I got an email this morning from Mike Delprete about Redfin and Opendoor “pausing” buying activity due to the COVID-19 situation:
By temporarily pausing the purchase of homes, Opendoor has shut off its only source of revenue; there’s no iBuying without buying. The effect is akin to an airliner losing both engines while in flight.
With no revenue — Opendoor’s engines — the company will glide until it either manages to once again generate revenue, or it runs out of money. Opendoor is not alone in this predicament; many businesses across a number of industries face the same challenge.
Let’s tap the brakes just a touch. As Mike’s own data from China shows, transactions plummeted to near zero as people were quarantined and on lockdown. Then it went back to near normal levels.
It isn’t as if Opendoor is the only one not buying; in some parts of the country, no one is buying because the county clerk’s office has shut down. Buyer tours can’t happen if there is a shelter-in-place order. The authorities, inspectors, brokers, agents, etc. are working through things but it’s still very early.
We don’t know just how much inventory Opendoor had on hand; they might just be looking at things and saying, “We’ve got 30 days of inventory on hand; let’s take a breather while no one is buying our houses either.”
Until we get more information, I’d caution against reading too much into the pause. I wouldn’t be surprised if Zillow paused as well while the whole world is in lockdown mode.
BTW, Redfin pausing is really no big deal as Redfin hasn’t truly been an iBuyer for a while.