[Transcript + Audio] Opendoor CEO Carrie Wheeler at Morgan Stanley Technology, Media & Telecom Conference, March 4th 2024

Transcript 

Matthew Koch

All right. Hello, everyone. Thank you so much for being here. My name is Matt Koch, Morgan Stanley U.S. Internet team. Very pleased today to be joined by Carrie Wheeler, CEO of Opendoor. Thank you so much for being here.

Carrie Wheeler

Thanks for having me.

Matthew Koch

So I'm just going to quickly go through the disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your MS sales representatives.

All right. So maybe let's talk about online penetration. Residential real estate, broadly, is one of the largest TAMs of consumer expenditure, but it also is 1 of the lowest online penetration rate. So maybe start high level. Let's talk about why you think iBuying is the right approach to change that adoption curve?

Carrie Wheeler

Yes. I mean you said it already. I mean Residential Real estate is a massive market, has seen very little disruption so far, outside of discovery in terms of online transactions or real estate. And more important maybe than the size of the market is like the enormity of the problem.

And for the average, consumer selling your home through additional listing process, it's pretty ratchet, right? You've got to find an agent, you're going to list your home, you're going to do repairs on spec. You've got to hold a bunch of open houses. And assuming you do all that and you get a buyer that you probably negotiated with, the chances of that transaction falling through are 1 and 4 Then you start the whole thing again.

So we're going after a problem that affects millions of people a year, and it's super stressful, [ student ] uncertain, and most people say like selling your home is like a top 3, 4 stressor in life. So that's the problem that big market, big problem set. The reason why we think our offering is so superior is because it takes all those pain points, all that friction out of the system.

It lets you have a cash offer, lets you transact with simplicity and total certainty. There's no listings, there's no showing. There's no repairs on spec. All that stuff goes away and what you have is control for the first time over what is probably the most important transaction you're ever going to have as a consumer. So that's something we feel really good about in terms of our purpose and what we're here to do. And, yes.

Matthew Koch

So obviously in having through the process and the heartache of trying to get an offer on the home and falling through it. I think it's very clear, your point about how this is a superior consumer experience. So I guess, from a home selling perspective, maybe more than buying in my particular case. But what is the road block or the adoption challenge you need to work with? awareness's? I mean, how do you get people on board with this, I think, clearly strong consumer experience?

Carrie Wheeler

Awareness is clearly key. We have been around for a decade. And yet still today, our aided awareness is relatively low. So making sure that people understand that this is an alternative that's real, is paramount. We've been focused on how do we put our offers and our [ placement ] out there in front of more people. So that's been expanding partnership channels and expanding brand investment to make sure that people are aware.

When people understand what they can do, they say yes to the offer. That's why our NPS is 80. That's why we started $12 million sellers and counting. So it's really been an awareness. And then also expansion over time. And we have been very deliberate about how we've expanded, whether that's buybox expansion or market expansion because we want to be deliberate about execution. But ultimately, this should be a mass product, nationwide product.

Matthew Koch

Got it. Let's talk about spreads. How do you manage spreads and use it as a lever to move through the cycle with the business? And then how does that play into your risk mitigation and strategy around expenses?

Carrie Wheeler

Yes. So for us, spreads are the lever by which we're thinking about managing those trade-offs between growth and margin and risk. So for everyone who's not familiar with the story, spread is another way to think about what's the discount in that offer. We're giving to a consumer. The lower my spread, the lower that discount, the more I can drive growth because that consumer is more apt to say, yes, to an offer and convert on that.

And we saw throughout 2023, after the market kind of took a downturn that spreads are really high, conversion was low. Acquisitions were muted as a result of that. And as we've been able to do the work to reduce brands durably through cost savings and improving price accuracy. We've been able to increase our acquisition pace quarter-to-quarter throughout 2023, and then contract growth going into this year.

