[Audio + Transcript] Opendoor CEO Carrie Wheeler at J.P. Morgan Global Technology, Media and Communications Conference

Transcript

Dae Lee

All right. So we're going to get started. I'm Dae Lee, JP Morgan's Internet analyst. And we're pleased to have with us today Opendoor CEO, Carrie Wheeler. Opendoor is a leading digital platform for residential real estate that is reinventing the way homes are bought and sold.

And in 2023, Opendoor bought 11,000 homes and sold 9,000 new book of homes. And at the peak of the housing market, Open was buying and selling more than 3,000 homes per month. And Carrie became the CEO in 2022, served as the CFO for about 2 years prior to that, and she also brought 20 years of experience in private equity. So Carrie, thanks for coming to our conference.

Carrie Wheeler

Thanks for having us.

Dae Lee

All right. So we're going to start at high level. Opendoor buys homes and typically sells them within 120 days. Some might consider it as a home flipping business. So how do you respond to that? And could you explain what makes Opendoor different?

Carrie Wheeler

Yes. I mean we don't use that word Dae. We are not a home flipper other than, obviously, we buy and sell homes, those folks buy and sell homes. That's where the similarities end. Our business model is really different. We're not about buying low, doing heavy renovation and repair and looking to sell high. What we want to do for the consumer is give them a competitive cash offer. We charge you a fee for that, a service fee for that. And there's an incremental spread that compensates us for the risk we're taking so that what we can give you is a totally seamless sale.

You don't have to hire an agent, you don't have to list your home on the MLS and host open houses, you're not doing repairs on spec, you have zero risk of fall through. So very different. What we're really trying to do is take what has been a very offline transaction, that really hasn't evolved forever, and bring technology to it and really transform the way people are able to sell their home.

Dae Lee

Okay. So on that topic, like what motivated sellers to sell to Opendoor and what are the biggest obstacles preventing more sellers from selling to you?

Carrie Wheeler

I mean, first of all, it's really what the alternative is, which I can go through the traditional process. I can endure all the friction, all the pain points that most people are ill-equipped to do, don't understand it before they go into it, can't manage it. You're managing kids and the dog and your home and your life and your job. Selling your home traditional way is pretty unpleasant for most people. It's highly uncertain. It's embedded with a ton of different intermediaries you have to manage. It's got a lot of hidden costs. And what we do is take all that out of the system and allow you to sell with simplicity, certainty, total convenience, speed, if that's on your agenda, in a way that is much better for the seller and really allows the home seller to really direct how they want their experience to be.

You can pick your closing date. You can decide if you need late checkout. We do the repairs for you on our time and you don't have to endure any of that. So that's the motivation. That's why people show up and ask for it.

Dae Lee

Okay. I mean it sounds like a better experience. So I guess, I mean, like what is the biggest obstacle preventing more people from coming to you? Is it just awareness or...

Carrie Wheeler

I mean the biggest impediment or obstacle to us like being bigger and serving more customers is just, frankly, increasing our top of funnel. Like how do we make sure that more and more people are aware that this is a very viable alternative. And so for us, that means increasing our brand awareness.

We know that when we have higher brand awareness, it's a tide that lifts all boats. People are apt to convert at higher levels because they understand it, they trust it, they've heard of us before, maybe they saw a TV commercial and they're more apt to say, yes, holding price, holding spread constant.

We want to be everywhere sellers are. So for us, that means different partnership channels. It could be, "Hey, I want to look at buying a new home, but I've got to sell my old home." We partner with the homebuilders. It could be I'm on Zillow's website, thinking about selling my home. And you know what, maybe I can do that via Opendoor and I get a cash offer. So we partner with the online real estate players.

It can be agents like, we've been working with agents really since the early days, but have made a lot of effort to really partner with agents and allow them to understand that we can be a tool for them, that they can use this as a selling tool. Not all customers want to go through the traditional listing process. Some of their customers may want to skip that step. So be in front of more people through lower partnerships. And the last thing is delivering our product at the most cost-effective way, we refer to that as spread, which is effectively the discount by which we sell our homes at. I mean, what would you price homes at.

And the job for us is to continue to improve our pricing models and overall cost structures that our spreads can be as low as they possibly can, adjusting for risk.

