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, +2.53%, 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, +1.64%, 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.
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.
“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|
|San Antonio, Texas||3.6%||2.5%||$184,750||$235,000|
|Las Vegas, Nev.||3.3%||3.4%||$285,000||$288,000|
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%).
“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, +1.81%, 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.