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Opendoor has had a wild ride.
After bursting onto the scene nearly a decade ago, the iBuying giant spent years as a well-funded Silicon Valley darling and real estate disruptor. Then, as times got harder and others — Zillow, Redfin — bowed out of the cash offer space, Opendoor had to contend with questions about the iBuying model. Finally, for the last couple of years, Opendoor has been grappling with the same punishing market dynamics that are bedeviling every real estate company.
All of which is to say, Opendoor has now existed through several distinct chapters in real estate history — and still it’s chugging along.
To better understand just how the company plans to thrive in today’s market, Intel caught up with CEO Carrie Wheeler shortly after the company reported its latest earnings. Wheeler took the helm at Opendoor just about a year ago, and this week was honored among Inman’s Best of PropTech award winners on Wednesday.
The takeaway from the conversation with Wheeler is that she believes Opendoor is well-positioned to thrive moving forward. Among other things, she touted Opendoor’s growing partnerships and said that in the near future, the company will significantly increase the number of homes it buys.
What follows is a version of that conversation that has been edited for length and clarity.
Intel: You just reported earnings. Talk to me about the big takeaways and highlights.
Carrie Wheeler: One would be market share gains in the quarter against what continues to be a declining U.S. housing market.
Two, we performed in line and ahead with prior guidance, which we attribute to a lot of work, operational excellence, some pricing improvements, on the platform side cost savings, and good risk management in this environment. It was an important quarter for us because we returned to positive contribution margin and we posted a 17 percent increase in acquisition volumes. As you know we’ve been focused on getting back on the path of growing our inventory and our acquisition pace.
Now frankly, we’re at the point where we’re looking ahead to 2024. We’re focused on growing those volumes, getting back to being cash-flow-positive. We feel really good about the distribution channel expansion we’ve had this year with all our various partnerships.
You mentioned accelerating acquisitions next year. Is there a target you want to hit, and what’s the strategy for accomplishing that?
We’ve been vocal about getting back to 2,000-plus home acquisitions a month. That would take us back to around $10 billion of run rate on the resell side and the acquisition side — which for us is the next milestone because it takes us back to cash flow positive.
That would be a doubling of acquisition volumes of where we are today. In this quarter we got it to about 1,000 a month. So we’re talking about getting from 1,000 to 2,200 per month. We feel good about our ability to do that.
The ingredients to that are one, for our business, we really look for price stability so we can price homes within a reasonable bound of accuracy and confidence and we’ve seen that for the balance of 2023.
We’ve seen continued constraint, low supply. We’ve seen relatively resilient buyer demand against that. And that dynamic has really persisted for all of this year, which is a good set up for us to be able to value homes, acquire them and sell them. So that’s one, price stability.
Two, we’re right in the seasonal doldrums of residential housing right now as we sit here in November. But we’re about to head into the new year where we see those headwinds become tailwinds. The purchases we make today are what we’re listing into the spring, so we will continue to ramp volumes as we think about the first half of next year.
Three, we’ve done a lot of work this year on spreads. Just taking those spreads down so we can offer a more competitive product to our customers. We feel good about where they are today. They’ve come down meaningfully and we feel they’re proper for where the market is — which means more customers will convert. The lower our spreads, the higher our conversion is, the higher the propensity of customers to say “yes” to an offer.
The last point is that we’ve been really expanding our partnership channels. Across agents, and across online real estate players like Zillow. We announced on the agent side the eXp partnership a couple of weeks ago. Homebuilders. We continue to put ourselves out there in front of more sellers.
Talk to me about Opendoor Exclusives. I didn’t hear a whole lot about it on the investor call, so what’s the view of that program right now?
Long term, we’re highly committed to building an off-balance sheet, capital-light part of our business that’ll let us attract more customers and serve more sellers.
Today I’d say the update from last quarter is probably the same update I’d give you today, which is that we’re very focused on a single market. We’re very focused on refining the consumer experience.
What we’ve learned so far is that when customers are given the option to put their home in a marketplace a majority say yes to it. They’d prefer not to list on the MLS, they’re delighted to learn about whether or not they would sell the home at a price they like. They love the fact that they still have the assurance of an Opendoor cash offer in their back pocket should they want to take it. And they give us a window to come to them and deliver alternative buyer proposals from consumers and institutions.
As you know, the biggest issue right now in housing today is buyer affordability. So I would say this is not an easy time to be building this business, but we remain committed to it.
So I think for right now it’s steady as she goes. We’re going to continue to focus on Texas. We’re going to make sure that we like the experience and where we sit before we scale it. And we’ll continue to invest in it.
Talk to me about the market. Do you and your team have an opinion on what the next year is going to look like?
I think at a high level about what we’ve seen so far in 2023: Relatively stable home prices against the backdrop of constrained supply. There are still 4 million people moving. That seems to get lost sometimes in the noise. People still move because life still happens.
That would be probably our base case for 2024. That being said, our job is to manage the business relative to market dynamics as they change and so we’ll continue to do that for the balance of 2024. But sitting here today, I feel like we’re set up very nicely to rescale the business from where we are right now.
Finally, let’s talk partnerships. Do you see more partnerships in the future, or is there more scaling of the ones you have?
The reason why partnerships are so important to us is that, one, we can be in front of a lot more sellers.
Two, they’re a really attractive customer acquisition channel for us. We have partnerships with the homebuilders, with agents and with the online real estate folks. Their development was frankly in that order.
We’ve been with homebuilders the longest, agents for a while, but we continue to try to penetrate to more and more agents. And then we’ve been expanding our partnership with the online real estate folks, particularly Zillow, where we’re in 45 markets as of this week.
We love all of those and they’re important to us. And I think we’ll continue to expand partnership opportunities over time.
