is laying off staff again, as the housing market continues to hurt from high mortgage rates and low demand.
Redfin CEO Glenn Kelman said on Wednesday that the real-estate brokerage was laying off 13% of staff, or 862 employees, including those at Rent and Bay Equity. The company was also closing RedfinNow, its iBuyer service that bought homes for cash and resells them to buyers on the market.
‘The housing market will get smaller in 2023,” Kelman wrote in an email to staff.
“A layoff is awful but we can’t avoid it,” he added.
The layoffs then were a response to the expectation that the company would sell fewer homes in 2022, Kelman said. This new round of layoffs “assumes the downturn will last at least through 2023,” he stressed.
The chief said that the company plans to keep increasing market share, but noted that the market in 2023 “is likely to be 30% smaller than it was in 2021.”
Redfin had previously laid off 8% of staff last June, due to “years” of “fewer home sales.”
The headcount at Redfin has fallen by 27% since April, when 8% of staff were let go.
Additionally, in November, 218 more roles were eliminated, but those employees were given a choice between staying at Redfin in a different capacity, or leaving, Kelman said. If they choose to leave, then the total headcount will have been reduced by 29% over the last seven months.
“‘We’ve tied up hundreds of millions of dollars in houses that you yourself wouldn’t want to own right now.’”
— Redfin CEO Glenn Kelman on the iBuyer market and closure of RedfinNow
The iBuyer market has been hammered — alongside the broader property market — by a sharp run-up in mortgage rates and plunging buyer demand. Rates are firmly above 7%, adding hundreds of dollars to homebuyers’ interest payments, which is putting many people off from purchasing a home.
The iBuyers have been hit by this pullback as well.
“One problem is that the share gains we could attribute to iBuying have become less certain as we rolled it out more broadly, especially now that our offers are so low,” Kelman said.
“And the second problem is that iBuying is a staggering amount of money and risk for a now-uncertain benefit. We’ve tied up hundreds of millions of dollars in houses that you yourself wouldn’t want to own right now,” Kelman said.
“Even before its overhead expenses, the RedfinNow properties segment will likely lose $22 million to $26 million dollars in 2022. However small our iBuying loss may be compared to others, that loss is still larger than we could afford to bear again,” he added.
At 11 a.m. Eastern Time, Redfin will make calls to people leaving, the company said.
“I’m sorry that we don’t have enough sales to keep paying you,” Kelman said. “I won’t pretend it isn’t heartbreaking.”
Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at email@example.com