By Niket Nishitant and Abhijith Ganapavaram
(Reuters)-US mortgage companies, refinancing companies and real estate brokers say they could fire thousands of employees in the coming months as many Americans postpone home purchases. Industry sources said.
During the coronavirus pandemic, low interest rates, exciting payments, and home-based work encouraged many millennial generations to look for new homes and fueled the US housing market.
But as the Federal Reserve raises borrowing costs, the market is now chilling amid economic uncertainty resulting from the conflict in Ukraine and the surge in mortgage rates.
“The cost of buying a home has reduced buyer interest,” said Chief Economist Robert Dietz, both as rising interest rates and the ongoing high cost of actually building a home. It is due to. ” National Association of Home Builders.
Existing home sales in the United States fell to a two-year low in May, but median home prices rose 14.8% year-on-year to a record high of $ 407,600, surpassing $ 400,000 for the first time.
Rating agency Fitch expects new home sales this year to fall by 2%, compared to the previously forecast of 1.8%.
The US housing industry, which employs hundreds of thousands of people, is responding by shrinking.
This month, real estate brokers Compass Inc and Redfin Corp both announced hundreds of headcount reductions.
And as interest rates on the most popular US mortgages approach their highest levels since November 2008, the impact could spread to mortgage companies as refinancing demand declines.
30-year fixed rate mortgage interest rate% https://graphics.reuters.com/USA-MORTGAGE/LAYOFFS/znvnegnmgpl/chart.png
JPMorgan Chase and Company, the largest lender in the United States, has begun to dismiss employees in the mortgage sector because of “periodic changes in the mortgage market.”
More than 1,000 employees will be affected by the move, with about half moving to another department within the bank, according to people familiar with the matter.
An executive at mortgage lender loanDepot Inc said in a statement last month that it hopes to cut headcount to control costs as market volume declines. The focus is on “only careful and essential employment,” according to sources at Ally Financial Inc.
Both companies added about 1,000 employees last year.
“There is little incentive to refinance, so in addition to the view of slowing (housing) sales, the downturn in the business suggests that layoffs will be needed across the industry,” said Senior Vice President and Chief. Economist Douglas Duncan said. Fannie Mae said.
Even if home sales stabilize, refinancing volumes will be significantly lower than in the last few years, said Leonard Keefer, Deputy Chief Economist at Freddie Mac.
The southern, midwestern and western parts of the United States are likely to have more housing-related unemployment than other regions due to the significant increase in construction since the pandemic, said Ol Sonora, dean of the U.S. Department of Regional Economics. ..
On Thursday, Texas-based mortgage company First Guaranty Mortgage Corp filed for Chapter 11 bankruptcy and filed a WARN (Worker Coordination and Retraining Notice Act) notifying the dismissal of 428 employees. I said I did.
Homebuilders who are already in short supply may not announce a layoff because of the backlog, Sonora said.
Indeed, the sound backlogs of some homebuilders who have learned lessons from the 2008 global financial crisis show that it is not all fate and darkness.
“There are still many people who want a single-family home,” Dietz added.
Some subsectors, such as mobile homes and motorhome (RV) sites, may be isolated from headcount reductions as most residents are retired, according to CFRA analyst Kenneth Leon. there is.
(Report by Niket Nishant, Abhijith Ganapavaram, Kannaki Deka in Bangalore, edited by Saumyadeb Chakrabarty)