When the market turned in mid-2022, many real estate disruptors began the long and painful process of reducing expenses, laying off staff, and reorienting their businesses to a new, challenging reality.

Why it matters: A year and a half later most disruptors are still around, but remain a shadow of their former selves and have yet to show signs of emerging from hibernation.

Dig deeper: The pre-2022 low interest rate environment was a breeding ground for real estate tech disruptors that relied on a financial component as the core of their product offering and business model – using cheap money to solve consumer pain points (iBuying, Power Buying).

• Because of this, many disruptors operate in the mortgage space and hired mortgage loan originators (MLOs) to service their customers.
   

• And as these companies rightsized to a high interest rate environment, they slashed their MLOs anywhere from 50 to 85 percent (and in Opendoor’s case, down to zero).

Zillow has been the outlier, accelerating the hiring of MLOs for Zillow Home Loans since February ‘23, at the same time its smaller peers have been shedding the same.

• This is both a clear signal of intent around Zillow’s plans to build Zillow Home Loans, and a powerful demonstration of the benefits of having a strong balance sheet.
   

• Read more: Zillow Still Crazy About Mortgages.

Arch-disruptor Opendoor, meanwhile, has embraced reality by significantly reducing the amount of homes it’s acquiring – all in an effort to streamline the business.

• Opendoor’s purchases have stabilized at around 1k per month – orders of magnitude lower than the highs of ‘21 and ‘22 – but with a recent uptick as the company aims to double its monthly acquisitions. 
   

• The goal appears to be refocusing the business on the core iBuyer proposition after years of adjacent distractions (like Opendoor Home Loans).

The bottom line: For many disruptors – private companies that don’t publish much data – MLO count remains the best leading indicator of demand for their services.

• For the time being the disruptors are still in hibernation mode, but if and when the tide begins to turn, MLO count should begin to tick upwards.
   

• And by that time, the surviving disruptors will be battle-hardened with more nimble and streamlined operations, better product-market fit, and on stronger financial footing with more rational business models.