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As the U.S. housing sector cools off, housing companies are slashing jobs left, right and center. One CEO of a real estate company said that job cuts were necessary, given how bad things are about to get.
“A layoff is always an awful shock, especially when I’ve said that we’d go through heck to avoid one…But mortgage rates increased faster than at any point in history,” Redfin
RDFN,
CEO Glenn Kelman said in a blog post announcing that he’d asked 8% of the company’s employees to leave. “We could be facing years, not months, of fewer home sales, and Redfin still plans to thrive.”
Mortgage rates are up on the back of rising inflation, with the average on the 30-year fixed-rate rising 14 basis points to 5.23% for the week ending June 9, according to weekly data from Freddie Mac. New data is expected on Thursday morning.
On Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 0.75 percentage point, the biggest increase since 1994 as it tries to tame rising inflation from a 40-year high.
Redfin and another real-estate company, Compass
COMP,
have both announced that they’re cutting jobs, MarketWatch’s Tomi Kilgore reported on Tuesday. Redfin said it was shedding 470 employees. Compass said it was cutting 10% of its workforce, around 450 jobs.
Rocket Mortgage
RKT,
began offering voluntary buyouts to about 8% of its employees earlier this year.
In November last year, Zillow
Z,
laid off a quarter of its workforce as it shut down its house-flipping operation.
Meanwhile, housing data reported on Wednesday morning signaled further weakness in the sector, one economist said.
“This is still the early stages of the housing rollover; homebuilders are not yet ready to admit that the sky is falling in,” Ian Shepherdson of Pantheon Macroeconomics stated. “But it is.”
Getty Images/iStockphoto
‘Early stages of the housing rollover’
One economist said that more pain was to be expected in the housing sector, given the rapidly changing environment
The home builder confidence index dropped by two points in the month of June — for the sixth straight month.
“We expected a bigger hit, but this is not the floor,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note on Wednesday. “Mortgage demand is in free-fall, and the [National Association of Home Builders] index will drop much further over the summer.”
With mortgage applications also dropping from December highs, Shepherdson said that inventory levels and new home sales data all point to signs of a further drop in prices and new construction activity.
“This is still the early stages of the housing rollover; homebuilders are not yet ready to admit that the sky is falling in,” he stated. “But it is.”
Write to: aarthi@marketwatch.com
