June 15, 2022
TechCrunch reports that more than 900 employees from two of the largest real estate companies in the United States, Redfin and Compass, have recently been fired. This employee layoff is the result of the continuously growing interest rates for all mortgage types. Redfin cut 470 employees, and Compass fired about 10% of its staff, which amounts to around 450 employees.
As of this week, mortgage rates have reached 6%, which is more than 50% higher than the rates of below 3% that we’ve seen just last year. This has had a huge negative effect on both companies’ stocks; a Redfin spokesperson has announced that their company’s share prices have drastically declined, from $97 to $8. Compass has also experienced a significant fall in its stock prices, although not as extreme as that of its competitor. The company’s stock prices have fallen from $17.70 down to $4.42.
Without any doubt, the increase in mortgage rates has come as a huge blow to the housing market, making the idea of buying a house far less appealing than it was in recent years. If you further consider the overheated markets with high home prices that continue to rise dramatically, it’s safe to assume that many prospective homeowners will postpone their idea of building or buying a home.
Redfin and Compass have both apologized to all their departing employees, announcing that due to the recent fall in property demand, they don’t have enough work for their agents. Redfin and Compass have both justified their decision by saying that it was inevitable since they’ll be taking drastic measures in order to reduce costs and save their business.