So really, that trade-off between growth and margin. We want to grow, but we also want to deliver within that 5% to 7% annual margin target. The other lever that we use spreads for is just really to manage our macroeconomic risk and also home level risk. So again, if you're less certain about something, spreads is the line. The tighter I can be in terms of understanding that home or understanding kind of like feeling good about home price stability, the tighter I can be on spreads.

Matthew Koch

Right. Maybe we can talk about some of the ancillary or add-on products that you have at Opendoor. So obviously, the majority of your revenue stake comes from the core business by far. But when you think about things like T&E, marketplace, is there one where you see the company prioritizing investment and focus on trying to grow versus others? And do they -- can you talk about how they enhance your core unit economics?

Carrie Wheeler

If there's been one watch word for us over the last, say, 18 months, really 2023 going to this year is like focus. We're going to focus on our core product because, as we said, it's still relatively nascent in terms of understanding awareness and share. And the good news is, as we think about how do we get to a size and scale so that we are positive cash flow, like adjusted net income positive, we can do that today on our current core product set. We don't need to rely on any ancillary revenue whatsoever to do that. So that's number one.

It's like focus, deliver on cash flow profitability with what we have today in the ground. The number of markets we have, our buybox, our core proposition. But we want ancillaries over time, too. So we have a [indiscernible] business. It's very profitable. It attaches at 80% plus kind of rates. It's accretive. It shows up in our gross margin line. And then we're also working on mortgage, which is -- sorry, not mortgage, marketplace, which is the third-party product we talked about, which is attaching buyers and sellers and being a bit of a market maker in the middle of that.

That is a longer-term initiative for us. It's not going to change whether or not we are cash flow positive near medium term, but it's something that we are wed to strategically as a long-term initiative for us. But I think the most important thing is like based on what we have today, we don't need to underwrite anything in terms of product expansion, ancillaries to get to a level where we're cash flow sustainable, and they can grow from there.

Matthew Koch

Got it. So I think just to revisit that. It would be fair to say then that it really is this very laser-focused on the core product right now and these ancillary products are things that you care about that you intend to grow over time, but they're not the driver of the [indiscernible].

Carrie Wheeler

Correct. And there's a long list of them outside the ones we talked about. I mean we can certainly think about all the other things that come with a home transaction over time, whether it's insurance or warranty or moving or personalization, those are all there for us to get. It is does not eat priority for 2024.

Matthew Koch

Yes. So let's talk about the rate of home acquisitions, I guess, in that core business. So towards the end of last year, you spoke to plans of doubling the home acquisition rate from 1,000 homes a month to 2,000 by the middle of this year. So I guess, is that still the goal? And how are you tracking towards it?

Carrie Wheeler

Yes. So that was part of the framework we put out there. We said, hey, we're at 1,000 homes per month right now. And to get back again to that cash flow breakeven, we want to be actually 2,200 homes per month, which is about $10 billion of volume. That's the magic number by which free cash flow is sustainable. The short answer is, given what I said earlier on spreads, we are -- we feel good about where we are today to be able to kind of get back to that level and then beyond. I mean, that's a milestone for us. It's not an endpoint.

Obviously, our aspirations are well beyond that $10 billion number. But given where our spreads are and what we're seeing in terms of the market right now, which is pretty good home price stability, which for us is the most important thing to be able to kind of price home with a reasonable view to kind of where they're going to end up in the 4- to 6-month holding period we have, we feel good about our ability to execute against that.

Matthew Koch

And when you look out of the market to decide how quickly you can execute along that path of growing the rate of home acquisitions, is it -- what are the metrics that you're looking at? Because the first thing that comes to my mind is homes available for sale. But of course, you're also trying to create willingness to sell by offering a superior product.

So, I guess, what are you watching to determine hey, over the next 6 to 12 months or 12 to 18 months or whatever time period it is, we have confidence to go out to the market or to investors and say, we can grow to 1,000, 1,500, 2,000 a month. What tells you that, that's in the cards?

