NBTIP Builder Report - March 2023

BUILDER

R E P O R T

CAN OPENDOOR SURVIVE A REAL ESTATE SLUMP?

OpenDoor is under immense pressure as interest rates rise, home prices decline, and the company's losses pile up. Wall Street lost all faith in the company, with its share price plummeting 97% from 2021 highs

Opendoor's cash offers and quick closing process were a tremendous value proposition for sellers who avoid realtors, open houses, and home staging.

However, overly optimistic pricing models, mounting debt loads, and stale inventory exposed significant flaws in the iBuying model The writing is on the wall, with peers like Zillow and Redfin closing their iBuying divisions following substantial losses.

Opendoor is pivoting to an asset-light marketplace model similar to Airbnb to survive. But facing a real estate downturn, the bears think it's too little too late for Opendoor, making rapid execution of the turnaround plan vital to Opendoor’s survival

BOTTOM LINE. . .

Even though Opendoor got off to a good start, going public in excellent conditions for home buying post-COVID, many Wall Street analysts have turned bearish on the stock, continually slashing price targets.

The iBuying business is capital-intensive, requiring lots of debt while carrying low margins and considerable downside exposure if home prices decline.

Furthermore, whether Opendoor's pricing model has, any predictive power is debatable The company has overpaid for homes at multiple points in the postCOVID real estate cycle, leading to losses.

Even when conditions were favorable throughout 2020-2021, Opendoor failed to book a profit With mortgage rates rising at record speed in 2022, home sales volumes slowing, and home prices declining, many ask if the company is planning a turnaround too late in the real estate cycle

Because it can be argued that iBuyers like Opendoor only fare well in a rising real estate market, all signs indicate that more pain is ahead for Opendoor Given the mounting losses and significant debt, some short sellers predict bankruptcy.

MARCH 2023

With a massive debt and inventory overhang on the company amid rapidly rising interest rates, Opendoor looks to transition a portion of its business to an assetlighter model

The main initiative on this front is their Opendoor Exclusives program, which operates as a real estate marketplace that nicely layers on top of Opendoor’s existing business Essentially, after making an offer to a seller, Opendoor also gives their network of buyers in the Opendoor Exclusives program a chance to outbid Opendoor Should that occur, Opendoor collects a fee on the transaction without the need to buy the house itself

Opendoor sees Exclusives as the future of its business, aiming for at least 30% of its total transactions to go through its marketplace by the end of 2023. In a recent interview with tech blog Stratechery, former CEO Eric Wu detailed that his longterm vision has always been for Opendoor to shift from their lowmargin house flipping business into a high-margin marketplace model.

Facing a significant debt and inventory pile with poor future funding prospects, it's door-die time for Opendoor. Looking forward, the company is likely to face struggles as it continues to write down the value of its inventory while revenue declines as the company flips fewer houses.

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REFERRAL-BASED

Closing Gifts

ADT VIDEO DOORBELL

Homebuyers can get a FREE video doorbell at closing by just giving us a referral!

Or, homebuyers can use our online Benjamin Moore Paint Design Board and our Designers will create several initial designs based on their color preferences, and find the design palette they love!

DESIGN TRENDS TO INCORPORATE IN 2023 NEW BUILDS

It’s that time of year when industry associations and experts analyze and predict which home design trends will rise to the top and which will fall to the wayside

1. Natural looks: The all-white trend has finally started to see its decline, as many homeowners now prefer the look of natural wood. Consider the transition to lighter woods or add a light, natural stain cabinet with the grain of the wood orientated vertically for additional height

2. Dedicated workspaces: With remote and flexible work here to stay, both Taylor Morrison and Ashton Woods report getting creative with home office spaces. “As long as there are companies allowing employees the flexibility to work from home, we need to accommodate that in our home designs,” shares Brian Juedes, Taylor Morrison’s national vice president of product design.

3. Front yards: Outdoor living now encompasses the entire perimeter of a home. While backyards have been the focus for the past couple years, Lee Crowder, Taylor Morrison’s national director of design and model experience, says the front yard experience will also be important this year.

4. Color and texture: Several sources report a renewed interest in bright, bold colors and layered textures. “The shift away from mostly neutrals and whites is something many pros attribute to the pandemic,” says Houzz’s design predictions.

5. Well-designed kitchens: Homeowners are looking to open the look and feel of the kitchen while adding elements that hide clutter, maximize island function, and extend the space into the outdoors

6. Relaxing bathrooms: Today’s homeowners are using their bathrooms as the ultimate escape. If designed properly, they can truly provide a break from the other duties of a home

Overarchingthemesincludea continuedfocusonremotework andoutdoorliving,aresurgenceof coloroverneutrals,functional kitchenspairedwithspa-like bathrooms,andtheriseofthe transitionalstyle.