Last December we conducted a wide-ranging analysis of Opendoor, the real estate startup that purchases homes directly from sellers. A look at of thousands of MLS records formed the basis of that piece, showing trends and extrapolating insights from the data.
At the time there were a number of unanswered questions we wanted to dig into: how much money does Opendoor make per transaction, how big could the model really get in the U.S., and does Opendoor have a sustainable competitive advantage against competitors?
Four months later I’m once again looking at the data, with these questions on my mind:
- What does Opendoor’s traction look like in its (relatively) new markets, Dallas and Las Vegas?
- Are there any notable changes in Opendoor’s fundamental business operations and metrics?
- Opendoor has two well-funded competitors in the market, Knock and OfferPad. How are they doing?
After looking at the data, there are three main observations:
- Dallas, Opendoor’s second market, is doing remarkably well. The transaction volumes there reached parity with Phoenix after only six months.
- Las Vegas, Opendoor’s third market, is off to a slow start. Key metrics suggest Opendoor is still finding its sweet spot in that market.
- Knock, Opendoor’s Atlanta-based competitor, is very early stage and has yet to ramp up in any significant fashion.
A snapshot of current volumes
Last time we looked at the data (at the end of November 2016), transaction volumes in Phoenix were going strong, Dallas was on a promising upswing, and Las Vegas was still small.
Since then, overall transaction volumes have surged from around 200 home sales per month to over 300 sales per month in February. In other words, in February, Opendoor was selling ten houses each day (including weekends) across all three markets. Not bad!
This growth appears to be driven by sustained volumes in Phoenix and very strong growth in Dallas — putting that market on par with Phoenix after only six months.
Opendoor does Dallas
Let me be clear: I’m impressed with the growth in Dallas. When I’m evaluating new businesses and new business models (see my article, The Two Principles of Startup Success), I always look for business model validation (does this work in one market?) and then the ability to scale (can this be replicated in another market?).
Opendoor’s success in Dallas is a resounding answer to that question. Yes, the business can scale beyond one market. This is a noteworthy achievement for the firm.
Like Phoenix, the average selling price in Dallas is well-clustered. During the past three months, Opendoor’s median sale price in Phoenix was $210,000, compared to $212,000 in Dallas.
This suggests that, like Phoenix, Opendoor has found its sweet spot in the Dallas market. It deals with houses in a narrow and specified value range and (generally) does not deviate from that.
Opendoor credits its success to the team in Dallas and their focus on providing customers an experience they love. “We’re seeing that customer love translate to growing word of mouth, and a growing business there,” said JD Ross, one of Opendoor’s co-founders.