Dae Lee

Okay. So we cover who you are. So let's talk about where we are in the industry. So given your background, like what is your assessment of the current state of the industry? And I guess, what key assumptions are guiding your current operational decisions?

Carrie Wheeler

Well, current state of the industry, I mean, it's hard not to recognize what's going on overall housing macro right now, and that's top of mind for a lot of people. I think we know that sellers are feeling frozen. They've got the lock-in effect of relatively undermarket mortgages, which is really creating a lack of supply.

You've got buyer affordability issues, given where mortgage rates are today, that's creating a lack of buyer demand. And so transactions are down. And what matters most for us though is our home price is stable. I mean is that relative balance of where sellers and buyers are, are those aligned, and they have been actually pretty aligned for us.

So I'd say from an overall operational decision against that macro backdrop, we just make sure that we are really in sync with what we're seeing across our 50 markets and that we have the flexibility to do always adjust how we may be pricing and moving our spreads to reflect whatever changes are afoot. We saw mortgage rates spike early this year from 6.5% to 7.5% and then come back down, like we want to be make sure that we're really responsive to those kinds of things.

Dae Lee

Okay. And I guess, does that mean your 2Q guide and early preview for 3Q, that assumes current environment kind of hold steady?

Carrie Wheeler

Yes. I mean what we've seen so far this year is that as I said, transaction is down. I don't see that changing. Home price is stable. So we don't see a significant change in the supply-demand dynamics, certainly relative to 2023. I would say the pace of home sales has slowed a little bit on the back of the increase in mortgage rates. That's something we watch pretty closely, lower than last year but still above where historical years have been. So again, those are the kinds of things we watch all the time.

Dae Lee

Okay. And at 4Q earnings, you mentioned having more than 1 million customers who have requested an offer, but have not yet sold their homes. So curious to hear like what you think the primary reasons are for these users not having yet sold their homes? Is it macro? Is it something to do with Opendoor? Is there something else altogether?

Carrie Wheeler

Those 1 million customers are a good thing because we have this incredible hook, right? People come to us because they want to understand the true value of their home. It doesn't mean them a seller today necessarily, they can may just be a seller in the future. So we got a ton engagement for people who want to understand the value of their home, are considering it. They're not quite ready to do it, but we keep them in the system.

And today, that's 1 million and counting, and that means that we can reengage you over time. We reach out, we talk to you about what the value of your home is, how that may be evolving and people reengage actively. They want to refresh their offer sometimes every week, sometimes every month. It seems they go quiet for a year and then come back and refresh, which is great.

We want to make sure that we're there for them when they actually do choose to sell. We don't monetize those leads. We keep them in the system today, but it's a valuable -- like million-plus customer base that we can monetize in the future. And you can see that in our markets, where we've been for longer, that retained customer base is very meaningful. And it just means that we have a window into sort of future growth, and we'll continue to build that in our newer markets.

Dae Lee

Okay. And I guess based on what you said, is it right for us to think that you think there's pent-up demand across sellers and buyers right now?

Carrie Wheeler

I mean we think so. I mean some people move because they have to, not because they're dying to move, right? Life happens, job changes and family dynamic changes and just aging or new homes or babies, and that's why people move.

I mean there are still 4 million people moving this year. But usually 5 million, 5.5 million people move. So for sure, there's some pent-up demand in the system. We see it when people kind of pull back from the market when there are exogenous factors like rate spikes. But if and when some of that loosens just because, frankly, demographic changes, life changes, people will start to just capitulate to kind of current rate environment or potentially if there's rate relief, that demand will come back into the system.

Dae Lee

Okay. All right. Let's now double-click on Opendoor. So looking back over the past 1.5 years and the once in a 40-year transition in the industry, what are the things that you think you could have done differently? Or are there any learnings that could help you better navigate if a similar shift in the market were to come back?

Carrie Wheeler

I mean it's a good question. It's one we talked about a lot and we retrod internally. I think when we look back, we'll consider 2022 as a real crucible moment for Opendoor because a lot of lessons learned. I'd say, at the highest level, we're always thinking about how do we maximize growth, how do we maximize margin? How do we manage appropriately for risk.

