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Opendoor, the home-flipping site, is probably regretting its bulk order of subway tiles and DIY laminate floors. The company lost money on 42% of resales in August, according to Bloomberg.
The company that rode the first wave of real estate iBuying, a way to automate real estate purchases, was hailed as the “Amazon of homes” when it went public in 2020. Its strategy is simple: make fast offers for homes using an algorithm, do some light reno, and resell them, sometimes in less than a few months.
But red-hot house prices were looking more like smoldering coals by June, and the Fed pumping interest rates through the summer had potential buyers closing Zillow tabs. So the company had all this inventory that it paid a lot of money for that no one wanted to buy.
You might remember when Zillow shut down its home-flipping business last fall for similar reasons. And proving that you shouldn’t throw stones if you have overpriced houses, Opendoor even trolled Zillow after the announcement, saying Opendoor was still “open for business.”
Big picture: Some analysts say the worst is over for Opendoor, but other indicators—like September’s homebuilder sentiment drop—hint that the housing market party has finally hit the morning after.—MM