This new trend in house selling could cast a cloud over America’s property market

This new trend in house selling could cast a cloud over America’s property market

1 Jan    Finance News

Planning to sell a home in Raleigh, N.C.? There’s a decent chance that an “iBuyer” will purchase it.

Raleigh had the largest share of homes bought by companies that use technology to make instant offers on homes. Nearly 7% of homes sold in Raleigh in the third quarter of 2019 were bought by iBuyers, according to a new report from real-estate firm Redfin RDFN, -0.28%, a reflection of the city’s affordable housing market and tech-savvy population.

Redfin operates an instant-offer program called RedfinNow. Other iBuyers include Zillow ZG, +0.75%, Offerpad and Opendoor.

The Redfin report examined public real-estate records across all markets that Redfin serves, whether through its traditional brokerage program or RedfinNow. To calculate the market share of iBuyers, Redfin compared all known iBuyers purchases in a metropolitan area with all single-family, condo, and townhouse sales, excluding new construction and bank-owned homes.

Read more: Want to trade in your home? Zillow tries a model most often used by car dealers

There are potential drawbacks to the rise of iBuying. Some research has shown that homeowners may lose money by selling to an iBuyer. A MarketWatch investigation found that people who sold their homes to iBuying companies Opendoor and Offerpad earned 11% less than people who sold their homes on the open market. (A report from Zillow, however, showed that sellers who declined a Zillow Offer and sold traditionally only made 0.22% more on average.)

And some economists have argued that as iBuying gains steam, it could make certain real-estate economic indicators less reliable, clouding the picture of the housing market’s health.

See also  Gold firms above $1,700/oz on hopes of less aggressive Fed

“With these types of transactions gaining market share, it reduces the accuracy and usefulness of data that is based on traditional multiple listing service sources,” Joshua Shapiro, chief U.S. economist at consulting firm Maria Fiorini Ramirez, wrote last month. “The National Association of Realtors periodically benchmarks its pending and actual sales data to attempt to account for this (and other) factors that can affect the accuracy of its data, but it is unlikely that even this benchmark process can fully deal with the effects of such market changes.”

Metro area Share of home sales purchased by iBuyers, Q3 2019 Share of home sales purchased by iBuyers, Q3 2018 Median price of homes sold by iBuyers, Q3 2019 Metro-wide median home sale price, Q3 2019
Raleigh, N.C. 6.8% 3.8% $235,000 $291,000
Phoenix, Ariz. 5.1% 4.9% $250,000 $281,250
Atlanta, Ga. 4.4% 2.1% $200,000 $250,000
Charlotte, N.C. 4.3% 2.5% $207,550 $264,300
Houston, Texas 3.9% 0.1% $208,000 $248,864
San Antonio, Texas 3.6% 2.5% $184,750 $235,000
Dallas, Texas 3.6% 2.5% $231,250 $223,700
Las Vegas, Nev. 3.3% 3.4% $285,000 $288,000
Jacksonville, Fla. 3.0% 0.0% $199,000 $240,000
Austin, Texas 2.7% 0.0% $235,000 $320,000
Denver, Colo. 2.7% 0.0% $390,000 $420,000
Orlando, Fla. 2.0% 2.4% $245,950 $260,000
Nashville, Tenn. 1.9% 1.3% $232,500 $303,000
Portland, Ore. 1.7% 0.0% $393,500 $405,000
Riverside, Calif. 1.6% 0.2% $390,500 $382,000
Minneapolis Minn. 1.2% 0.1% $242,300 $284,900
Tampa, Fla. 1.1% 0.9% $207,000 $236,393
Sacramento, Calif. 1.0% 0.0% $360,000 $416,000

Through its analysis, Redfin identified 18 metropolitan areas where iBuyers have achieved at least 1% market share, two-thirds of which were in the so-called Sunbelt. Beyond Raleigh, there were three other cities where iBuyers now account for more than 4% of sales: Phoenix (5.1%), Atlanta (4.4%) and Charlotte, N.C. (4.3%).

See also  Goldman Sachs CEO Is worried about US spending #shorts

“iBuyers are concentrating their efforts in southern markets where both home sales and prices are poised for strong growth,” Redfin chief economist Daryl Fairweather said in the report. “We think that iBuyers are likely to accelerate home sales in these markets. Homeowners who may have been reluctant to sell because they didn’t want to deal with the hassle may be persuaded by the convenience of an iBuyer sale.”

The median home sales prices in roughly all of these cities was at or below the national median of $270,900, according to the National Association of Realtors.

The Redfin report also indicated how iBuyers tend to focus on homes at the lower end of the market. In all but two of these cities, the median price of homes iBuyers sold after purchasing them was lower than the local median sales price.

Homes owned by iBuyers also sold faster than average in all but five markets: Portland, Ore., Sacramento, Calif., Minneapolis, Denver and Austin, Texas.

The Redfin report sheds further light on this growing trend across the country’s housing market. Zillow Z, +0.68%, for instance, has expanded its iBuying program to 22 markets since it launched 19 months ago, announcing Monday that it would begin making instant offers in Los Angeles.

Also see: One year after Amazon’s HQ2 announcement, here’s what happened to house prices in Northern Virginia

Leave a Reply

Your email address will not be published. Required fields are marked *