And on the growth front, I mean we're still growing. We doubled acquisitions year-on-year this quarter. We're growing, we're rescaling, but it's certainly not growth at all costs. We want to make sure that as we expand the balance sheet, as we grow, we're doing it in an appropriate way. On the margin side, one of the lessons learned is just we wanted to increase our overall margin target, build a little bit more, I'd say, margin cushion in the system.

We did that via cost savings and price accuracy improvements and just have a slightly higher margin target? And then the last thing I'd say is risk. We changed things around risk related, not just the process but also culture internally. So we certainly assessed, do we have the right guardrails, do we need new runs. We were at the right kinds of levels and we put new measures in place sometimes or we adjusted what we had. But I'd also say, culturally, clearly, I mean we're all thinking about risk all the time. And that's not just a risk team thing, it's a product team thing. It's a finance team thing.

So culturally, I'd say, just the awareness and the mutual responsibility to understand and respond to risk is something that is much more company-wide than it was, say, a couple of years ago, all for the good.

Dae Lee

Okay. And you touched on this a little bit, but I mean you were able to raise your contribution margin target from 4% to 6% range to 5% to 7% through that transition. So what were the key drivers behind that improvement? And looking out, do you see opportunities to further improve that?

Carrie Wheeler

Yes. I mean I'd say, at a contribution margin level is really -- there were really 2 factors. One was how do we improve price accuracy, so we can be -- know that when we're pricing for spreads, we can hit our margin targets. And a couple of examples of how we did -- improved price accuracy would be around home condition. So better home level data. Do we understand the relative and absolute condition of that home.

And then just overall cost savings, just to improve our margin target. We get to choose where our contribution margin target is. We get to set it. And then the question is could we manage the business toward and -- I mean the proof is in the fact that over the last 7 quarters, for our new book of business we've been building since the middle of 2022 post-market reset, we have delivered within that 5% to 7%. So it's a combination of better pricing, some cost savings, and we've been able to execute against that.

Dae Lee

Okay. All right. So let's talk about 2024 now. So you outlined your North Star as rescaling the business in a durable and sustainable way. So what does that mean in the current housing environment and for your spread?

Carrie Wheeler

We touched on it a little bit right now. I mean there are 2 components to rescaling the business in a durable way. Are we increasing our top of funnel, which you and I talked about earlier, making sure that we're putting Opendoor in front of more customers, in more places. And then ensuring that we're managing in a way that is, when I say durable, like sustained, long-lasting. We can grow the business in all sorts of ways that could be temporal. Like we can decrease spread in a way that is too risky.

We can increase marketing dollars that are not -- maybe not that effective in terms of return on investment, but we're going to do all those things in a way that is long lasting. So when we make measurable improvements in our pricing system, we can actually put them back into just durably lowering spread in perpetuity, right? That's the goal. Like how do we go from x to y for the benefit of all customers, so their product is cheaper. And those are the kinds of things we've been focused on for the year.

Dae Lee

Okay. I know it's only been a few weeks since 1Q, but I mean, have you seen any change in the environment that could change how you're thinking about, I guess, 2Q and 3Q and maybe your trajectory in 2024?

Carrie Wheeler

Nothing that has really changed, nothing that wasn't embedded in how we talked about Q1 results and how we guided to Q2. I'd say just that the market continues to be pretty dynamic, you and I are talking about the spectrum of rate relief, and I don't think anyone sitting here today would have thought no to maybe one rate cut for the year. So we can't manage those outcomes. We know that.

And our job is to build a business that can respond to the macro, but certainly doesn't manage to the macro. We have to be agnostic to that. So no, we feel, I'd say, relatively constructive about housing right now. As I said, it's slowing a little bit in terms of clearance rate on the back of some of the mortgage rate increases. And so we are staying very close to that, but still feel good about where we are in this point of the year.

Dae Lee

Okay. And talking about your business in a durable and sustainable way, a question we get asked a lot is, could Opendoor generate free cash flow and when? And I think your answer to that question is when you reach $10 billion revenue run rate. So like why is $10 billion the right number?

Carrie Wheeler

Yes. I mean I'd say at a high level, first of all, our entire company is geared around getting to being positive free cash flow. We know that, that's really important. And so we talk about it a lot internally. The $10 billion framework we put out there was the level by which we felt like if we were run rating at that level, whether that's acquisition GMV or steady-state revenue at that level, our cost structure is at a place where we can be positive adjusted net income, which is our proxy for cash flow.