Carrie Wheeler

Well, a couple of things. First of all, there's a lot of focus on what's happened with the transaction velocity. Certainly, it's a horrible time to be a home buyer. Affordability has been constrained. Sellers have felt frozen because of the lock-in effective of mortgages. But what gets lost in all that, is that 4 million people are still moving. Like there's 4 million people who are moving.

And against that 4 million people, we have a $600 million addressable market based on our buybox. So we don't need to believe that much to go from 1,000 to 2,000 to 3,000, that's going from less than 1% share, something a little bit higher. So we certainly don't feel constrained from the market environment from an overall transaction velocity side. The constraint is, right, do you feel good about the home price velocity from a variability standpoint. And home price has been pretty stable, so that's number one. What's the second part of your question, Matt?

Matthew Koch

Talking about just what you're looking at externally to get confidence. So I feel like you were kind of addressing that. There was a second part.

Carrie Wheeler

I think it's really -- it's been in the home price stability side of the equation, which has been -- they've been pretty stable, frankly, even though supply is depressed, buyer demand is depressed. They're relatively in line, and that has been a good setup for us in terms of how we can set spreads and offer reasonable prices to customers.

Matthew Koch

That sets up very well for where I want to go next, which is just about the amount of transaction volume in the market. I think it's no surprise to anyone in this room that, that's slowed down, and there are a lot of reasons why the interest rates were probably by far the biggest one. I guess, do you have a view at Opendoor on what rate level we would need to see to see a meaningful increase in the amount of homes available for sale? Or is it -- is that even the right metric for us to think about as sort of like the milestone we need to hit?

Carrie Wheeler

Yes. I mean, really coming back to the earlier comment, we care most about what is the trajectory for home prices and how stable are those home prices. And again, we're a small player in what is an enormous market. And while transaction velocity, I think sales were down 20% this year, they're at 1995 levels, like they're certainly depressed, given where we play, that's not the constraint. The constraint is do we feel good enough about the home price environment. And we do. That's the reason why we took our spreads down so much last year. It's the reason why we're able to put marketing dollars back into the system right now, we'll be up 50% quarter-on-quarter because we like where we sit in terms of our ability to offer you something that feels reasonable. It's really not about market volumes, not the share level we're at today. Again, 4 million people we're talking to.

Matthew Koch

Right. So the thing that matters, if I understand that, is your ability to tighten spreads and that's what matters first?

Carrie Wheeler

You think about what's in a spread. Spread is where do we set our contribution margins. It's our cost structure. It's -- can we reasonably price at home in terms of accuracy. And then the last part of it is like, how will that home fair in our ownership period in terms of when we go to sell it. We control 1, 2 and 3. 4, I don't control, we don't have a crystal ball. So we're really focused on the first 3. And so long as this last 4 is within some relative range of reasonable, we can be much more efficient in how we set spreads and drive growth.

Matthew Koch

Got it. I guess, so you're currently active in 50 markets right now. I guess, how should we think about the pace of expansion to additional markets? Like what would you say your approach is to balancing investments towards adding those new markets versus growing share in the markets where you currently operate?

Carrie Wheeler

There are 2 main ways for us to think about expanding our market footprint. One way is just what you said, more cities, right, 50 today, expand that to be nationwide over time. And the other lever is really in how we define our buybox, right? What are the universe of homes within a given market that we feel like we have the algorithm, the pricing, the operating capabilities to be able to underwrite against. And that by far has been the most significant level for us.

If you think about where we were in '19 versus today, we've taken our buybox up by 4x. So today, I think it was $160 billion or something like that in 2019. Today, it's at $600 billion. And that's through really through buybox expansion and some cities for sure, we doubled our CD footprint. So sitting here today with -- again, with that less than 1% share and that $600 billion market opportunity, there's 0 headroom in terms of our ability to grow. So lots of focus right now on additional cities. We want to do those over time.

We want to be nationwide, but it's really within our existing buy box, we underwrite 57%. We can underwrite 57% of the transaction and where we sit today, capturing more and more of those transactions when customers think about selling. That's really the lever for growth for us.

Matthew Koch

So talk a little bit more about the buybox, how you think it through and how you see it changing?

