SEATTLE, Feb. 26, 2020 /PRNewswire/ -- (NASDAQ: RDFN) — The nation's top iBuyers purchased 1 of every 100 homes that sold in 2019, according to the latest iBuyer analysis from Redfin (www.redfin.com), the technology-powered real estate brokerage. Redfin analyzed MLS and public records data across more than 200 U.S. metro areas on home purchases and sales made by the most well-known national iBuyers, including Opendoor, Zillow, Offerpad and RedfinNow.
The term "iBuyer" (short for instant buyer) is used to describe real estate companies that use technology and AI to make instant offers to home sellers and then purchase homes in quick, cash transactions. iBuyers charge sellers a higher fee than a traditional real estate agent would for the convenience of avoiding home prep, showings and open houses and the certainty of a cash offer with a flexible move out day. These companies then make any necessary improvements and resell the homes to homebuyers.
While iBuying represents a sliver of overall U.S. real estate activity, Redfin's analysis shows it is growing quickly in many metro areas, particularly in the South and Southwest. Raleigh had the highest iBuyer market share in 2019. iBuyers purchased 7.3% of the homes that sold there in 2019, up from 3.9% in 2018. Phoenix had the second highest iBuyer share at 5.9%, followed by Charlotte and Atlanta (both 5.2%) and Las Vegas (4.1%). iBuyers had a market share of at least 1% in 21 markets, including in 11 markets where they had a share of 3% or more.
In raw numbers, instant offer companies purchased the largest number of homes in Phoenix at over 5,200, followed by Atlanta (over 4,300) and Houston (over 2,100).
"It's no surprise Raleigh and Phoenix led the nation in iBuyer share because those housing markets are iBuyer sweet spots and are poised for price growth in 2020," said Redfin chief economist Daryl Fairweather. "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 homogenous housing stock. iBuyers also try to buy homes that will likely retain or increase in value over the short period between purchase and sale. Our forecasts indicate that both Phoenix and Raleigh will have strong price growth in 2020."
Fairweather also predicts the metros seeing strong iBuyer activity will also see growth in home sales.
"It's a seller's market right now, but this can be a double-edged sword for sellers who also are looking to buy. iBuyers are a big help for folks who need the equity from their current home to buy the next and want the flexibility of lining up their sale with the purchase of their new home. Homeowners who may have been reluctant to sell because they were concerned about carrying two mortgages or worried about the stress of choreographing two transactions may be persuaded by the convenience of an iBuyer sale."
iBuyers had the highest year-over-year growth in market share in Raleigh (up 3.4 percentage points), followed by Houston, Atlanta and Denver. iBuyers grew their Houston market share from 0.1% in 2018 to 3.0% in 2019, in Atlanta from 2.2% to 5.2%, and in Denver from 0.2% to 2.7%. Orlando was the only metro area where share fell from 2018 to 2019, declining from 2.6% to 2.2%.
Fourth Quarter 2019 Highlights
Raleigh led the nation in iBuyer market share for the third consecutive quarter. Raleigh (7.9%), Durham (6.2%), Atlanta (5.8%), Phoenix (5.7%) and Charlotte (5.2%) all exceeded 5% market share in the fourth quarter.
iBuyer market share grew the most year-over-year in Tucson, where iBuyers bought 3.1% of the homes in the fourth quarter of 2019, up from zero purchases a year prior. Denver saw the second-largest increase, up to 2.7% from just 0.4% a year prior.
Market share fell year-over-year in Las Vegas (-3.4%), Phoenix (-1.2%) and Orlando (-1.0%).
The most expensive markets for iBuyer purchases were Riverside, CA, Denver and Portland, OR, where iBuyers bought homes for a median of $403,500, $371,000 and $367,000 respectively.
The most affordable markets for iBuyer purchases were Jacksonville, Tucson and Atlanta, where iBuyers bought homes for a median of $191,500, $200,400 and $207,800 respectively.
In 18 of the 19 iBuying metros for which we have a year-over-year comparison, iBuyers sold homes faster in the fourth quarter of 2019 than the fourth quarter of 2018. The change was most drastic in Sacramento, where iBuyer homes were on the market for a median of 20 days, compared to 90 days in the fourth quarter of 2018.
About Redfin Redfin (www.redfin.com) is a technology-powered real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer's favor. Founded by software engineers, Redfin has the country's #1 brokerage website and offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry's lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents, while saving thousands in commissions. Redfin serves more than 90 major metro areas across the U.S. and Canada. The company has helped customers buy or sell homes worth more than $115 billion.
For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email [email protected]. To view Redfin's press center, click here.