So $10 billion of revenue, doing, call it, 2,200 homes a month or 6,600 homes a quarter, managing the business to a 4.5% operating expense rate, let's say, 2% to 3% interest costs would take you to adjusted net income positive, assuming we're managing at the high end of our contribution margin range. And today, we've made a lot of progress towards that. I mean, we guided to Q2 to around 4,500 acquisitions. So not at 6,600, but 2/3 of the way there.

As I said earlier, we've had 7 quarters of consistent contribution margin performance where we're well within that 5% to 7% and actually higher. And then on the OpEx line, where we said 4% to 5%, which would be $400 million to $500 million at a $10 billion run rate, we manage around $100 million and change, $107 million last quarter, $110 million guide. So like we're squarely within that target.

So I feel like we have meaningfully decreased the losses in the system. We have substantially reduced our cost structure. So we are marching towards that goal. We haven't put a time line on it, Dae, but we are going to get there.

Dae Lee

Just took away my next question. I guess let's stick on the topic of $10 billion, does that require market recovery? Or is this something that you can do in this current depressed environment?

Carrie Wheeler

I mean when we talked about the $10 billion, it was really about what level of share do we have to be at, for us relative to our current addressable market, which is around $650 billion, that's within our buy box in the markets we have. We have $650 billion we can underwrite. That's getting us to like a 1.7% share from like 1 and change where we are today.

I don't think that's a stretch. So that's the current market environment as it stands. And that's -- doing all the things we talked about earlier, it's growing top of funnel, it's increasing brand awareness, which we've seen great gains in and it's just continue to invest in awareness because that drives conversion.

Dae Lee

Okay. And getting to free cash flow positive is first, but we'd like to look longer term. When you look at your business, looking further out, is there like a longer-term adjusted EBITDA or just the net income margin potential that you try to drive the business towards?

Carrie Wheeler

We haven't updated our long-term targets recently. I'd say -- when you look at -- if you sort of step back from everything, Dae, and you think about like what is the market opportunity we're going after here. I mentioned the $650 billion based on just what we have today. That's current buy box. Buy box is a definition of what we can underwrite. That's defined by mostly price point, but also home type and age and in the 50 markets we're at.

So of that group alone, just kind of what we have today, there's like no headroom on growth opportunity, and that's before we increased buy box some more, before we go to more markets. And then the question is, how does margin structure evolve in that context as you scale the business, 5% to 7% contribution margin? What we haven't talked about is over time, we want to have a business that has more capital light, right?

Will that be accretive to margins over time. And then below the line, as we grow the business, scale brands, scale partnerships, scale the retained customer base we have in all these markets and time does that for us. Like a lot of our markets are very immature. We opened a bunch in 2021. We kind of shut them down or at least they went a little dormant in 2022, just given the market reset.

Growing our retained customer base, so marketing over time with scale and maturation should be to the benefit of like being more efficient. And then fixed costs, certainly, I think there's a whole bunch of operating leverage in our business. And I think as we rescale, I don't see fixed costs really growing. So all of that will be to the bottom line over time.

Dae Lee

Okay. And we've already talked about how you acquire sellers a little bit, but let's dig into that a little bit more. And partnership is an area where we spent a lot of effort over the years. So could you discuss the types of partnerships that you have established to date -- and what makes partnership attractive to you?

Carrie Wheeler

Yes. I mean for us, partnerships is a catchall for 3 discrete channels that we work with, one is homebuilders, two is agents and three are the online real estate folks. The reason why partnerships in total are so attractive is because they have fixed customer acquisition costs, and they tend to be accretive to our overall cost of acquisition.

So we pay them on closed contracts. We don't put money in the system and hope we convert a bunch of people like when we close a contract, we pay, and it tends to be a very efficient setup for us. On the homebuilder side, today, we have partnerships with most of the largest players, I think about 90 homebuilders in total. And for us, that is a perfect trading customer.

It's a customer who walks into a showroom on a weekend, say they want to buy a new build home, do they, cannot be a contingent buyer, that's not of interest to the home builder, but we can unlock what is their home equity over the course of that weekend, when they're looking in the showroom, and we can line up the close dates for them, and it's very hand in glove. It's a great partnership for us. And we've been doing that really since the early days of Opendoor.

