Earlier this week, two of the nation’s biggest names in real estate announced significant layoffs, saying the drastic move was due to the housing slowdown that the country is currently experiencing.
Seattle-based Redfin has announced it’s laying off eight percent of its staff, around 470 people, while residential brokerage company Compass, one of the largest in the country, is letting go 10 percent of its staff, or about 450 people.
Both companies said the layoffs should not reflect at all on the employees, but it was simply the only solution to the fact that there was not enough work for these employees.
“Today’s layoff is the result of shortfalls in Redfin’s revenues, not in the people being let go…with May demand 17 percent below expectations, we don’t have enough work for our agents and support staff,” said Redfin in a statement.
The price of Redfin’s shared dropped from about $39 at the beginning of the year to $8.55 this week.
That the biggest real estate companies in the U.S. are letting their employees go and complaining of a plunge in demand for their services is a telltale sign of the state of the American housing market.
The market has reported a slowdown since April, which has persisted in May and June. Buyers’ demand has fallen amid record-high home prices—34 percent higher now than two years ago—and soaring mortgage rates.
“Throughout the past year, all statistics related to the American housing market have hit some sort of insane record: house prices have reached an all-time high, the number of properties sold above the asking price is astronomical, meaning that the number of property sales reached a record breaking low,” property expert Bruna Pani told Newsweek.
Mortgage rates are at their highest levels since 2008, after the average 30-year mortgage rate rose from 3.1 percent to 6.28 percent on Tuesday. Now a higher cost of borrowing after the Federal Reserve has increased its key interest rate for the first time since 1994 is likely to worsen the market condition for potential home buyers and borrowers, slowing spending, though mortgage rates have temporarily dropped since the Fed’s announcement on Wednesday.
Meanwhile, home prices are still rising.