The hot housing market in San Antonio is forcing iBuyers to wait

On May 13, Silicon Valley technology company Opendoor purchased its 1,550 home in San Antonio: a four-bedroom, 3.5-bath apartment at the end of a dead-end street in Suenos, Cibolo Canyons, near TPC San Antonio Golf Course. Course.

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

Like other iBuyers – technology companies that use algorithms to buy and sell homes – Opendoor prides itself on its speed. If you are looking to sell, the company will offer you an immediate offer so you do not have to worry about repairing the house, setting up a display or hiring a real estate agent. Usually, the company takes a 5 percent commission, makes minor repairs and then asks to sell the house at a profit.

However, companies and competitors like Offerpad are not always so quick to sell the homes they buy in San Antonio, according to an analysis of offense records from the Baxer County clerk.

A median of 105 days passes between when the county documents the purchase of the Opendoor home and the sale of the home, the records show. In other words, it usually takes a company three and a half months to sell a house it bought. For Offerpad, the median is similar, 101 days.

For Zillow, which has dismantled its local assets after announcing last fall that it was leaving the return home business, the median is 94 days.

Opendoor has had 198 homes sold for at least 200 days since the company entered the local market in 2018, according to the listings.

The delays mean that hundreds of homes have likely sat empty, at least for a while, in a housing market where the ever-reduced supply of homes for sale is bringing prices to peaks almost every month.

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

This 34-day time frame is “similar to our monthly average” for the length of time that elapses from the moment Opendoor presents a home for sale to a pending sale, a company spokesman said in response to a list of questions sent by email.

Asked whether Opendoor owns homes so that they will increase in value, she referred to the company’s letter to shareholders from the fourth quarter of last year. She notes that the company’s management expects that “holding periods in the fourth quarter will be extended” due to “seasonal softness” in the resale market.

In addition, “extended home repair schedules” have forced the company to own homes for longer, the letter said.

“By the end of the year our repair schedules have returned to historical norms regarding new acquisitions, and we are entering 2022 with greater operational capability to meet the high demand we anticipate,” the letter said.

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Opendoor is using local vendors to make repairs to homes it buys in San Antonio, the spokesman said.

“There is a shortage of labor and material all over the country. Despite these challenges, Opendoor has continued to operate and provide homes to our customers,” she said. “Homes we buy are usually in good condition – we usually do small jobs, minor repairs, so preparing the homes for resale does not require special work.”

Offerpad did not respond to a request for comment.

Generally, it’s in iBuyers’ best interest to sell their homes quickly, because otherwise they are charging for housekeeping and paying interest on the debt used to buy it, said Mike Delperita, a residential researcher in real estate technology at the University of Colorado Boulder, who has been monitoring the industry since 2015.

However, there has been at least one case where Opendoor appears to have deliberately prevented the homes from the market, he said. In late 2020, the company allowed a month to pass during which it continued to buy homes, but did not release new ones for sale, he said.

“If you want a plague analogy, it’s like I went out there and kept buying toilet paper every week, but I didn’t use it,” he said. “It’s a hamster. It’s storage.”

IBuyers have three main sources of income, he said: valuing their homes between buying and selling; The fees they charge for their transactions; And the “ancillary services” they provide, such as mortgages.

Since the epidemic, with house prices soaring across the U.S., price appreciation has come to represent a much larger share of their income, he said.

“Historically, pre-epidemic, (the estimate) was a few percentage points. They go in – a new rug, a new color. The house is worth a few thousand dollars more than they bought it,” he said. “But since the epidemic, the rise in house prices has gone over the roof. So, sometimes, iBuyers make a lot of money between what they buy and sell a house for.”

Since entering the domestic market in 2018, Opendoor has established itself as the largest iBuyer operating in San Antonio by a large margin. As of this month, limited liability companies associated with the company have sold at least 2,446 homes in Baxer County, according to property records. For Offerpad, which acquired its first home in 2019, that number is at least 372.

Opendoor appears to be stepping up its operations in San Antonio. So far this year, LLC-affiliated LLCs have sold at least 427 homes, while they sold 746 in all of 2021, compared to 293 during 2020. The company sold 784 homes in 2019.

“We continue to see high demand for Opendoor in San Antonio, as customers are looking for a simple on-demand digital real estate experience,” the spokesman said.

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

“In general, these are homogeneous markets where it is easy to estimate housing inventory,” he said. “Markets without winters, without basements, without hurricanes – these are really good markets to operate in. It’s all a matter of speed and certainty, to price exactly what a house is worth.”

Zilo decided to leave the iBuyer sector because it determined that the U.S. housing market was too volatile for it to reliably profit from house reversals, CEO Rich Burton said in a November statement. However, Opendoor and Offerpad work well, DelPrete said.

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

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