Redfin and Compass lay off workers over housing decline

Real estate brokers Compass and Redfin are both laying off employees, a sign that the housing market is cooling as higher interest rates make mortgages more expensive and rising inflation squeezes incomes.

Glenn Kelman, managing director of Redfin, announced a reduction in the company’s workforce of around 8% in an email to employees on Tuesday, citing the drop in demand, which was 17% lower than last month’s forecast. . “Today’s layoff is the result of a revenue shortfall at Redfin, not people being made redundant,” Mr Kelman said. Redfin employed approximately 6,500 people at the end of 2021.

Compass is cutting 10% of its employees “due to clear signals of slowing economic growth,” a spokesperson said in a statement. Compass employed approximately 4,800 people at the end of 2021.

Declining home sales and rising mortgage rates dampened the housing market, putting pressure on the real estate sector. The rate on a 30-year fixed-rate mortgage has risen to 5.65%, the highest level since 2008, the Mortgage Bankers Association announced on Wednesday. “With mortgage rates well above 5%, refinancing activity continues to be more than 70% lower than last year,” said Joel Kan, associate vice president of economic and industry forecasts at the band.

Redfin is offering employees up to four months of severance pay, according to Mr. Kelman’s email. He said he expected gradual, slower growth in what he described as a “housing downturn.” Redfin shares have fallen nearly 80% in the past six months.

“We could be facing years, not months, of fewer home sales,” Kelman wrote to employees. “If going from $97 per share to $8 doesn’t strain a company, I don’t know what does.”

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