Home sales to the top four iBuying companies more than doubled in Southern California this past spring, jumping 123% from the quarter before to an all-time high of 789 homes, a Zillow analysis shows.
Zillow Offers, Opendoor, Offerpad and RedfinNow collectively spent more than $512 million buying houses in Los Angeles, Orange, Riverside and San Bernardino counties, the study found. They also bought an additional 197 homes in San Diego County this past spring, up from 75 over the winter.
iBuying is a relatively novel form of house flipping, with well-capitalized online companies making cash offers to buy a home. The online process frees homeowners from the burden of staging their home, making repairs and listing it on the open market.
The sales model represents a tiny but growing proportion of all transactions.
The 389 homes sold to iBuyers in Los Angeles and Orange counties represented 1.2% of all home sales there. That's the most sales and the highest market share since iBuyers launched operations in the two counties in late 2018, Zillow figures show. The 400 iBuyer sales in the Inland Empire represented 2% of all transactions, also the highest for sales and market share since iBuying began there in late 2017.
Zillow tracked iBuyer sales in 33 U.S. markets.
Homeowners sold more than 15,000 properties to iBuyers in the second quarter for a total of nearly $5.3 billion. That's up from the previous quarterly high of about 10,400 homes in the summer of 2019.
Market share for iBuyers this past spring reached 1% of all U.S. home sales, the highest since the first iBuyers launched operations in Phoenix in 2015.
"The growing number of homeowners using an iBuyer service clearly demonstrates that sellers desire an easier way to sell their homes, with more certainty and less stress, even in a hot sellers market," said Zillow Chief Operating Officer Jeremy Wacksman.
Under the iBuyer sales model, homeowners upload a description of their home and get an all-cash offer within a day or so based on pricing algorithms. After sending an inspector to the home, the price is reduced to cover repairs and service fees.
The iBuyer then spruces up the home and lists it for sale within a few weeks. Zillow reported it typically took iBuyers 64 days to resell a home during the spring quarter.
iBuyers prefer houses in the middle price range, where demand is highest. They tend to buy homes requiring minor repairs and upgrades.
Zillow's data mirrors a recent report by Bankrate.com showing record sales numbers.
"The evidence shows that it is resonating with consumers more than ever, and market conditions are in fact fueling its growth," iBuyer tracker Mike DelPrete of the University of Colorado told Bankrate.
Citing data from real estate technology company Zavvie, Bankrate reported iBuyers now are paying a premium for homes, making bids that averaged 104.1% of market value during the first half of the year. Market conditions, which make it harder for homebuyers who need to sell their old home first, also boosts iBuyers' appeal since they promise fast, predictable sales.
iBuyers also have reduced their fees so that they're more competitive with traditional transactions, Bankrate reported. The average cost for selling to an iBuyer is now just 7%, down from nearly 11% last year.
Zillow reported the highest number of sales were in the mainly homogenous housing markets where the iBuying concept first was tested: Atlanta, Phoenix and Dallas. It's easier to calculate prices in markets with expansive, suburban-style housing tracts where there are lots of sales of similar sized homes to compare to.
Nonetheless, success in L.A. shows the concept can work in more diverse markets where older neighborhoods with dissimilar homes make automated valuation algorithms less reliable.
"The growing popularity of (iBuying) we've seen in Southern California is an important indicator that ... instant buying can work in large, competitive and expensive markets with diverse housing stock like the L.A. metro," Zillow's Wacksman said.
Transactions in Los Angeles and Orange counties increased 87% this past spring from the winter quarter, with sales totaling $202 million. iBuyers paid a median price of $769,500 in L.A./Orange County, compared with a median for all sales of $818,184.
Sales rose 174% in Riverside and San Bernardino counties this past spring, totaling $310 million. The iBuyer median in the Inland Empire was slightly higher than for the market as a whole: $496,500 for iBuyer sales, compared with $481,981 for the market as a whole.
