Opendoor, the iBuying giant, announced on Tuesday that it was laying off 22 percent of its workforce, cutting a total of 560 positions. The majority of the cuts were focused on operations roles. In a statement, a company spokesperson described the decision as “very difficult” but necessary due to the “sharp transition in the housing market.” Last year’s historic rise in mortgage rates resulted in approximately 30 percent decline in new listings from peak levels, driving the need for operational cost alignment with the anticipated near-term market opportunity.
Opendoor did not specify the exact number of employees remaining, but with 560 cuts amounting to 22 percent of its workforce, it is estimated that the company will have around or just under 2,000 workers after the layoffs. The affected employees will receive severance, extended healthcare benefits, and job transition support, with the company’s priority stated as supporting its people.
The housing industry as a whole has been facing challenges, with demand for new loans dampened by higher rates and slower home price growth. Existing home sales fell every month in 2022, though sales rebounded in February 2023, they were still 22.6 percent lower than the same time last year. This has resulted in job losses in various real estate sectors, with companies like Zillow, Compass, and Keller Williams also announcing layoffs over the past year.
Opendoor has faced its own challenges as an iBuyer, suffering a net loss of $399 million in the final quarter of 2022, and a total loss of $1.4 billion for the year. The company reported an average loss of $28,000 per home sold in the last three months of 2022, a significant reversal from the $16,000 average profit per home sale in the same period in 2021. However, Opendoor’s CEO, Carrie Wheeler, noted during the company’s recent earnings report that homes purchased more recently were performing better than expected, indicating that the main challenge in early 2023 was offloading homes bought during more favorable times in the past.
Other iBuyers, such as Redfin, have also faced similar challenges and ended their iBuyer programs. Offerpad, Opendoor’s main rival, reported a loss of $121.1 million in the fourth quarter of 2022 and $148.6 million for the entire year. The company also incurred a cost of $24,100 for each home sold in the fourth quarter of 2022 and is at risk of being delisted from the New York Stock Exchange if it fails to improve its share price.
In response to the changing housing landscape, Opendoor has launched a new marketplace called Exclusives, which aims to connect buyers and sellers with Opendoor acting as a middleman and collecting a fee for its services. The marketplace represents a potentially more agile and asset-light business model that does not require heavy spending on property acquisition and renovation. Opendoor has also formed a partnership with former rival Zillow.
While Opendoor’s CEO did not comment on the layoffs, she has previously expressed confidence in the company’s prospects despite the challenging market conditions. In the company’s February earnings report, she emphasized a focus on operating with excellence and leveraging the company’s core strengths.