- Redfin is letting go of about 470 workers or 6% of its staff.
- Compass is releasing about 450 workers, which is equivalent to 10% of its staff.
- Both companies saw their shares fall between 5% and 10%.
Anticipating cooling home sales across the country and rising interest rates, two big-name real estate firms laid off hundreds of workers on Tuesday.
Real estate technology companies Redfin and Compass announced layoffs totaling more than 900 employees in separate announcements.
In a blog post, Redfin CEO Glenn Kelman said his company is laying off about 470 employees, about 6% of its workforce after demand in May was 17% below expectations.
“We raised hundreds of millions of dollars so we didn’t have to lay off people after a few months of uncertainty,” Kelman said. “But mortgage rates rose faster than at any time in history. We could be looking at years, not months, of lower home sales, and Redfin still plans to prosper. If the drop from $97 a share to $8 doesn’t put the company in trouble, I don’t know what he does”.
Meanwhile, Compass confirmed to USA TODAY in an email that the company is laying off about 450 people, which is equivalent to 10% of its staff.
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The layoffs come as the once-buoyant housing market begins to cool as high mortgage rates and inflation rates of around 6% dominate. Both companies saw their shares fall on Tuesday, as Redfin was down almost 5% and Compass was down more than 10%, respectively.
Kelman said Redfin is giving laid-off employees 10 weeks of base pay, with an additional week of pay for every 12 months of service beyond one year, capped at 15 weeks of pay. The Seattle-based firm added that it is also providing three months of health care coverage to its former workers, which should keep them through the end of the summer, Kelman said.
“Today’s layoff is a result of a shortfall in Redfin revenue, not people being laid off, but before now our culture has been making a major shift toward performance and profit,” Kelman said.
Meanwhile, a Compass spokesperson said in an email: “Given clear signs of slowing economic growth, we have taken a number of steps to safeguard our business and cut costs, including pausing expansion efforts and difficult decision to reduce the size of our team of employees by approximately 10%.