Redfin and Compass lay off over 900 employees as mortgage interest rates continue to climb – TechCrunch
Redfin’s CEO said: “I said we wouldn’t fire unless we had to. We must.’
The housing market took a huge hit this year as mortgage interest rates jumped and homeowners cut back on purchases.
The latest casualties in the proptech world are Redfin and Compass, who both today announced layoffs totaling around 920 people.
In an email, a Redfin spokesperson told TechCrunch that the company was laying off about 470 employees today, after May, demand was 17% lower than expected.
Meanwhile, a Compass spokesperson confirmed to TechCrunch that the company is cutting about 10% of its workforce, or about 450 people. He said: “Due to the clear signals of slowing economic growth, we have taken a number of steps to protect our business and reduce costs, including the difficult decision to reduce the size of our team of employees. ‘around 10%.”
Both Redfin and Compass are on a mission to help people find and buy homes.
Mortgage interest rate jumped nearly 6% this week, significantly higher than the sub-3% rates seen in 2021. Needless to say, the idea of buying a home is much less appealing than it has been in recent years. Combine that with overheated markets where prices have risen dramatically and many potential buyers are putting their plans on hold.
In a blog postRedfin’s Glenn Kelman said his company would hold a brief town hall meeting to discuss the move and that managers would call affected employees directly.
He wrote: “To all the people who are leaving and have trusted Redfin, I’m sorry that we couldn’t deliver on our commitment to you. With May demand 17% lower than expected, we don’t have enough work for our agents and support staff, and fewer sales leave us with less money for head office projects. »
Kelman went on to say that the company offers terminated colleagues ten weeks of base pay, with an additional week of pay for each 12 months of service beyond one year, capped at 15 weeks of pay. Redfin said it was also paying the bill for three months of medical coverage for affected employees.
“That should give you until the end of the summer to find work,” he added. “…I said we wouldn’t fire unless we had to. We must.”
The executive then acknowledged the irony of going ahead with a layoff despite raising hundreds of millions of dollars.
But mortgage rates have risen faster than at any time in history. We could be facing years, not months, of fewer home sales, and Redfin still expects to thrive,” he wrote. “If going from $97 per share to $8 isn’t straining a business, I don’t know what is… We owe it to everyone who has invested your time or money in this business to become profitable, and then very profitable.
Compass shares were trading at $4.42 per share as of noon, down from a 52-week high of $17.70. Redfin shares fell to $8.16 from a 52-week high of $65.41. Its market capitalization is $874 million, while Compass is currently valued at $1.885 billion.
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