Redfin lays off 862 employees as housing market cools
The layoff bug that's hammering major tech companies is also infecting the real estate industry, with Redfin announcing it will ax 862 jobs this week.
That figure represents 13% of Redfin's workforce, the real estate data company said in an email posted on its website. About 264 of the jobs being cut are at RedfinNow, the house-flipping arm of the company that launched five years ago. Redfin said it plans to spend the coming months dismantling RedfinNow, adding that homes purchased by the unit lost $18 million in value during the third quarter.
"Winding down RedfinNow is a strategic decision we made in order to focus our resources on our core businesses in the face of the rising cost of capital," Redfin said in a regulatory filing Wednesday.
The job cuts this week come after Redfin laid off 470 employees in June, citing a slowdown in the housing market.
Cooling housing market
The Seattle-based company is laying off employees as the U.S. housing market is cooling down from its white-hot activity earlier this year. Mortgage rates have grown every month since this spring, causing many would-be homebuyers to sit on the sidelines. The combination of today's mortgage rates with higher home prices compared to last year has priced some buyers out of the market, economists have said.
The average interest rate on a 30-year fixed rate mortgage hit 7.14% this week, its highest level since 2001. Pending home sales dropped 35% in October compared to a year prior, according to Redfin data. The number of homes sold has decreased for the past eight months, according to the National Association of Realtors.
Hoping to entice a dwindling pool of buyers, some sellers across the Sunbelt and the South have lowered their asking price. Economists expect mortgage rates to climb higher next year as the Federal Reserve continues its battle with soaring inflation.
Redfin said in its regulatory filing that it eliminated jobs expecting "a housing downturn that lasts at least through 2023."
"We're laying off employees beyond RedfinNow because we expect to sell fewer houses, even as we keep taking market share," Redfin CEO Glenn Kelman said in a statement to CBS MoneyWatch. "None of this makes a layoff any less heartbreaking."
Not just Redfin
Changes in the housing market aren't just affecting Redfin. Realtor.com, as well as mortgage lenders Better and LoanDepot, have also eliminated positions in recent months. Better has been through four rounds of layoffs this year, according to HousingWire, while LoanDepot said in July it will eliminate 4,800 positions this year.
Redfin's rival Zillow has also slashed hundreds of jobs recently, laying off about 300 employees last month. The cuts represent 5% of Zillow's workforce, Bloomberg News reported. Zillow announced plans last year to lay off about a quarter of its staff after its home-flipping unit lost more than $420 million, the New York Times reported.
In a statement to CBS MoneyWatch, Zillow said the layoffs would allow the company to grow its "housing super-app." Zillow is still hiring for tech-focused jobs, the statement read.
Real estate data firm Compass saw two rounds of layoffs this year — cutting about 450 positions in June and a "significant portion" of its product and engineering team in September. The New York-based company didn't disclose exactly how many positions were cut in September.