Carrie Wheeler

It's changed a lot. It just got wider and wider over time as we've improved our ability to price certain homes. We define it from a price point, we don't want to be too low, not too high. A little bit of Goldilocks, just right. And that varies by market. So we want to be in the most liquid part of the market when we think about pricing. It can be also be constrained by age, it can be constrained by -- for a home that we can't price because there are enough comparables in the market. It's not dense enough. There's not enough liquidity. So it varies by market, but that's how we define our buybox.

Matthew Koch

Got it. Got it. I guess, on the competitive landscape. I guess, how do you think about competition in the near and the long term? I mean it's changed quite a bit from a couple of years ago in terms of how many entities that we're focused on, on being in iBuying. And what are the factors that you compete on in the markets where you do face stronger competition than others?

Carrie Wheeler

It has changed but in some ways it haven't because we really define our competitive set is the traditional listing process. I mean that's we compete against day in, day out. If you're coming to us and asking us for an offer, you're either going to take our offer ads or you're going to list your home in MLS and go the traditional route. And so that's -- those 99% of off-line transactions is our competitive set, and we love that set up for us because we think what we offer is vastly superior.

You're referring to players who are in the market who may have left the market in the last couple of years given some of the shakeout or people who are pivoting away from the market. I'd say this, we have built the system over the last decade to be entirely purpose built. So from day 1, how do we build the pricing algorithm, how do we build the operating capabilities to complement that with a very offline online business. And we really stand alone today to be able to deliver that at the scale we do so. We really -- there really is no competitive set that we think about doing what we do at the scale we can do it.

Matthew Koch

So I think the fact that in a very buoyant housing market, there were so many different companies trying to enter iBuying probably speaks to, at the very least, the size and probably also the attractiveness of the of the opportunity. Do you see an environment maybe a more positive housing environment at some point in the future where maybe you do have new entrants? And do you feel that your moats will be even deeper by that point in time? I mean, will it become harder as time goes on for new entrants to come up behind you now that some very big, well-funded entities with a lot of data have kind of backed off from iBuying?

Carrie Wheeler

We like our strategic positioning right now a lot. I mean a lot of the people we -- you were alluding to an earlier question are now partners of ours, we're on their platform. That feels pretty strategically important to us. Those are partners that we care about a lot. And for someone else to come into this environment right now with our 10-year head start in terms of data insight, the hundreds and hundreds of thousands of homes we've been over time, all to the benefit of making sure that our pricing information is better for the next set of homes.

It's pretty hard. It's a real compounding advantage against that. And then there's the operating component, which, again, we do run a capital-intensive, low-margin, but operationally intensive business. And we have built the technology, the systems and the processes to be really good at that and to be able to do it in a centralized way. I think someone has to come into the market [indiscernible] to think about how they do that. It's not very purpose-built in terms of the system and the platform we have.

Matthew Koch

Right. Talk about the NAR, a major topic in the industry right now. I guess we've seen quite a few headlines, a lot of speculation, a number of different legal cases playing out. But can you just remind us of your view at Opendoor of what is at stake here? What could change? And what impact, if any, it could have on?

Carrie Wheeler

So everyone is not reading about all the NAR news. This is about the traditional practice of the seller and the seller's listing agent paying for the buyer's broker commission when you come along with your agent. And there's been a lack of understanding amongst consumers that they get their buyer's agent for free. This is about unbundling that and potentially having the buyer's agents be borne by the buyer and the seller is borne by the seller.

Short answer to your question is like -- number one, we make no revenue from the buyer-broker commissions, 0. That's not our business model. Unlike a lot of people who are in this industry and they make most of their revenue from buyer-broker commission, that's not our business model. We're very seller focused. And we're kind of stand-alone in the seller focus we have. So that's one.

