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Zillow and Redfin are pausing home-buying — could the coronavirus pandemic make the iBuyer model more popular?

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As state and local governments across the country put restrictions on business activity to stop the spread of the coronavirus, so-called “iBuyer” companies have stopped purchasing homes.

Whether the iBuying business model — in which companies use technology to make instant offers on homes and then sell those properties for a profit — will survive any recession that results from the COVID-19 outbreak remains an open question.

Zillow ZG, +13.48%  announced Monday that it had paused all home-buying activity through its iBuying service, Zillow Offers. “Given the concerns for public safety and rapid developments by governments that restrict local real estate activities, we determined it was prudent to pause our home buying to preserve our capital,” said Zillow Chief Executive Rich Barton said.

The news sent Zillow Z, +14.82%  shares up in trading Monday, even as the Dow Jones Industrial Average DJIA, -3.04%  and S&P 500 SPX, -2.93%  fell in value as the coronavirus outbreak continued to create market turmoil.

Offerpad also confirmed to Marketwatch that it will not be purchasing homes at this time. “Due to health concerns for customers and employees, the uncertainty of the economic impact, and to ensure we are complying with proper local municipalities, protocols and CDC requirements related to COVID-19, we are not currently providing offers to new sellers,” said Cortney Read, Offerpad’s senior director of communications.

Read more: This new trend in house selling could cast a cloud over America’s property market

Before Zillow, Redfin RDFN, +3.10%  and Opendoor had paused their home-buying operations because of similar concerns. That iBuyers chose to stop purchasing homes at this time is not a major surprise, analysts said, because purchasing homes requires a significant amount of capital. “iBuying is capital intensive which is not ideal in a time when everyone is looking for liquidity (or cash),” Danielle Hale, chief economist at Realtor.com, told MarketWatch.

Companies also pointed to the difficulty they now face in off-loading homes from their balance sheets. “We remain as committed as ever to giving homeowners the option of an instant offer, but only when we can know what a fair price for an offer would be,” Redfin CEO Glenn Kelman said. “With whole cities shutting down nearly all commerce, no one can say what a fair price is right now, so we’re not making any instant offers.”

Even as these companies stop purchasing homes, they still face significant hurdles to remain viable as the coronavirus outbreak wreaks havoc on the economy. All of the iBuying companies already have thousands of homes in their inventory — homes that are now much harder to sell as millions of Americans face the prospect of being laid off.

‘If you own one house in Phoenix and the market goes down, 5%, you’re out a couple thousand dollars. The problem is, if you own 3,000 houses and the markets seize up everywhere at once you’re potentially in a lot of pain.’

Mike DelPrete, an independent analyst who tracks the iBuying industry

Zillow confirmed its home inventory balance was 1,860 homes as of March 19, down from 2,707 home at the end of 2019. Other companies, such as Opendoor, were likely buying significantly more homes recently, Mike DelPrete, an independent analyst who tracks the iBuying industry, estimated.

Beyond the costs of keeping those homes on these companies’ balance sheets, which could produce significant losses, there’s also the risk that they will see smaller returns when they go to sell those properties in the future if home prices drop.

“It’s a math problem,” DelPrete said. “If you own one house in Phoenix and the market goes down, 5%, you’re out a couple thousand dollars. The problem is, if you own 3,000 houses and the markets seize up everywhere at once you’re potentially in a lot of pain.”

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Because the coronavirus and the resulting economic turmoil have affected all parts of country at once — unlike a more typical recession where only certain markets might be affected — the hedge iBuyers had taken by diversifying their portfolio geographically has not paid off.

And with the unique situation the coronavirus outbreak has caused, these companies are faced with few options of what to do with these properties, such as pivoting toward renting, except sitting on them and waiting for the market to recover, DelPrete said.

Therefore, survival could come down to which companies do more than iBuying, with Zillow and Redfin in a potentially better position than Opendoor and Offerpad.

Those iBuyers that do come through, though, could face a more receptive audience for their business. For home sellers who need to offload their properties as quickly as possible in a recession environment, the speedy process iBuyers offer could be quite appealing.

“From the seller’s perspective, it’s probably a great time to have an iBuyer since you can sell without opening your home up for any open houses,” Hale said.