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Month: August 2022

After ditching home-buying business, Zillow Group partners with rival Opendoor

Zillow Group still wants to help people quickly sell their home.

The Seattle real estate giant announced a partnership with Opendoor that allows homesellers on Zillow’s platform to request an instant cash offer from Opendoor, one of the leading “iBuyer” companies that aim to make real estate transactions more seamless.

Zillow last year decided to shut down its own iBuyer business, Zillow Offers, marking a surprising end to an ambitious home-flipping bet that resulted in a $405 million write-down and a 25% workforce reduction. Zillow was unable to accurately forecast the price of homes and said the business ultimately required too much capital.

Now, Zillow users will still be able to get an instant cash offer for their home, but the transaction is facilitated by Opendoor. Zillow will get a referral fee when a customer sells to Opendoor.

Zillow CEO Rich Barton said the deal expands the company’s addressable market, allowing it to create a suite of seller services.

“This isn’t just a lead-gen distribution deal,” Barton said on a call with analysts Thursday. “This is going to be a deep integration.”

Barton said Zillow will take advantage of the investment it made developing Zillow Offers. More from Barton on the call:

“We invested quite a bit of time and treasure and IQ figuring out how to integrate the cash offer into our home details page and our user flow, to attract sellers to interact with us. All of those learnings can be brought to bear on this partnership. It’s interesting because it involves deep integration of the Opendoor offering into our set of services. That gives us the opportunity to quarterback the process and introduce our customers who request an Opendoor cash offer to Premier Agents, mortgages, Zillow closing services, and a myriad of other things that we have our hands on.”

Homesellers will be able to compare the cash offer from Opendoor to a traditional open-market sale that can be facilitated by a real estate agent from Zillow’s Premier Agent program.

Customers “can evaluate their selling options and easily package it with other Zillow services to buy and finance their next home,” Zillow Chief Operating Officer Jeremy Wacksman said in a statement.

Opendoor reached a $62 million settlement this week with the FTC, which said the company used misleading marketing practices and deceived customers “into thinking that they could make more money selling their home to Opendoor than on the open market using the traditional sales process.”

(Bigstock Image)

Zillow says the partnership with Opendoor builds on its strategy to offer a “housing super app,” described by executives earlier this year as a digital experience that “connects all the fragmented pieces of the moving process and brings them together on one transaction.”

“Building out a suite of complementary seller offerings over time opens up meaningful opportunities for us across agent transactions and adjacent services like mortgage and title & escrow,” Barton wrote in a shareholders letter Thursday, which you can read below. “When it’s fully rolled out, this will create another way for Zillow to serve potential sellers across more than 50 U.S. markets, while growing our business in the capital-light manner we described when we exited iBuying.”

Founded in 2014, Opendoor went public in 2020 and reported revenue of $8 billion in 2021, up from $2.6 billion the year prior. It was one of the first to use the iBuyer model, which gives homesellers the certainty and immediacy of an all-cash offer in exchange for paying a fee. Redfin and Offerpad also have their own iBuyer businesses.

In addition to fees, which are similar to real estate commissions, Opendoor also makes money on the difference between what it buys and sells a home for. It also offers ancillary services including home repairs and mortgage. The company acquired Seattle startup Pro.com last year. Its market capitalization is just below $3 billion, down from around $8 billion last year.

“For parents looking to upsize, a young professional moving for a new job, and millions of others who regularly use Zillow to explore their home selling options, we will provide them with the ability to move with a tap of a button,” Opendoor President Andrew Low Ah Kee said in a statement.

Zillow shares were down more than 10% Thursday after announcing its second quarter earnings report. Zillow’s stock is down nearly 40% this year. Its market capitalization is more than $9 billion.

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https://www.geekwire.com/2022/after-ditching-home-buying-business-zillow-group-partners-with-rival-opendoor/

in Housing and Finance Posted by blueencore

Second Quarter of 2022 Homeownership Rate at 65.8%

The Census Bureau’s Housing Vacancy Survey (CPS/HVS) reported the U.S. homeownership rate at 65.8% in the second quarter of 2022, which is statistically unchanged from the last quarter reading (65.4%). The national rental vacancy rate slipped to 5.6%, while the homeowner vacancy rate stayed at 0.8%. Both rental and homeowner vacancy rates are hovering near historical lows, reflecting tight housing market conditions.

The covid-induced data collection restrictions have ended in all areas as of the last quarter of 2021. However, technical issues involved with data collection changes limit useful comparisons of the data during the pandemic with the prior data series. We have especially noted the homeownership rate data for the last three quarters of 2020 with separate dots below to denote these technical issues. We encourage readers to consider these data points separately from the remaining data series.  Nonetheless, the first three quarters of 2021 likely return the series to a more apples-to-apples comparison with the prior history of the series.

