Real estate brokerages 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, Redfin’s CEO, announced a cut of about 8% of the company’s workforce in an e-mail to employees Tuesday, citing sinking demand, which was 17% lower than expected last month. “Today’s layoff is the result of shortfalls in Redfin’s revenues, not in the people being let go,” Kelman said. Redfin employed about 6,500 people at the end of 2021.
Compass is eliminating 10% of its employees “due to the clear signals of slowing economic growth,” a spokesperson said in a statement. Compass employed about 4,800 people at the end of 2021.
Declining home sales and rising mortgage rates have put a damper on the housing market, putting stress on the real estate industry. The rate for a 30-year fixed-rate mortgage has risen to 5.65%, the highest level since 2008, the Mortgage Bankers Association said Wednesday. “With mortgage rates well above 5%, refinance activity continues to run more than 70% lower than last year,” said Joel Kan, the group’s associate vice president of economic and industry forecasting.
Redfin is offering employees up to four months of severance pay, according to Kelman’s e-mail. He said that he anticipated gradual, slower growth in what he described as a “housing downturn.” Redfin’s shares have dropped nearly 80% over the past six months.
“We could be facing years, not months, of fewer home sales,” Kelman wrote to employees. “If falling from $97 per share to$8 doesn’t put a company through heck, I don’t know what does.”