By Lance Lambert via Yahoo! Finance

Nestled in the sprawling desert community of North Las Vegas, the three-bedroom home at 6043 Clovelly St. perfectly embodies what has gone terribly wrong at Opendoor Technologies. Back in April 2022, Opendoor bought the home for $420,900. The company then flipped it back onto the market in May 2022 for $480,000, only it was too late: Las Vegas had already shifted from a housing boom into a sharp housing correction. By the time the home sold in January 2023, Opendoor only fetched $346,000—or 17.8% less than the purchase price.

“They [Opendoor] are taking huge losses, and as buying agents, we are all testing their pain threshold. When I represent a buyer, it’s my fiduciary duty to represent them the best I can. So when I look at an Opendoor house for a client, as a buyers agent, we are coming in low and hard. We are getting counter offers and we are having conversations. If they weren’t desperate, we wouldn’t be having conversations or getting counter offers, but they want these things off their books,” Chris Davis, a real estate agent in Phoenix, tells Fortune.

We’ve seen this movie before. Back in 2008, leveraged amateur home flippers across the country had no choice but to sell—or foreclose—at big losses as home prices began to slide. Only this time around, the correction is regional, and it’s a corporate titan that got stuck holding the bag.

Not too long ago, Opendoor had been riding high. The San Francisco-based company entered the market with the goal of becoming a leader for so-called iBuying. It works like this: Through its online platform, Opendoor makes speedy offers to buyers—who are often selling homes in need of some tender loving care—in exchange for a “service fee.” The company then makes the needed repairs, and flips the home back onto the market for a quick buck.

Opendoor’s early success was enough for investors to push the company’s stock price to over $34 per share soon after its initial public offering in 2021. The company’s robust growth also saw it go from a startup in 2014 to No. 425 on the Fortune 500 in 2022. Even Zillow, which had launched its own iBuyer business in 2018, was racing to catch up with fast-growing Opendoor.

But fast-forward to this week, and things aren’t looking so hot for the former Wall Street darling. On Tuesday, the company announced it would lay off another 560 staffers, or 22% of its remaining workforce. And on Wednesday, shares of Opendoor closed at just $1.56.

View this interactive chart on Fortune.com

How did things go so terribly wrong for Opendoor?

To better understand, let’s rewind back to the fall of 2021. At the time, the U.S. housing market was still going gangbusters from coast-to-coast. However, in hindsight, the first crack appeared when Opendoor’s competitor Zillow announced in October 2021 that it would pause its own flipping business. Just weeks later, Zillow announced it was shutting down the effort—known as Zillow Offers—and laying off 2,000 workers while scrambling to off-load its remaining homes.

It turns out that Zillow had made a bad bet. Zillow’s much-lauded algorithm was struggling to predict future price appreciation, which led to overpaying for homes. Zillow executives were also unsure as to whether the iBuyer flipping business model would turn into a long-term profit engine.

Jeremy Wacksman, Zillow’s COO, told Fortune in May 2022, that the company had no choice but to go big on its iBuyer program: Flipping homes is an expensive, complicated, low-margin business that can be profitable only on a massive scale. Zillow needed to “automate transactions so efficiently that you can cover the fixed cost required to run that operation, which requires a lot of technology, a lot of data, a lot of automation, and, again, a lot of capital,” says Wacksman.

In the end, that scale—which saw home flipping account for 87% of Zillow’s revenue in the first quarter of 2022—and the potential for even bigger losses, was enough for Zillow executives to exit the business.

“It’s a part of business. You’re going to take some big swings. Some work out, some don’t,” Zillow president Susan Daimler told Fortune last year.

As Zillow exited its home flipping program, Opendoor investors didn’t seem too worried: On Nov. 2, 2021, the same day Zillow announced it’d permanently exit iBuying, shares of Opendoor closed at $21.12. In hindsight, maybe Opendoor investors should have been on higher alert.

Speaking in front of Congress later in November 2021, Fed Chair Jerome Powell said “it’s probably a good time to retire” the phrase “transitory.” Powell, it seemed, was sending a hawkish message that inflation was here to stay and the Fed would jack up interest rates. If the Fed actually did so, it would mean the 3% mortgage rates that were helping to power the Pandemic Housing Boom would go poof.

Nevertheless, iBuyers like Opendoor and RedfinNow kept buying up homes in late 2021, and homebuyers kept bidding up homes prices. The music kept playing…but it was about to stop.

View this interactive chart on Fortune.com

The U.S. housing market was an absolute frenzy through the first few months of 2022. In fact, U.S. home prices as measured by the Case-Shiller National Home Price Index in March 2022 notched a record year-over-year jump of 20.8%.

But the national housing boom’s end had already been set into motion: In preparation for the Fed’s first 25 basis point interest rate hike in March 2022, financial markets were already pushing up mortgage rates. The average 30-year fixed mortgage rate, which ended 2021 at 3.11%, was up to 3.89% by the end of February 2022. By the end of March 2022 it was up to 4.67%.

Mortgages rates kept inching up through the first half of 2022, and Opendoor kept buying homes. At first those spiked rates simply slowed down the housing market, however, right around June 2022, when mortgage rates topped 6%, Western housing markets like Phoenix and Boise slipped into home price corrections. Soon afterwards, the national housing market slipped into its first correction since the housing crash bottomed out in 2012.

Nationally speaking, the home price correction—which saw U.S. home prices fall 3% on a seasonally adjusted basis between June 2022 and January 2023—has been somewhat mild. However, the housing correction has been particularly sharp in frothy housing markets out West, with many seeing close to double-digit home price declines in the second half of 2022. Those hard-hit Western markets, including places like Phoenix (down 7.5% from its peak) and Reno (down 7.8% from its peak), are also the very places where iBuyers like Redfin and Opendoor (see chart above) had significant exposure.

In those fast-correcting Western housing markets, iBuyers like Opendoor and Redfin had no choice but to start slashing home prices last summer.

“When the shiitake mushrooms hit the fan, you [investors] want to get out first. The way to do that is to figure out where the lowest sale is, and be 2% below that. And if it doesn’t sell in the first weekend, move it down [again],” Redfin CEO Glenn Kelman told Fortune last fall. “We notice immediately when fewer people are on our website and fewer are signing up for tours… We’re sitting on $350 million worth of homes for sale that we bought with our own money, or worse bought with borrowed money. And what we always told investors is that we would protect our balance sheet by acting quickly. We don’t have hope as a strategy. We immediately started marking down things.”

In November, Redfin joined Zillow in throwing in the towel on its home-flipping business. The move saw it cut 13% of its staff.