Number two is the agent channel. I'd say -- we've also been working with agents since the beginning, but we've really changed, I think, that relationship to be much more symbiotic, better for us, hopefully better for the agents, too. An agent today can come into a listing appointment and they may say, "Hey, listen, if I had marketed your home and put it on MLS, we do all these things, and we spruce it up for sale and we do the open houses, we may get x."

The alternative is to not do those things, and this is sort of essentially the other alternative, which is an Opendoor offer. And that might be right for certain customers that -- it may not be right for all. That's okay. But for some set of the customers, that may be a much more attractive alternative. And for the agent, the return on their time can be great.

I mean we pay them less than they would otherwise earn in terms of their listing fee. But again, the return on their time, that calculus makes sense sometimes for a whole host of them. And we're penetrating not just with individual agents, but now we announced a partnership with Exp Realty, 70,000 agents across the country who are integrated into their app and their flow, and we do that with other major brokerages across the country.

And like we're just -- I feel like we're very underpenetrated in that channel still today. We'll do more of that over time. And then last one is just the online real estate folks. Zillow being the large example we have, where you're on Zillow's website and you're thinking about selling your home, again, we're integrated into their flow. You can click on, you can ask a few questions and assuming you want to pursue that, you come over to us and we can explain the product to you and get you a cash offer. So those are, in total, like a significant segment of our offers and our overall business and growing.

Dae Lee

Okay. And when you look at your partnership channel, like how do you grow that over time? Is it by adding more partners to your program? Or is it doing more with the existing partners?

Carrie Wheeler

It's going to be a combination of both. I think we can have a higher penetration with our existing partners. Certainly, that's something we work on. We aren't in -- we don't have an offer in all agent hands. We don't have all homebuilders. And then there are channels outside of those 3 that we've yet to penetrate.

For example, we're not today aligned with any mortgage lenders. You can say that as being a very appropriate channel for us to spend time on. So the answer will be a bit of both.

Dae Lee

Okay. And when you look at your home acquisition channels, like what's the mix across, I guess, partnerships, brand or maybe even performance marketing? And how do you see that mix changing over time?

Carrie Wheeler

Yes. It's a little nuanced because generally over the last year or so, we pulled back a lot of marketing spend at a time where spreads were high. I'd say, our direct business shrank, on purpose, by design, and partnerships took up that mix. So I think we indicated that partnerships have been a huge portion of our growth, but I expect as things more normalize, there will be a healthy balance between what I'll call sort of the direct side of our business and the partnership channel side of our business.

Dae Lee

Okay. All right. And then let's move to your balance sheet. So like how is Opendoor's liquidity position currently? And we do get some people worried about like if you have to renegotiate some of your lending program? Is there something that we should be worried about maybe?

Carrie Wheeler

So in terms of balance sheet, we have today about $1.3 billion of capital, so substantially capitalized. About $1 billion of that is unrestricted cash. So that's available for us to invest in homes if we choose.

We have about $8 billion of asset-backed financing facilities, a portion of which is committed, some of which is uncommitted. And of that, about $2.1 billion is in term loans, which are attractively priced. I think they're like less than 4% today with a fair bit of tenure on them. They stretch out to 2027. So based on what we have today, the cash on hand, our total parent capital and the facilities we have access to, we feel like amply capitalized to fund future growth.

Dae Lee

Okay. And at 1Q, you announced the at-the-money equity offerings program. So the question is like why now? And like what scenarios could necessitate utilization of that program?

Carrie Wheeler

Yes. I mean we thought of the ATM program as really just a tool to have in our toolkit. It is a program by which we could issue up to $200 million of equity at market with, frankly, lower fees. And it's an option, not an obligation to do anything. Where we need to tap into that to fund future growth, we could do so, but certainly don't have a design to do it right now, as we said in the call.

A lot of the more capital-intensive companies do avail themselves of ATMs. I'm thinking of the single-family REITs who have done a lot of them, less pervasive probably in the world of tech, although folks like Carvana and Tesla, and I think Zillow has one, like folks who are managing balance sheets, they have used it. And just given our trading volume, this is something we are uniquely available to take advantage of too. So we're going to be opportunistic, but also patient.

