Opendoor: America’s Biggest iBuyer Could Go Bankrupt By 2024

Higher mortgage rates and slower home price growth over the last year have made it far more challenging to buy, revamp and sell homes for a profit.

KEY TAKEAWAYS

Opendoor, a real estate iBuyer specializes in buying and reselling homes with the help of AI technology.
Opendoor officially laid off more than 1,000 employees in the past 6 months.
Despite performing right around expectations, the firm is heading toward bankruptcy due to heavy debts and unfavorable market conditions.
Doubling its losses from the previous year, the iBuyer scored a loss of $1.2 billion in 2022.

Opendoor Technologies Inc., America’s biggest iBuyer, laid off around 560 of its employees in mid-April 2023. It had already cut about 550 jobs, or 18% of its workforce back in November 2022. The layoffs are not just limited to the outcome of uncertain market conditions but more than what it appears.

The firm has doubled its losses from the previous year to a net loss of $1.4 billion in 2022, as per FY’22 financial report. It also reported a net loss of $399 million in the final quarter of the same year only. The company’s share prices have tumbled nearly 97% from its 2021 highs.

At the time of writing this piece, Opendoor’s stock prices has massively decreased to around $2.3 per share from $39 per share cost in 2021. After going through its finances, Houzeo concluded that Opendoor is facing significant financial difficulties which could lead to its bankruptcy.

Here’s Our Detailed Video About Opendoor Bankruptcy

Housing Market Prediction: Opendoor will be BANKRUPT in 24 Months!

In this video we’ve analyzed the current state of Opendoor and come to a conclusion that the firm will go bankrupt by 2024.

Opendoor’s Nosedive Journey

Opendoor revenue grew about 210% in 2021 due to the rise in home prices in the US. The company ended 2022 with two consecutive quarters of losses, a result of its declining homebuying business.

In Q4 of FY’22 alone, Opendoor reported revenue fall of 25% YoY to $2.9 billion. The company said it sold 7,512 homes in Q4, 23% fewer homes than the same period in 2021, and also met with an average loss of $28,000 per home.

Meanwhile, the company’s business model faced significant flaws due to overly optimistic pricing models, mounting debt loads, and stale inventory. These factors heavily impacted its growth potential.

The rise in mortgage rates, declining home prices, and fewer home sales made it increasingly more work for iBuyers like Opendoor to flip a house for a profit at present.

The company now started focusing on cutting expenses to return to profitability. It reduced its operating costs by approximately $110 million. The company tried to conserve cash by lowering operating expenses. “We are highly focused on stabilizing our core business and ultimately returning to positive free cash flow,” Opendoor’s CEO, Carrie Wheeler told investors.

Big Players Departure

iBuying is a relatively new concept that allows companies to purchase properties from consumers and sell them for a profit. Opendoor offers its consumers a transparent and hassle-free experience while selling their homes with the help of technology.

Opendoor’s prime competitor, Zillow, exited the market after suffering substantial losses. Redfin followed suit and end its iBuying program in November 2022. Another major iBuyer, Offerpad had also lost $148.6 million for the entire year.

“iBuyers will be out of business in the next 24 months.” Don Mullen, CEO of Pretium had already told Bloomberg while commenting on the future of the iBuyers.

Opendoor has made slight changes in its business model to tackle these challenges. Now its has shifted toward growing the company’s margin and building Opendoor’s marketplace for home buyers and sellers.

However, Wheeler stated, “Building towards that managed marketplace will be a multi-year journey, but what underpins our conviction are the capabilities we’ve built to become one of the largest buyers and sellers of homes in the country.”

Opendoor Real Estate Business in Dark

The company is currently asset-heavy and may not be able to realize a profit on its current inventory. The company also overpaid for homes at multiple points in the post-COVID real estate cycle.

Despite its recent partnership with Zillow, the company still faces significant financial losses. Additionally, Opendoor risks being delisted from the New York Stock Exchange if its share price doesn’t improve.

With $1.3 billion in the bank and the worst behind it, Opendoor has enough runway to turn things around. Wheeler also has acknowledged the company’s challenges and is working to refine its business model. Opendoor now priced its offers to buy homes, expecting sales prices to fall modestly this year.

Though Opendoor CEO is optimistic about the company’s prospects, the reality is that Opendoor’s financials are in a mess. With no clear path to profitability, Opendoor is predicted to go bankrupt by 2024.