Two, it's a cost to us today, significant cost. When I go to sell one of our homes, you come along with me, you probably have an agent in tow, and we then pay 2.5%, 3% in the form of that buyer broker commission out to you. If you think about our contribution margins, 5% to 7%, that's a pretty hefty portion of our cost structure. So assuming that over some period of time, we'll see how these lawsuits shake out, either that commission rate becomes unbundled in the response -- full responsibility of the buyer, there's compression over time, those costs to us get reduced.

It's either a pass-through, so it's the worst case, it's neutral to us and maybe there's some benefit over time. I think the more important point for us is like everything we do is like to bring total transparency to the customer. They know exactly what they're transacting and what they're paying. And then two, they have choice. If you want to -- you want an agent and you want to work with Opendoor, great we'd love to partner with you. If you want to come to us directly and you want to buy stuff, great.

Look, we've built the platform, the only platform to be able to do that. So we're agnostic in this fight. We want to be a market participant. We're going to see how this all shakes out, I'm sure over many, many years. But it's not a cost, it's not a threat to us in any way. It may be a benefit.

Matthew Koch

Okay. So I think you just explained very well how it's a cost on the back end, the fee that you pay to the buyer's agents when you sell a home. But is the service fee that you charge effectively when you buy a home from a home seller, is that in any way linked or connected economically to the rate that a home seller might pay to a listing agent? And if that fee goes down, could there be some pressure on the service fee?

Carrie Wheeler

There could be. But again, that will be pass-through for us, right? We would pay less in costs, and we would take down the revenue side. I think it's net neutral long term for us.

Matthew Koch

Yes, fair enough. So I guess, in the past, you've talked about leveraging AI to drive operational excellence. Maybe let's talk about that. It's been a very, very big topic over the past 12 months. I guess, how are you using AI today? And where is the room to put in more use cases for AI going forward?

Carrie Wheeler

It's a big topic for us, too, internally, as you might imagine, everyone's talking about it. We've been using AI really since inception in our pricing algorithm like neural networks and machine learning, what have you. We see broad application of AI across our entire business in pricing, in operating excellence and inventory management.

On the pricing side, we are using AI to take imagery in the form of video or pictures or sometimes we're using the ability to capture conversation with customers and be able to take all that information in a way that is structure -- more structured and feed that back in so we understand home condition level better, and we can feed that back into having more accurate offers. So there's a huge amount of work around improving price accuracy vis-a-vis AI. One example is applying LIDAR in all our homes so that we can understand square footage very accurately, which is a huge input into thinking about how you price at home.

And also not just understanding square footage, but understanding layout. You might have 3,000 square foot home, but you might have a funky layout, and that might really impact marketability. That's something maybe we won't know until we all know, but now we can understand that. We can understand why this is going to be a tougher sell potentially because of the way it's laid out, [indiscernible] living room and who knows, right?

We can now understand those things better using AI. So we're excited to start to do more of that on the pricing side. On the operations side, we're building Copilot for our home project managers. These are our colleagues who are in the field who are understanding like what do we have to get this home sale ready and back on market so I can list it, what's the pair we need to do and having something in their pocket, so to speak, in the form of a Copilot it allows them to scope home repairs to make sure that the full set of questions are being asked and then also to understand how we quickly price it and be able to kind of generate a work order very, very quickly. We're excited about doing more and more of that.

And the last thing is on inventory management. We've done a lot of work to understand home conditions better. Do we really understand relative and absolute home condition so that, again, we can make sure that we are turning homes quickly. We are pricing accurately. So a lot of application for us on AI.

Matthew Koch

That's interesting, I guess, on understanding, for example, the layout of the home or the condition of the home. A lot of that is, I guess, both capturing information and analyzing it more quickly than you were in the past. Is that the right way to think about the role that AI plays in those particular functions or...

Carrie Wheeler

Maybe thinking like -- like today, for example, we have a home project manager to what we call a day one walk. We own this home now, and now we got to figure out, well -- we scoped the repairs during the assessment process, but now we own it. And we really got to make sure that we understand home condition and the pictures are off the wall, the furnitures moved out looks a little different. So now that HPM, home project manager, can walk through potentially with the benefit of AI, can understand instead of like looking down the iPad, and to do checklist, they can be looking around or being queued by here all the things.