Dae Lee

Okay. That makes sense. And then moving on -- thinking about longer-term growth opportunities. The market expansion was one of them before the industry correction. And you put that on pause during that transition and even the cut out of 3 markets towards the end of 2023. So looking further out, like what do you need to see for you to resume the market expansion?

Carrie Wheeler

Yes. I mean a couple of things I'd say, high level, first of all, and I think I said this earlier, based on where we're at today, what we can underwrite, we want to be that part of the distribution curve that is the most liquid, that has the most transaction velocity and across our 50 markets. If you combine all that, defined by our buy box, price point, home type, home age, there's $650 billion of addressable market for us to go at.

So there's no governor really on the growth we can go after right now. There's 2 ways for us to expand. One is increasing our buy box, which we continue to do. I think we went last year from 47% coverage to 58%, something in that order. So we'll continue to, I think, edge out buy box across markets over time, and that expands the pie, makes it bigger.

And then over time, certainly, like we want to be nationwide. We'll be in more markets over time. It just -- given where we're at today, as I said, it's not a cap on anything. But over time, we want to make sure the customers, if you're in market X and you want to be a market Y, we can serve across the nation.

Dae Lee

Okay. About Marketplace. This was something that you guys began to work before that industry transition. It's been a little bit quiet over the past few quarters. I was curious like what that opportunity is, right? I mean like how is that trending -- progressing right now? And this is something that we should look forward to a longer term from you guys?

Carrie Wheeler

At the highest level, we are very focused and over time, we want to have more balance sheet light revenue in the system. It can come through marketplace. We have a product called List With Certainty that allows you to list your home but retain the security of an Opendoor cash offer. It's also a capital-light project.

We have a title and escrow business that's capital light and there are other services and ancillaries, we can add them over time. So all those are in the vein of having more balance sheet light revenue over time. Marketplace is something that we've spent the last year really focused on a single market to make sure that we understand how consumers are going to respond to something that's different than listing your home on the MLS, like list it in our marketplace, give us a couple of weeks to better which you might get from Opendoor, let us serve up other buyer offers for you, and let's understand how that customer will respond and convert. I'd say, I mean the early takeaways has been that it converts in terms of people's propensity to try very high.

There is a seller out there who doesn't want to go through traditional listing, expose their home to the MLS, do all the repairs on spec that we require, but has a reserve price that they want to see whether or not we can match or beat. And we are seeing, I'd say, early signs that we can clear a good portion of those homes.

So what we've said is we are going to be [indiscernible] show, don't tell a marketplace. We want to really have proof of the pudding and real tangible results more than a market before we really talk about it much externally. For us, it's a bet we're going to continue to invest in, but there's really nothing to kind of put on the table right now to share with investors, but it's something we're going to continue to work on.

Dae Lee

And we can open up for audience questions if there are any. If you have one, raise your hand, then mic will come to you.

Unknown Attendee

So I think as I look at your business, where do you see the most constrained? Is it on the supply side or on the demand side? And the second question, if I may. How sensitive your business to the mortgage rate? Like have you looked -- I'm sure you looked at it like how much mortgage rate increase, how does that impact the supply and demand dynamics?

Carrie Wheeler

Yes. So first question is, are we more constrained on the supply side or the demand side. I mean, I'd say, first of all, our entire business is focused on the seller, right? And so making sure we have more sellers in the system, I think that's the ultimate constraint to us to grow. I mean people understand us, are they aware of us, are we in front of them?

And can we give them competitive offers, so they convert and they say yes. So once we have a home that we own, then our job is to make sure that we can turn it as efficiently as possible, relist the home, do the repairs efficiently and get into the market and we market it on the MLS. And that's not a real constraint for us. We're very good at that. And we'll find a home for that. Our job is to make sure that we are guarding at things like adverse selection and their homes were in good condition and they're salable and marketable. As long as we do that well, that's not really a constraint.

Our constraint is making sure that we are servicing sellers, and that's the business we're growing. Second part of your question was, how sensitive are we to interest rates? I'd say at a high level, the market has been super dynamic, right? And interest rates have gone up and down. They spiked to 8%. They spike to 7.5% recently.

