Yesterday, Opendoor, the largest and oldest iBuyer, announced its financial results for the second quarter of 2024, also addressing recent settlements and the impacts on buyer agents and sellers.
In the wake of recent settlements, investors asked Opendoor CEO Carrie Wheeler about the impact on the company as a result of new buyer agent contracts and buyer broker commission rules.
“The buyer agent contracts are going to be implemented in a couple of weeks here…(i)s there anything to flag on how you’re thinking about how that may impact the ecosystem maybe in Q3?” asked investor Nick Jones.
“I’d say we’ve been doing some experimentation to understand how this is all going to roll out so that we are ready,” Wheeler responded. “I’d say one of the things that we are seeing in our markets is about 10 to 15 basis points of pressure on the commission rate since April. And while that’s not a huge amount, it’s decidedly different than all prior years, where that rate has been pretty flat. So change is coming.”
A Redfin report released Friday would appear to corroborate Wheeler’s estimates, as the portal tracked a slightly smaller but still noticeable drop in buyer commissions ahead of the NAR changes.
Wheeler pointed out that she understands it will take time to educate homebuyers, sellers and agents on new rules and transparency.
“We see that as we interact with them as we experiment how we’re going to show up with how we’re going to compensate buyers.”
Wheeler also explained that the company is mostly focused on the long-term, and what the best option is for consumers to thrive.
“It’s going to take down the cost of the transaction. It’s going to lower friction, and we can pass it on to consumers and drive more transactions. And we think as people become more educated, the potential to lean into the fact that we have the only direct e-commerce platform to buy a home is really important, and people as we come educated as a cost of additional agents to help should lean into our direct platform because we can share more savings with them. So we’ll see. It’s going to be interesting this summer.”
Delving further, Wheeler noted that she did not believe the NAR settlement caused sellers to strip the market of their listings, or wait to pay lower fees after the new rules go into mainstream effect.
“Not really, to be honest. I don’t think so.”
Earnings data
Although the housing market is still recovering post-COVID, with no presented rate cuts from the Fed until possibly September—leading to affordability challenges rather than mortgage rate concerns, which have dropped in recent weeks—Opendoor remains confident in their quarterly growth, though many figures are currently down year-over-year.
“We are proud of our second quarter performance and the progress we’ve made in building a platform where all customers can begin their home-selling journey. Revenue, Contribution Margin and Adjusted EBITDA exceeded the high end of our guidance, and our acquisitions outperformed expectations, growing nearly 80% year-over-year,” said Wheeler.
Wheeler noted that in the second half of Q2, the company “began responding to signals that indicated additional slowing in the housing market. We are making decisions that appropriately balance growth, margin and risk in what continues to be a challenging environment.”
And, that the housing cycle will recover at some point from current struggles, and the company improvements being made are “enduring.” Wheeler and the company believe that they will continue to push progress in increasing acquisitions and reducing adjusted net losses in 2024 in comparison with a flourishing 2023.
Diving into the Q2 data, Opendoor earned $1.5 billion in revenue, down 24% from Q2 2023, but up 28% from Q1 2024. The company sold less homes, 4,078 total, which was down 24% versus Q2 2023, but up 32% from last quarter.
Additionally, Opendoor posted a Q2 gross profit of $129 million compared to $149 million in Q2 2023, and $114 million last quarter, as well as a gross margin of 8.5% rather than 7.5% in Q2 2023, and 9.7% in Q1 of this year, respectively.
During the earnings call, Wheeler also touched on Opendoor’s market intelligence company Mainstay, which is now an independent privately held company that Opendoor claims less than 50% in ownership.
“Today, we announced that our business unit Mainstay is becoming an independent privately held company in conjunction with an outside equity investment led by Khosla Ventures. Mainstay is a comprehensive market intelligence and transaction platform for the single-family rental industry. Mainstay was built as a separate business, leveraging Opendoor’s data insights, transaction platform capabilities and enterprise customer relationships. This transaction sets up both Opendoor and Mainstay to focus on building their respective businesses with dedicated teams and resources.”
Christy Schwartz, interim CFO, added that Opedoor “will retain less than 50% ownership on a fully diluted basis. The company is in the process of assessing the financial statement impact of the fundraise, but we do not anticipate recognizing Mainstay’s ongoing financial results in Opendoor’s income or loss from operations going forward.”
