The cities of Las Vegas, Phoenix, Raleigh-Durham, Charlotte and Atlanta all have one thing in common — they were the most popular markets for the so-called iBuyers like Zillow, Redfin, Opendoor and Offerpad that quickly buy homes, fix them up and sell them.
Raleigh, N.C. was the most popular market for iBuyers in 2019, with those companies accounting for 7.3 percent of home purchases, according to a new report from Seattle-based Redfin. Phoenix, often referred to as the birthplace of the iBuyer trend, had the second-highest share at 5.9 percent, followed by Charlotte and Atlanta (tied at 5.2 percent each) and Las Vegas (4.1 percent).
Overall, iBuyers — short for instant buyers — accounted for 1 percent of all home purchases across 200 U.S. cities tracked by Redfin in 2019, up from 0.6 percent in 2018. Most of the activity came in the South and Southwest.
“These markets work well for iBuyers, which tend to purchase homes that are relatively affordable, were built within the last few decades and are easy to price accurately because they are located in tract neighborhoods with largely homogeneous housing stock,” Redfin Chief Economist Daryl Fairweather said.
The iBuyers have yet to tackle the nation’s most expensive coastal markets, such as San Francisco, Seattle and New York. The most expensive markets served by these companies in 2019 were Riverside, Calif., Denver and Portland, where median sale prices approached $400,000.
The iBuyers use technology and artificial intelligence to make instant offers to sellers and purchase homes in quick, cash transactions. They aim to simplify buying and selling homes and make it easier for people to purchase a house while simultaneously selling their current place.
Though not a pioneer of the trend, Seattle-based Zillow has quickly become the face of the iBuyer movement, thanks to its abrupt pivot to direct home sales in early 2019. The move has supercharged growth, with the home-buying segment bringing in more revenue on its own last year — $1.37 billion — than the entire company generated in 2018. Zillow bought more than 6,500 homes in 2019 and sold approximately 4,300.
Redfin has also invested heavily in iBuying through its RedfinNow program, though it hasn’t made it the centerpiece of the company the way Zillow did. Redfin’s Properties segment, which includes RedfinNow, brought in $240 million in revenue in 2019, making up close to a third of the company’s total revenue.
Opendoor and Offerpad, two of the pioneers of iBuying, are private companies, so they don’t have to report how much money they make buying and selling homes. Opendoor says it has helped more than 65,000 customers buy and sell homes. Offerpad doesn’t say how many homes it has bought and sold, but the company is active in more than 800 towns and cities across the U.S.
The median price of a home bought by an iBuyer in 2019 rose 3 percent. However, in all but two markets, Orlando and Riverside, iBuyers bought homes below the area’s median price.
The companies turned homes around faster in several markets in 2019, which is important because every day an owner holds on to a home property taxes, interest and upkeep eat into profits. In nine of 21 major markets, the companies sold homes at a faster rate than the typical sale in the area.