When you think about what we are doing is we are giving you an offer on a home, and then we are looking to own that home for, say, 3 to 4 months, like 90 to 120 days. So we are -- we don't need to be 1-year smart on rates. I don't need 2-year smarts on rate. I need a point of view about where is the market generally over that time frame, relatively short and that is much to do, frankly, with seasonality as anything, like I want to be really sharp about buying a home in the summer, and I'm selling in the shoulder season of the fall.

Or I'm buying a home in December, and I get to sell in the spring selling season. We spend a lot of energy and time around that. And so it's less about like short-term fluctuations and more about where we are in the time of year. But we respond to certainly exogenous shocks, and that's about making sure that we are monitoring the pace of inflows and the pace of outflows.

So are markets responding differently in terms of like slowing clearance or are we acquiring in a way that we feel like we want to minimize exposure maybe because of mortgage rates. And we can do that. We do that every day. We do it every week.

Dae Lee

Okay. We have another one.

Unknown Attendee

Maybe just in terms of the markets that you're in. The disparity of profitability of maybe some of your better markets versus perhaps some of the less performing markets and how much variability? And then also around new markets that you might be going into, if there are any that you're still not penetrated into?

Carrie Wheeler

I'm not sure I caught the second part of your question. Sorry, you may have to repeat that one.

Unknown Attendee

The markets that you might still want to get into that you aren't already if there are any of those?

Carrie Wheeler

Yes. So question #1 was just around disparity of profitability or just like how wide the range is, best to worse in terms of markets. First of all, I'd say we manage to do an overall contribution margin across all our markets. But for different reasons, different markets may receive a different spread because of that market risk or what have you. So it's more in the spread like discount to market.

I see it in the margin we're trying to manage and overall margin outcome across markets. I would say customer acquisition costs, which are below the contribution margin do vary by market. And that is as much to do with time and brand awareness. So say, in Phoenix, we've been for a long time. We have a huge base of retained customers in the system. Brand awareness is much higher in a market that's much more nascent where brand awareness is lower, customer acquisition costs, maybe a little bit higher, and there just isn't that ballast of customers to continually reengage.

That's where you sort of see the disparity in margin after CAC, and that's as much about just market maturity. And one of the things we're excited about is we kind of put a bunch of things a little bit on hold in 2022. And we've got now half of these 50 markets that are ready for rescaling and ready for marketing dollars and ready to grow and there's just natural tailwind for maturing those markets over time that we haven't been able to kind of frankly do in the last year. That was one.

And the second part of your question was around...

Unknown Attendee

Market -- any markets that...

Carrie Wheeler

They're going to be in over time. I mean, one, we want to be nationwide, I would say that. There are certainly some of the major metros that we haven't really been in like New York and the boroughs. We haven't done that yet. I'd say we're tiny in the Bay Area. We've been in L.A., but it's a big market. We haven't fully cracked it. So I think we want to be everywhere. I mean, 50 going to 100 is sort of like a nice rule of thumb we talk about internally. But I would say no one really sort of said, "Hey, we're coming here next." We've gone on the record with.

Dae Lee

Okay. We have 10 seconds. So I'm just going to ask a short answer question. NAR, good for you or bad for you.

Carrie Wheeler

Good for us. I mean it's about putting power in the hand of the buyer, decide how they engage their agent and what they pay. At a high level, we think it will decrease commissions, that is net good for the consumer. What it means for us is today, we don't make any money off the buyer broker commission, to be clear, it's a cost to us. So those costs come down, means our spread comes down, cost of delivery comes down, conversion goes up.

We make the same margin, but we can convert more customers. It should create more transactions in the system, right? Lower friction, lower fees. The last thing I'd say to you is consumer education matters here. We have the only direct selling platform, the only direct buying platform in the country for residential real estate. So I think as people become more attuned to what they have been paying for a buyer's agent, they may have said, "Hey, I don't need to pay 2.5 or 3 points for that." And by the way, if you come to open door, you want to buy one of our homes, you can click on Buy Directly in e-commerce like transaction. You can sell to our homes. You do not need a buyers agency agreement. So we are set up really well for this because again, if it's good for the consumer, we feel like it's good for us because we're aligned with transparency, we're aligned with agency. we're aligned with self-serve and choice. And net-net, good time frame, TBD, we'll see how it all rolls out, but net positive for us.

Dae Lee

All right. Extra nugget for those of you in the audience. All right. Thanks, Carrie.

Carrie Wheeler

Thanks Dae.