Seattle real estate company Redfin announced on Tuesday that it is cutting about 8% of its workforce, acknowledging that the housing slowdown in the US is hitting the company hard.
The company blamed “market conditions” in a Securities and Exchange Commission filing, and Redfin CEO Glenn Kellman said in a note to employees, which was posted on the company’s blog, that “a layoff would always have been a terrible blow.” especially when I’ve said we’ll work hard to avoid one.” But May demand was 17% lower than expected, he said, and lower sales left the company with “less money for headquarters projects.”
The cuts will affect about 470 employees and are expected to be completed by the end of June. When RentPath and Bay Equity’s employees are included, this number is closer to 6% of Redfin’s workforce.
Real estate brokerage Compass also announced that it is cutting 10% of its workforce on Tuesday.
Redfin released an analysis on Monday showing that the homebuyer budget has essentially flattened. Redfin reported that for the three months ended April 30, there was a growth of just 0.3% year-on-year across the country. This is the slowest growth rate since June 2020. The fall in the budget is a leading indicator that the growth in home prices has reached its peak and will slow down in the coming months. ,
“Mortgage rates increased faster than at any point in history,” Kelman wrote. “We may be facing years, not months of low home sales, and Redfin still plans to grow. If the fall from $97 per share to $8 doesn’t hurt the company, then I don’t know what happens.
The company’s stock had fallen more than 4% on Tuesday.
Redfin previously cut 7% of its workforce and fired hundreds of agents in April 2020 at the start of the COVID-19 pandemic.
Redfin CEO Glenn Kellman at the 2018 GeekWire Summit. (Geekwire file photo/Dan DeLong)
“We’ve broken our commitment to our people twice in three years,” Kelman said. “We can’t hold back from doing what’s best for the whole company, not just a part of it, today and every day. But I’ll spend the rest of my life thinking about how I could have avoided these layoffs. “
His note explains where the company will cut this time.
“We’ve already built tools for teams to work together on transactions, so we need fewer engineers to connect those tools,” he said, adding that he’s also focused on analytics and user research. Will spend less He added that groups involved in recruitment, training and licensing will also be “hardest hit”.
The company said the workforce reduction would result in a pre-tax cash charge for one-time termination benefits, which include severance and related costs, between approximately $9.5 million and $10.5 million in the second quarter of 2022.
“We are losing many good people today, but for the rest to last, we have to increase the value of Redfin,” Kellman said. “And to increase our value, we have to make money.”
Redfin’s move coincides with Seattle trucking marketplace startup Convoy, which last week announced it was cutting 7% of its workforce.
A bevy of tech startups have laid off employees and big giants are slowing or halting hiring altogether, a concern for companies across all sectors due to a host of macroeconomic conditions, including rising inflation. Venture capitalists are advising tech companies to cut expenses and expand their cash runway. Stitch Fix and Bird are among those who also announced layoffs last week, with cryptocurrency exchange Coinbase cutting 18% of its workforce on Tuesday.