Amid an anticipated cooling of home sales nationwide and rising interest rates, real estate firms Compass and Redfin last week announced they were laying off hundreds of workers.
Compass said it would lay off about 10% of its workforce or about 450 employees across the company in filings with the U.S. Securities and Exchange Commission (SEC).
Redfin announced it would lay off 6% of its workforce or about 470 employees by the end of June, per SEC filings.
“We raised hundreds of millions of dollars so we wouldn’t have to shed people after just a few months of uncertainty. But mortgage rates increased faster than at any point in history,” Redfin CEO Glenn Kelman wrote in a blog on Redfin’s website. “We could be facing years, not months, of fewer home sales, and Redfin still plans to thrive. If falling from $97 per share to $8 doesn’t put a company through heck, I don’t know what does.”
“Today’s layoff is the result of shortfalls in Redfin’s revenues, not in the people being let go. But months before this layoff, our culture has been making an important shift toward performance and profits,” Kelman added.
The announcement came shortly after real estate data curator ATTOM released its first-quarter 2022 U.S. residential property mortgage origination report, which showed overall residential lending activity was down by 32% between the first quarter of 2021 and the first quarter of 2022, the biggest annual drop since 2014, while mortgages secured by residential property dipped 18% from the fourth quarter of 2021.
Overall, lenders issued $892.4 billion worth of mortgages in the first quarter of 2022, per the data, down quarterly by 17% and annually by 27%.
“The drop-off in Q1 refinancing activity is no surprise with mortgage rates rising as rapidly as they have,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “But many forecasts expected purchase loans to remain strong in 2022, and even increase in both the number of loans originated and the dollar volume of those loans. The weakness in purchase loan activity shows just how much of an impact the combination of escalating home prices and rising interest rates have had on borrower activity this year.”