The profitable iBuyers club just got its newest member. After losing more money than Zillow in 2021, which shuttered its iBuying program in November, Opendoor recorded its first profitable quarter in Q1 2022.
Thanks to record revenue of $5.2 billion, up 590% compared to the first quarter of 2021, Opendoor generated a net income of $28 million. In comparison, the San Francisco-based company lost $270 million during the first quarter of 2021.
“We are proud to report our first quarter of positive net income as we exceeded our expectations across all of our key metrics,” Opendoor Co-founder and CEO Eric Wu said during the firm’s first-quarter earnings call with investors on Thursday. “For the past eight years, we have been working on the rare opportunity to transform the $2.3 trillion housing industry.”
Opendoor’s only competitor in the iBuying space, Offerpad, recorded its first profitable quarter during the fourth quarter of 2021. On its earnings call with investors on Wednesday, executives announced that Offerpad had again recorded a net income, earning $41 million in Q1 2022.
During the first quarter of 2022, Opendoor purchased 9,020 homes, a year-over-year increase of 151%, and sold 12,669 homes, an increase of 415% year over year. As of March 31, 2022, the iBuyer had 13,360 homes on its balance sheet, representing nearly $4.7 billion of inventory at current market value. Executives said they expect this to be the low point of inventory for the year and that they will not change their pace of home acquisitions due to housing market uncertainty.
In addition, only 7% of homes owned by Opendoor were listed on the market for more than 120 days during the first quarter, compared to 24% of homes overall.
“We hold highly liquid homes for short periods of time, aiming to turn our inventory every 90 to 100 days,” Wu told investors.
Executives attribute the iBuyer’s first profitable quarter to showing up to the quarter with plenty of housing inventory in a low inventory market with unusually high demand for the time of year.
“We expected to see really high sell-through rates for inventory and we did, but we probably sold more homes than we even have guided to,” said Carrie Wheeler, Opendoor’s CFO, on the call Thursday evening. “In addition, we saw a little bit of pull through of demand and we expected to see some of that. We sized it at around $300 million of what we saw in Q1, was a function of people closing homes faster than we otherwise would have expected, pulling those homes from what would have fallen into Q2 into Q1.”
While many in the real estate industry are approaching the current changing and uncertain market conditions with caution, Opendoor executives are positive that their firm will be able to succeed even if the market takes a turn.
“What is core to our business model and frankly what is most misunderstood is that our systems and margin structure are designed to be durable across different housing environments,” Wheeler said. “Housing dynamics are a key input to our business, and we’ve custom-built our pricing and operational systems to give us a deep understanding of the underlying drivers and to be able to dynamically adjust to changing conditions.
“And in environments of high volatility, our models are designed to be more conservative. Combining this with holding liquid sale-ready homes and having updated views on home pricing on a daily basis gives us the confidence that we can deliver against our baseline annual contribution margin targets of 4% to 6% across market cycles.”
Wheeler added that she believes iBuying will become more appealing to homeowners as they navigate the changing market conditions.
Looking further ahead, executives said they plan to continue expanding Opendoor into more markets. During the first quarter of 2022, Opendoor launched in San Francisco. Since the start of the second quarter, the iBuyer had launched in parts of New York and New Jersey, as well as the greater Detroit area, and expanded its coverage area in Southwest Florida and the Portland, Oregon area.
“This quarter marked another step along our journey to transform the real estate industry,” Wu told investors. “While I am encouraged by our financial performance, I’m most proud of how we delivered these results. We focused on delivering system-level changes that enable us to drive sustainable margin improvements.”