The cooling housing market is driving yet another round of layoffs at a Seattle-based company.
The online real estate brokerage Redfin plans to lay off 862 employees nationwide and shut down its house-flipping business, RedfinNow, the company announced Wednesday. The layoffs will cut the company’s workforce by at least 13% and include 75 jobs in Washington.
The cuts are “awful but we can’t avoid it,” CEO Glenn Kelman told employees in an email sent before 6 a.m. PST. The cuts come in response to the slowing housing market, Kelman wrote, and “this layoff assumes the downturn will last at least through 2023.”
Kelman thanked departing employees. “I’m sorry that we don’t have enough sales to keep paying you,” he wrote.
Workers will be laid off across several divisions of the company, including 264 people working on RedfinNow and 197 lead agents, about 9% of the company’s lead agents. Of the total cuts, 218 employees will be offered a different role at Redfin, a company spokesperson said.
The cuts follow an earlier round of nearly 500 layoffs at Redfin in June and scores of other job cuts across the real estate industry as fewer people buy homes and home prices begin to slide.
Zillow, also based in Seattle, cut 300 employees nationwide in late October. The brokerage Compass laid off 84 employees in Washington. And Flyhomes, a Seattle startup that promised to make average homebuyers competitive with all-cash offers, cut a fifth of its staff this summer. Other real estate companies, from mortgage lenders to brokerages, have cut jobs across the country.
Across Washington, more people are employed in real estate jobs now than in the run-up to the 2008 housing crash, but that number has dropped from 63,000 to 60,900 since June. The data, from the state Employment Security Department, includes various real estate and rental-related jobs, including agents, appraisers and landlords. Most real estate agents and appraisers are independent contractors, though Redfin employs agents directly.
Redfin’s employee head count is down 27% since April due to layoffs and attrition, including the latest cuts, and that would swell to 29% if all the employees offered new jobs opt to leave, Kelman wrote. The company will announce its quarterly earnings Wednesday afternoon.
Redfin’s share price has been in steady decline, falling from a peak of nearly $97 in February 2021 to under $4 on Tuesday. Zillow saw a similar free fall, dropping from a peak of nearly $204 to $33.
RedfinNow was an attempt at iBuying, a new take on house flipping that relies on algorithms to help determine prices.
After competitor Zillow shut down its iBuying division last year, Redfin executives defended their flipping efforts, saying they were buying and reselling homes on a smaller, more manageable scale.
Now, Kelman describes the undertaking as “a staggering amount of money and risk for a now-uncertain benefit.”
“We’ve tied up hundreds of millions of dollars in houses that you yourself wouldn’t want to own right now,” Kelman wrote to employees.
RedfinNow properties are likely to lose between $22 million and $26 million in 2022, Kelman said. The company will write down $18 million in inventory because it paid more for the homes than it now estimates they could sell for, according to an SEC filing.
The company reported it was sitting on about $265 million worth of homes at the end of October, and is under contract to sell another $92 million worth. Redfin plans to finish the purchase of homes it has agreed to buy, then renovate and sell those properties “quickly.”
Redfin is relying on offloading homes fast. The company said it expects to have about $85 million worth of inventory on hand by the end of January and to finish selling all the homes by mid-2023.
The “bulk” of the layoffs will occur Wednesday, though some will take place next year after the house-flipping business is completely wound down.
