The cuts affect approximately 550 people, Opendoor CEO Eric Wu said in a blog post Wednesday, and come amid a worsening housing market that has forced layoffs across the real estate industry.
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IBuying giant Opendoor on Wednesday announced that it has laid off approximately 550 workers, describing the move as a necessary adjustment as it navigates “one of the most challenging real estate markets” in a generation.
Founder and CEO Eric Wu made the announcement in a blog post, writing that the layoffs amount to about 18 percent of the company. Wu described the cuts as a response to a “once-in-forty year market transition,” but said that fact didn’t “take away the difficulty, frustration, and sadness downsizing brings.”
“The reality is, we’re navigating one of the most challenging real estate markets in 40 years and need to adjust our business,” Wu also wrote in the blog post. “To manage through the turbulence in the market, we’ve worked quickly over the last two quarters to reduce our operating expenses.”
Workers who lost their jobs will receive severance pay, healthcare for three months and job transition support.
Wu further explained that Opendoor “scaled back our capacity by over 830 positions – primarily by reducing third party resourcing.” The blog post didn’t go into further detail on that point, though it appears to refer to vendors the company uses to rehab homes. Additionally, Wu wrote that “we eliminated millions of fixed expenses,” though he also did not say what those expenses were.
The layoffs come after months of skyrocketing mortgage rates have stalled the housing market and, most recently, led to forecasts of nationally falling housing prices. The situation has led to thousands of job losses in the real estate industry over the course of 2022.
IBuyers in particular have faced some skepticism as the market cooled, with both Opendoor and rival Offerpad seeing their stock prices fall precipitously in 2022. As of Wednesday afternoon, Opendoor shares were trading for about $2.42, only slightly above the company’s all-time low of $2.26.
Opendoor’s job cuts also come just one day before the company is set to report on its earnings during the third quarter of the year. The firm’s most recent earnings report, which covered the second quarter of 2022, showed that it was cutting prices after buying more homes than it sold. Opendoor also lost money in the second quarter, reversing its track record from the first quarter when it was profitable for the first time ever.
The current earning season is poised to be a brutal one thanks to the worsening market. Already, Anywhere and eXp World Holdings have published results that highlight the challenges of operating in a world where transactions close more slowly, prices don’t appreciate like they used to, and interest rates are high. But the iBuyers are particularly vulnerable to such trends; unlike a brokerage that makes money on any kind of transaction, iBuyers have to sell houses for more than they paid if they want to turn a profit.
That proposition has proven challenging lately, and in September analyst Mike DelPrete found that Opendoor was selling homes at a loss for the first time ever.
Despite the myriad challenges, however, Wu indicated in his blog post that Opendoor will be pressing on.
“I understand the burden and responsibility you all have placed on my shoulders, especially to those we are saying ‘goodbye for now’ to,” he wrote. “And, that burden weighs heavy as we now have the task to ensure your hard work carries forward and we accomplish our mission.”
Update: This post was updated after publication with additional context and background.