If you're taking pictures of imagery, AI may capture things that the average person might miss as they do a full house walk through. They may be queued as they get more information, so what about this? What about this? They may catch things that are different, and they can also hold themselves to repair standards that today, definitely take some layer of human judgment because, again, this is about bringing more systematic tools and processes to the system. So those are just a bunch of examples.

We're definitely thinking about chatbots with -- for our customers, we can offer more personalized experience of the home seller who shows up and answer more questions, we're seeing early, early signs that, that actually improves conversion. And by the way, there's a lot of paper in real estate. There's a lot of paper in the title business. So intelligent document processing being able to just HOA homeowners association documents and being able to do that with AI. Like there's lots of benefits for us.

Matthew Koch

I'm sure a lot of people would love to have an AI to deal with their HLA. So on the partnership side, you were talking about this before, and I think it's a really important point. You have a number of important strategic partnerships, including with companies like Zillow and Redfin, I guess, they've been a growing source of home acquisitions. How do you think about the opportunity to expand those partnerships? And is there a mix that you're thinking of long term between partner sourced versus organically sourced?

Carrie Wheeler

Yes. I mean partnership channels, this thing, you said it. They are a meaningful part of our business and minimum of our acquisition volume. And it goes all the way from homebuilders to the online real estate players, to agents, and we lean into all of them, particularly in 2023 when our spreads were high, marketing spend was less efficient.

The good thing about partnership channels for us is, first of all, we can see more places. We can talk to more sellers. We can show up in more channels so that people are aware of the product, and they come at a fixed customer acquisition costs. So they're relatively efficient, less impacted by where spreads may be where we might find paid marketing to be inefficient at a time of high spreads, channels are pretty stable.

So we -- on the online real estate side, last year was about ramping Zillow. We had 2 markets going to 45. Now it's ramped. We re-extended our partnership with Redfin to continue to like -- just be the de facto cash offer choice when people are thinking about selling their home and they're online looking at Zillow late night or Redfin or whatever you.

Agents. Really being a partner of the agents, we're not a floating agent. We're a partner to agents. We think we're a tool in the toolkit. And agents now understand, I come up -- I show up for a listing appointment, and I have an open door offer, and I have the listing option for a customer. And different customers for different reasons, may choose different things. For a customer, it may be perfect for them to sell the Opendoor because it's super efficient and they maximize the outcome that they want to, given objectives for certain convenience.

For the agent, the return on their time is bad, right? I mean they're managing a small outlook of business and the -- and so to be able to do that for a customer very efficiently and quickly, while the commission rate is lower, the ROI is higher. So agents are a growing channel for us. We just went live, I think, this week or last week with EXT, which is large brokerage in the company -- in the country, growing very quickly. And now when they go to that portal, an XP agent will sort of see the option to show up their next listing appointment with an Opendoor offer in hand for the customer.

We think that's obviously excited about that. And then the last piece is on homebuilding, which we've been doing for a long time, but that's like a perfect trading customer for us, right? I don't want -- you can't be a contingent buyer these days. And so we unlock that for someone who's looking to do a new build home, which obviously there's been a lot of interest and demand for new build homes.

So all those are important. I think we said a couple of quarters ago, it was 40% of our mix and growing. Where that goes over time, who's to say, but I think there's a lot more to be done on the partnership side for us.

Matthew Koch

So I want to give a minute and -- just a few minutes to the audience if there's any questions that are there. But I want to revisit one thing you just said, just about EXP and the agents. What is that conversation like? Because I would think, and you alluded to this pretty clearly, I would think that agents would view Opendoor's involvement in a transaction from a knee-jerk perspective negatively. Because, to your point, it may be a higher ROI, but they see things just in terms of like the fee pool. So, obviously, you have an important partnership that you signed there. So you've gotten over the hill and you know what the pain points are. So what was that conversation like? And then how did you get them over the hump?

