Razor's Edge: Carvana vs. Opendoor; Supreme Intelligence Edition

I asked the Supreme Intelligence to evaluate whether Opendoor will be the next Carvana. Her is what she thinks...

fyi- this took a few seconds and did not require standing outside Drake's house

1. Asset Dynamics: Cars vs. Houses

 Cars are depreciating, highly standardized assets with very liquid secondary markets. Carvana can hold inventory, recondition cars, and sell quickly with predictable pricing spreads. Wholesale auctions give them a backstop.

 Homes are appreciating (sometimes) but highly idiosyncratic assets. No two houses are alike in terms of location, condition, layout, etc. There is no deep wholesale market to liquidate inventory if Opendoor misprices. A mistake on pricing a single home can wipe out the margin on dozens of “correct” ones.

 2. Market Velocity and Holding Costs

Used cars turn over fast. Average days-to-sale is ~30–45 days. Cars can be stored in centralized lots.

Homes can sit unsold for months. Carrying costs (mortgage, taxes, insurance, upkeep) are enormous compared to cars. Opendoor’s holding risk is orders of magnitude higher.

In a slow housing market, inventory balloons and carrying costs crush margins. Carvana can at least discount quickly; Opendoor cannot force liquidity in housing.

 3. Financing Fragility

Carvana leverages auto financing — high-margin loans, securitization of auto debt, and F&I add-ons (insurance, service contracts). These create recurring revenue and help offset thin used-car margins.

Opendoor has no comparable financing engine. Mortgage origination is a brutal, low-margin, cyclical business. They tried partnerships, but there is no lucrative equivalent of auto loan securitization and upselling warranties.

4. Pricing & Data

Cars: VIN-level data, abundant comps, well-understood depreciation curves. Algorithms can price to within a few hundred dollars with high accuracy.

Homes: Zillow’s “Zestimate” failure proved how hard AVMs are. Small local factors massively shift value. Opendoor’s risk model is inherently fragile — especially in volatile housing markets. 

5. Macro Dependence

Carvana benefits from replacement cycles (people must buy cars every ~7–10 years) and strong used-car demand even in downturns (people trade down from new to used).

Opendoor is entirely hostage to the housing cycle. If mortgage rates spike (as in 2022–2023), volume collapses. There’s no “trade-down” dynamic — people just don’t move.

6. Path to Scale

Carvana’s turnaround hinged on cost discipline, better inventory mix, and benefiting from supply/demand tightness in used cars. Its business model could scale once they fixed execution.

Opendoor cannot scale into profitability in the same way, because its unit economics are fundamentally constrained: thin gross margins, massive carrying risk, and exposure to local housing cycles. Scaling increases its risk profile rather than de-risking it.

7. Investor Psychology

Carvana’s story is a “tech-powered retailer” with visible leverage to execution improvements. Investors could see a road back.

Opendoor’s story is “trying to trade houses at scale” — something even traditional institutions avoid because of risk and illiquidity. The TAM (housing) is huge, but Opendoor cannot safely capture it without catastrophic downside risk.

Bottom Line

Comparing Opendoor to Carvana is misleading:

Cars are liquid, fungible, quickly resold assets with ancillary financing profits.

Homes are illiquid, unique, slow-moving assets with high carrying costs and no reliable secondary liquidation market.

Carvana’s turnaround was about operational execution within a structurally sounder market. Opendoor’s problems are structural — no amount of cost-cutting or “tech” can change housing market fundamentals.

In short: Carvana had a real shot at a turnaround because its industry allowed for it. Opendoor is fighting gravity itself — the economics of housing iBuying make a true turnaround almost impossible.

I then pushed her to deep dive on the economics.... 

1. Gross Margins per Home

Opendoor’s average gross profit per home has typically been in the 2–5% range in good times.

Example: On a $300,000 home, gross profit might be $6,000–$15,000.

But small pricing errors wipe this out. If Opendoor misprices by just 2–3%, the entire margin is gone.

In 2022, when rates spiked, they were forced to sell homes at a loss of $20k–$40k each on average for multiple quarters. That kind of volatility is built into the business.

2. Carrying Costs

Opendoor has to finance its inventory through warehouse lines of credit.

Carrying costs per home:

Mortgage/financing interest: ~6–7% annualized → ~$1,500/month on a $300k home.

Taxes, insurance, HOA, utilities, upkeep: another $300–500/month.

If a home takes 3–4 months to sell, that’s easily $5,000–7,000 in carrying cost — eating up most of the theoretical gross margin. 

3. SG&A vs Revenue

Opendoor’s business model requires:

Sales/marketing spend to acquire both sellers and buyers.

A workforce for inspections, repairs, title, and transaction management.

SG&A runs at ~7–10% of revenue.

When your gross margin per home is only 3–4%, you can’t cover fixed costs at scale unless you’re moving tens of thousands of homes flawlessly, every quarter 

4. Capital Intensity

Every home Opendoor buys is hundreds of thousands of dollars in balance sheet exposure.

To “scale,” they need billions in capital constantly turning.

Unlike Carvana, which can churn used cars fast and recycle capital quickly, Opendoor’s cycle time is slow and risky.

This creates leverage without upside: they take housing risk without housing’s long-term appreciation (because they flip, not hold).

5. Unit Economics Snapshot (Simplified Example)

Let’s take a $300,000 median U.S. home:

Line Item         Amount

Gross spread (3%)       $9,000

Carrying cost (3 months)        –$6,000

Repairs/renovation     –$3,000 to –$7,000

Net before SG&A        ~Break-even or loss

SG&A allocation (~$20k per home sold, depending on scale)          

Pushes further negative

Result: Negative contribution margin unless everything lines up perfectly (hot housing market, fast turnover, low borrowing costs, high volume).

6. Comparison with Carvana

Carvana gross margin per car: ~$4,000 (on a ~$25k car). That’s a 16% spread, with fast turnover and high-margin add-ons (financing, warranties).

Opendoor gross margin per home: ~$10k on a ~$300k house → only 3%. Slow turnover, no add-ons that meaningfully offset risk.

 7. Why Scaling Makes It Worse

If Opendoor doubles volume, they double exposure. A single housing market shock can turn “thin margins” into catastrophic, portfolio-wide losses.

Carvana can at least scale into profitability (because per-unit economics are positive in steady state).

Opendoor scales into more risk, not more margin.

✅ Conclusion:

Opendoor’s unit economics are fundamentally broken:

Gross margins are razor thin.

Carrying costs and SG&A often exceed gross profit.

Capital intensity means scaling only magnifies risk.

Unlike Carvana, there’s no ancillary revenue (financing, warranties) to rescue margins.

This is why, structurally, there is almost zero chance Opendoor can ever “turn around” into a sustainably profitable business, let