Redfin said it will save about 8% of its workforce and Compass will cut its workforce by 10%.
Reductions are the latest sign that the red-hot housing market is showing signs of chilling.
In a note to employees on Tuesday, Redfin CEO Glenn Kelman said the company wouldn’t fire people unless absolutely necessary, but it’s time.
“Today we’re losing a lot of good people, but in order for the rest to want to stay, we need to increase the value of Redfin,” he writes. “We are grateful to everyone who has invested your time and treasure in this company to make a profit and make a lot of money.”
Demand for Redfin’s services in May was 17% lower than expected, Kelman said. As a result, the company isn’t creating enough work for agents and support staff, and low sales mean less money for larger projects.
“Today’s layoffs aren’t letting people go, but are the result of Redfin’s lack of income,” he said.
Sectors that saw a big rise during the housing boom were most affected by layoffs, Kelman wrote in a note. The need for engineers is reduced because many of the tools needed to complete a transaction have been built. He also said the company will spend less on analytics and user research.
“When we were alienating tens of thousands of customers in 2020 and 2021, we had to hire 1,000 employees a month to catch up, requiring a tremendous level of recruitment, training and licensing.” Kelman writes. “These groups are inevitably the hardest hit today.”
Kelman said the company will continue to invest in its online presence, on-the-spot tours, and Redfin Now, the company’s ibuying division, which allows homeowners to sell their homes without listing by buying them in cash.
This is the second time Redfin has announced a layoff in the last three years. In the early days of the April 2020 pandemic, the housing market soared, causing Redfin to reduce staff and kill more than 40% of its agents.
According to a statement by a spokeswoman, the compass will reduce 450 of its 4,500 employees “due to clear signs of slowing economic growth.” The company said the layoffs will take place across the company’s business units, but will not include agents.
In addition to the layoffs, the company said it had suspended employment, expansion, mergers and acquisitions until the end of 2022.
These cuts follow other contractions in the real estate industry as the red hot housing market begins to smolder.
Earlier this spring, some mortgage companies withdrew their previously expanding businesses to accommodate huge volumes of mortgages due to the overheating of the market over the past two years.