The homeownership rates of adults ages less than 35, 35-44 and 44-54 increased over the last year, while the remaining two older age groups experienced decreases. The homeownership rates among households ages less than 35 registered the largest gains among all age groups, from 37.8% to 39.1%, followed by households ages 45-54 with 1.2 percentage point increase from 69.4% to 70.6%. Households ages 35-44 experienced a modest 0.6 percentage point increase. However, homeownership rates of households ages 55-64 and 65+showed a decline of 0.3 percentage points.

 

While the total housing inventory estimates were unaffected by the data collection changes during the COVID-19 pandemic,  the estimates of homeownership rates, vacancy rates, and the components of housing inventory were affected severely until the second quarter of 2021 when in-person interviews were allowed in 99% of the country. The housing stock-based HVS revealed that the count of total households increased to 128.0 million in the second quarter of 2022 from 126.3 million a year ago. The gains are largely due to strong owner household formation (1.6 million increase), while renter households only increased by 81,000.

 

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in Housing and Finance Posted by blueencore

More Prospective Buyers Are Actively Searching for a Home

The share of prospective home buyers who are actively engaged in the process to buy a home rose to 49% in the second quarter of 2022, after declining for three straight quarters.  The pivot is likely driven by less competition from buyers who have exited the market, which has encouraged many of those remaining to become active buyers.

Except for the South, the share of prospective buyers actively searching for a home rose in every region between the first and second quarters of 2022: Northeast (50% to 54%), Midwest (40% to 51%), and West (46% to 57%).

In the second quarter of 2022, the share of active buyers who have been looking for a home for 3+ months fell to 63%, down from 67% in the previous quarter.  The share is at its lowest point in almost two years (since the third quarter of 2020, when it was 62%). Before the pandemic (between the first quarters of 2018 and 2020), fewer than 60% of active buyers shopped for a home for 3+ months.

**Results come from the Housing Trends Report (HTR) – a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets.  The HTR is produced quarterly to track changes in buyers’ perceptions over time.  All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult.  Results are seasonally adjusted.  A description of the poll’s methodology and sample characteristics can be found here.  This is the fifth in a series of six posts highlighting results for the 2nd quarter of 2022.

 

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in Housing and Finance Posted by blueencore

Banks Report Unchanged Home Lending Standards

In the second quarter iteration of the Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS) on Bank Lending Practices, banks reported largely unchanged lending standards across all residential real estate (RRE) loans. Major net shares of banks reported weaker demand for most RRE loans except for home equity lines of credit, for which a significant net share of banks reported stronger demand. The second quarter also saw tighter credit standards for Commercial Real Estate (CRE) loans and Commercial and Industrial (C&I) loans.

The below figure derived from the SLOOS shows that RRE credit standards relative to the first quarter of 2022, tightened by no more than 5.6 percent, except for subprime mortgages for which banks tightened standards by 12.5 percent. Government-issued mortgages, such as FHA and VA loans, were the only category of RRE loans that showed a loosening of credit standards, that too, by a negligible amount of -1.9 percent.

Although major net shares of most banks reported weaker demand for RRE loans, a small fraction of banks reported moderately to substantially stronger demand across all loan categories except subprime residential mortgages. For loans extended to homeowners based on their homes’ market values, a positive net share of 41.1 percent of banks surveyed reported moderately stronger demand for home equity lines of credit and 5.4 percent of banks reported substantially stronger demand.

Meanwhile, banks reported tighter lending standards for all Commercial Real Estate (CRE) loan categories and weaker demand in construction and land development loans and nonfarm nonresidential loans. A modest net share of banks, 6.1 percent, reported stronger demand for loans secured by multifamily residential properties. In Q1 2022, multifamily loans’ demand, on net, was 18.5 percent stronger. In the following quarter’s survey, 4.5 percent of banks reported substantially stronger demand, 18.2 percent indicated moderately stronger, and 60.6 percent of banks reported unchanged demand. The questions were subdivided between large commercial banks and other commercial banks.

In SLOOS’s last category, Commercial and Industrial (C&I) loans, banks reported a tightening of lending standards across all firm sizes, citing unfavorable economic conditions for the tightening. Thirty-three percent of banks reported moderately stronger demand for C&I loans made to large and middle-market firms while 29 percent of banks reported moderately stronger demand for loans made to small firms. Interestingly, the survey asks banks to use only funds disbursed to measure C&I loan demand.

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in Uncategorized Posted by blueencore