of their homes between buying and selling; the commissions they charge on their transactions; and the “ancillary services” they provide, such as mortgage loans.

Since the pandemic, with soaring home prices in the United States, price appreciation has come to represent a much larger share of their income, he said.

“Historically, before the pandemic, (appreciation) has been a few percentage points. They come in – new carpet, new paint. The house is worth a couple thousand dollars more than they bought it for,” a “But since the pandemic, home price appreciation has exploded. So sometimes iBuyers make a ton of money between what they’re buying and what they’re selling a home for.”

Since entering the local market in 2018, Opendoor has established itself as the largest iBuyer operating in San Antonio by a wide margin. Since this month, LLCs tied to the company have sold at least 2,446 homes in Bexar County, property records show. For Offerpad, which bought its first home in 2019, that number is at least 372.

Opendoor appears to be ramping up its operation in San Antonio. So far this year, limited liability companies linked to the company have sold at least 427 homes, while they sold 746 in 2021, compared to 293 in 2020. The company sold 784 homes in 2019.

“We continue to see strong demand for Opendoor in San Antonio as customers seek a simple, on-demand digital real estate experience,” the spokesperson said.

Opendoor and other iBuyers prefer to operate in markets with a large supply of new homes — which are less likely to have major problems — and without severe weather conditions, DelPrete said. Many of these markets tend to be in Texas and the Sun Belt.

“In general, these are homogeneous markets where the housing stock is easy to assess,” he said. “Markets without winters, without basements, without hurricanes – these are very good markets to operate in. It’s all about speed and certainty, to accurately assess the value of a home.”

Zillow decided to exit the iBuyer business because it determined the U.S. real estate market was too volatile for it to reliably profit from house flips, its CEO Rich Barton said in a statement in November. Still, Opendoor and Offerpad are performing well, DelPrete said.

“The data and evidence couldn’t be clearer: what happened to Zillow last year was a Zillow problem, not an iBuyer problem,” he said. “Because in the same market conditions, the exact same market, Zillow lost more money than ever and Opendoor and Offerpad made more money than ever.

About Teresa G. Wilson

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