Carrie Wheeler

Yes. I mean it's not just EXP. We do business with thousands of agents and many brokerages across the country. And I do think there's a change in sentiment early days and early days of Opendoor we've been like, oh, you're trying to disrupt the entire real estate business, you're trying to put agents out of business. Again, we want to meet customers where they are. So if you have an agent and you want to work with an agent, that's fine.

If an agent decides what their customer wants to maximize their outcome by listing. We understand that. But if they have a customer where they don't want to go through traditional listing process, I don't want to get my home ready for sale. I don't want to do it repairs. I don't want to endure 6 open houses. And you want to sell in a way that is much easier, much faster. I know exactly my close date. I know exactly what I'm going to realize, and we can help you do that. That's a great tool for an agent to have. And I've used this example before, but we are on the phone with one of the leading brokerages in the country. And they said, "You're kind of sure can you fiduciary responsibility if you're not telling the customer, these are the panoply of options you have", like one is in listing and one is the certain cash offer.

And again, we're not saying it's going to work for 100% of the customers, we understand that. But for those who want it, it's incredibly powerful. And for the agent, again, they're managing a whole book of business that we pay them a point when they deliver one of those leads to us. But the ROI and their time, they don't have to do listings. They don't do the open houses. It's pretty powerful. And so we're a tool in their toolkit, and we're happy to be one.

Matthew Koch

Yes. That makes sense. Happy to take anything from the audience. There's a mic coming.

Unknown Attendee

Carrie, just 2 quick questions. One on the partnerships that you were just talking about, the 40%, is that of the funnel? Or is 40% of the actual new home acquisitions that are happening through the channel?

Carrie Wheeler

40% of the acquisitions. We're coming via partnership [indiscernible].

Unknown Attendee

Okay. And then what -- have you talked about the contribution margins on those relative to the kind of status quo business?

Carrie Wheeler

We haven't. So one thing I would say is that -- and we don't disclose the economics of partnerships, but the -- again, it has the attractive benefit of having a fixed customer acquisition cost, and we pay on contract closes. So it's not a lead proposition. It's more certain, yes.

Unknown Attendee

Got it. Okay. And then second question, kind of coming at Matt's question a little bit about what you look forward to get more aggressive in new home purchases. 2023 I would have thought was a very good backdrop for -- to ramp acquisitions or i.e., lower spreads. Like you said, volumes don't matter, prices matter and prices were stable through 2023. So why now? What are you kind of seeing now? Is it just 4 quarters of price stability and so now you feel comfortable? Or is there -- you wanted to work through the book of business that you were working through before? Just trying to understand why you feel now is the time to kind of hit the accelerator.

Carrie Wheeler

Yes. I mean I don't think all of 2023 felt like it was going to be perfectly stable. I think we're all -- we got to be -- right? Retrospect, having come out of 2022, we want to make sure that we were building into a new book of business with margins that we like as we cleared the old book of business, home prices and trajectory over mortgage rates, like that's -- we can't crystal ball it. So we wanted to be pretty disciplined in how we're building that new book, and we were, like we had, I think, 8.3% contribution margin on the new book in total for 2023. And to your point, we over-earned a little bit, right?

Home prices did better than we were underwriting and I think we were deliberately conservative in some of that. And so to the benefit of an 8% contribution margin. Having now kind of had 2023 behind us and given where we're sitting, we've done 2 things. One is part of the spread is about what we can control, right? It's cost structure. So we did a lot of work in 2023 to reduce our cost structure, and we fed that back into spread. So we've taken down our spreads to allow us to grow faster and just turning to more volume.

And part of it is like the setup feels okay. Okay, yes, right? We care most about home price stability. And I think sitting here in 2024, given that setup of supply demand, we feel pretty good about the ability to lean into acquisition volumes. I'd also say that this is the time of year where it's the most liquid. It's the most appropriate to be the most risk on because it's when home sellers are coming into the market. This is a spring selling season. This is our Christmas or this is what we lean into. And so, again, that's the time to be leaning into acquisition volumes.

