The company's CEO, Glenn Kelman, delivered the bad news to employees by e-mail. He also announced that they would be closing their home-flipping service RedfinNow. The number of employees at Redfin and its subsidiaries has dropped by at least 27 percent since the spring.
He wrote: "We’re laying off 862 brilliant, loyal people and also closing RedfinNow. We'll still need home-services employees for our concierge service to fix up brokerage customers' listings, but since that group spent most of its time renovating RedfinNow homes, it will get much smaller.”
He also shared a shocking prediction about where he sees the housing market headed next year, saying: “We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30 percent smaller than it was in 2021. The June layoff was a response to our expectation that we'd sell fewer houses in 2022; this layoff assumes the downturn will last at least through 2023.“
He added that RedfinNow is too expensive and risky, with the properties segment expected to lose between $22 and $26 million this year.
Meanwhile, the Case-Shiller index showed a drop in American housing prices of 1.3 percent in August from their peak noted in June of 2022. The US home price index growth has been slowing for five months in a row and recently noted its largest-ever absolute drop in growth rate.
The poor performance of the housing market was a major factor in the layoffs. Last month, the average rate for a 30-year fixed-rate mortgage surpassed 7 percent in its highest figure in nearly two decades. At the same time, high borrowing costs have been slowing construction and home sales. The National Association of Realtors reports that the sales of existing homes dropped nearly 24 percent in September over the year before.
Redfin isn't the only real estate company that is struggling. The online home buying platform Opendoor recently laid off 18 percent of its own workforce, while another real estate brokerage firm, Compass, cut 10 percent of its employees this summer, and even more cuts are on the horizon.
At the heart of much of the country's financial woes is rapidly rising inflation, which has now accelerated to its quickest pace since 1982. Concerns are growing about an impending recession, and the costs of mortgages have only gone up as the Fed raises interest rates in an attempt to bring down high prices.
Redfin is just one of many tech companies that have noted massive layoffs this month. Most notably, Twitter laid off 50 percent of its workforce as Elon Musk took the helm. Thousands of employees were laid off last week in departments throughout the country a week after Musk took over, with employees from departments such as marketing, search, wellness and public policy tweeting about the fact that they were let go. While Musk has made no secret of his desire to make changes to the platform, he framed the layoffs in an interview as a necessary move as the company deals with revenue challenges arising from advertisers reconsidering their spending in the face of growing recession fears.
Video sharing website Cameo has cut a quarter of its workforce, while investing app Robinhood has slashed 23 percent of jobs; tech firm Intel and social media platform Snapchat have both laid off 20 percent of their workers. Major retailers Amazon and Apple, meanwhile, have instituted a hiring freeze as inflation continues to take its toll.
Sources for this article include: