The headwinds that began in the middle of 2022 have yet to give an inch as companies try to weather the changing tides of a rebalancing housing market and economic volatility. While many struggle with the market shifts, some are having a more challenging time than others.
That has been the case for Opendoor, who announced that it would be firing 560 of its employees, or 22% of the San Francisco-based company’s workforce. The move, which the iBuying giant announced internally on Tuesday, comes days after Redfin cut 200 jobs, further highlighting the company’s turmoil under shifting market conditions.
“We’re taking these actions now to better align our operational costs with the anticipated near-term market opportunity while maintaining our critical technology investments that will continue to drive the business long term,” said an Opendoor spokesperson in an emailed statement sent to RISMedia.
The spokesperson continued, “While this was a hard decision, it was necessary to ensure that we can continue to deliver on our mission and serve our customers for years to come.”
Admittedly, the spokesperson acknowledged that the iBuyer has been trying to endure the “sharp transition” in the housing market since the Federal Reserve embarked on its journey to reel in record-level inflation, with several interest rate hikes dating back to March 2022.
The effects of that initiative coupled with surging mortgage rates that peaked in June 2022 sent ripples through the housing market that forced many industry players to reevaluate their expenses and labor needs.
One segment of the real estate industry that has taken a significant hit in the past year has been the iBuying sector, which has been whittled down to two large-scale players—Opendoor and Offerpad—after Redfin bowed out of the sector in November.
The second half of 2022 was brutal on iBuyers. Both companies tallied sizable losses in the third and fourth quarters of the year.
In its latest earnings report, Opendoor posted a 25% decline in revenue in the fourth quarter last year, reeling in $29 billion. The company also suffered a net loss of $399 million, nearly double its losses in the same period the year before.
While that is much lower than Opendoor’s Q3 2022 showing—when it posted nearly a billion dollar net losses—it serves as another example of how the company and the iBuying sector overall have fared as the shifting conditions took hold of the housing market last year.
That was partially attributable to a change in the value of the company’s cache of properties. Opendoor reported an average of $28,000 lost on each home sold in Q4 versus the $16,000 profit it made on each house in the fourth quarter of 2021.
Opendoor’s financial performance was also underscored by a significant shift in leadership after former CFO Carrie Wheeler stepped into the CEO role after Eric Wu resigned to focus on the company’s new Marketplace.
During a recent earnings call outlining the company’s performance last year, Wheeler indicated that the company has been focused on “stabilizing our core business.” That, at least partially, includes some belt-tightening for the iBuyer, which has resulted in labor cuts.
Tuesday’s announcement follows a previous round of layoffs in November when Opendoor fired 550 employees—roughly 18% of its workforce—as the company continued to weather the challenging market conditions.
In a blog post announcing firings, Wu—still at the company’s helm at the time—admitted that the company was “navigating one of the most challenging real estate markets in 40 years and needed to adjust our business.”
“To manage through the turbulence in the market, we’ve worked quickly over the last two quarters to reduce our operating expenses,” Wu wrote, adding that the company had “scaled back” its capacity by over 830 positions—primarily by cutting third-party resourcing.
Aside from its cost-cutting measures, the company has been exploring other methods to reel in more business.
Opendoor launched its partnership with former competitor Zillow to allow the portal’s users to accept an Opendoor offer on the platform. The company is also rallying behind its new Marketplace and Opendoor Exclusives platform, making the iBuyer’s listings available to consumers for 14 days before being listed on a multiple listing service (MLS).
“As we look ahead, we are energized about our future,” Wheeler said during a February earnings call. “We have set clear goals that will stabilize the business in the short term while strengthening our foundation for the long term, and we believe we have the team, the balance sheet and plans in place to ensure we realize these goals.”