And I would say, given last year, too, what we didn't have is if we were working down spreads very high to much lower and we kind of exited the year where we are today. Marketing was inefficient. We basically had to turn off the marketing because those dollars didn't make sense. And so we didn't get the benefit of having that either. So now we're at a place where we can start to invest those dollars in a more efficient manner.

Matthew Koch

Anything else from the audience?

Unknown Attendee

I almost want to ask the opposite side of that question, which is like if I had to guess a year ago, I would probably guess, like today, would be closer to that 2,000 homes a month kind of pace than we are right now. So I guess like I'd love to understand what has driven that sort of like a slower recovery in the purchase volume? And like the acceleration throughout the rest of the year, does that reflect sort of our intention to kind of take risk back up slowly? Or does it reflect like operational reasons like it just can't mechanically happen that quickly?

Carrie Wheeler

So just to make sure I understand your question, why 2,000 now versus last year?

Unknown Attendee

Or why haven't we seen that already? And then just if we're going to start seeing that, why throughout the rest of the year and not pretty immediately?

Carrie Wheeler

Yes. As I said, like we had to reduce spreads meaningfully throughout the course of 2023. So we weren't in a place to drive. We weren't going to see the kind of conversion at those spread levels that would get us anywhere near the 2,000. So part of it was taking spreads down, partly through cost savings initiatives, partly just feeling better about the environment, right? We're pretty risk off going into 2023 on the heels of 2022. That was one.

And today, I mean, I feel good about our setup to then lean into more volume for all the reasons I just said. We were not feeling that way necessarily middle of last year because the environment is still pretty uncertain, like interest rates up, interest rates down, what's going to happen with the Fed. And we want to make sure that whatever we're doing, we want to do it in a way that feels really durable. And we can lean into spreads, we can lean in to spend and drive growth at the expense of margin and the expense of risk. And those are trade-offs that we're not willing to make right now.

I think we learn those lessons in 2022. And what we want to make sure is that as we build the system for more volume, which is very much in our control right now, our view, given the macro and all the work we've done, we're going to do it in ways durable. We're going to do it in a way sustainable. Like we're going to get to [indiscernible] and then grow from there. There's a lot of things we can do short term. We're not going to make those moves, we're going to do that long term.

Matthew Koch

All right. I guess, maybe we can close on this one. Just looking out longer term, if you're looking out 5 years or maybe farther, what -- I don't want to say typical, but what do home -- what does -- what do home transactions look like? How will that have changed in terms of the role that Opendoor or companies like Opendoor are playing? Like where can market share go? Where can home buyer and seller awareness go? Where do you think we'll be in 5-plus years?

Carrie Wheeler

Yes. There's a chart that we have in our investor deck, and we segment our markets from the most mature to the least mature and you think about the most mature market, still low, but aided awareness is 40%; newer market, 20%. Adders entry like people's willingness to engage with Opendoor 40% for mature market, much lower for a small market.

10 years from now, I hope those charts are like irrelevant because everyone should start their selling journey with an offer from Opendoor. Like that should be paramount. I think everyone should be tapping their address, and we shouldn't be capturing 40%, we should be capturing 90% of people in the markets we're in. So everyone is starting their selling journey on our platform to understand like what do I really own and what's the value of it, and they can go from there.

And then our job is, over time, what we want to do is expand the ways we communicate with sellers and also our offerings so that we really need sellers where they are, if you want a cash offer, great. If you want to list your home with a certainty of the cash offer in your pocket, we can do that, too. If you want to put your home in the marketplace, fine. We should be meeting sellers where they are. And that's really our vision, my 10 years from now. It'll be [indiscernible], you'll be starting really top of mind, you will be starting your home journey with Opendoor and then we are servicing all sellers. And so our product is maybe less spread dependent, depending on what channel you use and our market share, obviously. Much higher.

Matthew Koch

Great. We can close there. Thank you so much for being here.

Carrie Wheeler

Thank you. Thanks for having me.