Redfin to lay off 13% of staff, shutter home-flipping business
Redfin has already reduced its workforce by 27% since April
Homeowners see property tax savings as home prices decline
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Redfin announced Wednesday that it's laying off 13% of its workforce and shuttering its home-flipping business RedfinNow amid the tumultuous housing market.
Approximately 862 workers who had been renovating RedfinNow homes will be laid off as part of the online brokerage's latest cuts, CEO Glenn Kelman said in an SEC filing.
Kelman said Redfin will still need home-services employees for its concierge service in order "to fix up brokerage customers’ listings, but since that group spent most of its time renovating RedfinNow homes, it will get much smaller."
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Kelman admitted that the additional reduction in its workforce is "awful" although it's unavoidable due to the current economic environment. Since April, Redfin has already reduced its staff by 27%.
A Redfin real estate yard sign is pictured in front of a house for sale on Oct. 31, 2017 in Seattle, Washington. (Photo by Stephen Brashear/Getty Images for Redfin / Getty Images)
In June, the Seattle-based real estate brokerage laid off 8% of its employees in "response to our expectation that we’d sell fewer houses in 2022" amid the cooling market, Kelman said. However, the latest layoff "assumes the downturn will last at least through 2023," he added.
REDFIN LAYS OFF 8% OF WORKERS, FORECASTS YEARS OF FEWER HOME SALES AMID RATE HIKES
Last month, Morgan Stanley analysts already projected that home prices could tumble another 7% by the end of 2023. While that's smaller than the 27% decline seen when the mortgage bubble burst more than a decade ago, it would still mark the second-fastest decline since the Great Depression.
Sign for technology driven realtor Redfin on home for sale in San Ramon, California, September 17, 2019. (Photo by Smith Collection/Gado/Getty Images / Getty Images)
The investment bank blamed rapidly spiking mortgage rates for the expected decline.
Mortgage buyer Freddie Mac reported last week that the average on a 30-year rate is near 7%, up from 3.86% a year ago.
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"We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30% smaller than it was in 2021," Kelman said.
The company has also eliminated the roles of 218 employees, who have the option to stay at Redfin in another role. If all of those employees leave, the overall reduction in Redfin's workforce would be 16% in November and 29% since April, the company said.
FOX Business' Megan Henney contributed to this report.