Trimming workforces, rethinking strategies: Layoffs in 2022
Many companies across the real estate spectrum have announced layoffs this year, citing the slowing housing market and high interest rates.
- The sudden market shift left some companies, particularly those who rapidly increased headcount when the market was booming, with many employees and too little revenue.
- Public companies and private enterprises recast priorities, shifting from growth to belt-tightening and efficiency measures.
The real estate market is recalibrating after a period of high home prices driven by buyer demand and tight supply. Companies are reining in costs and reducing personnel as rising interest rates keep buyers away.
Workforce reductions are underway across the homebuying industry. Keller Williams, Compass, Redfin and RE/MAX are among the residential real estate companies to cut staff and reset priorities. "The direction of mortgage rates — upward or downward — is the prime mover for home buying, and decade-high rates have deeply cut into contract signings," said Lawrence Yun, chief economist at the National Association of Realtors, in a September NAR report.
"Real estate brokerage firms are reducing overhead, namely headcount, in this new reality," said Eric Sussman, an adjunct accounting professor at UCLA's Anderson School of Management.
"Those who won the mortgage lottery and secured those 3% mortgages now cannot afford to move," Sussman said in an interview. "Thus, not only has the number of prospective buyers declined precipitously, but the number of properties listed for sale has followed suit."
These are some of the real estate brokerage, technology and mortgage companies to lay off workers in 2022:
Brokerages, franchisors and others
Anywhere Real Estate signaled more cost cutting during its Q2 earnings report in July and laid off an unconfirmed number of employees soon after. Anywhere owns several major real estate companies, including Sotheby's International Realty, Corcoran and Century 21.
Compass is decreasing its workforce in the areas of technology and product development after updating its proprietary platform for agents. In a Sept. 30 filing with the Securities and Exchange Commission, Compass said it planned to reduce its "go-forward investment in technology" through layoffs. In the SEC filing, Compass estimated that it would spend between $23 million and $26 million on severance packages.
Previously, In a June 14 filing with the SEC, Compass disclosed that it would lay off 10% of its workforce, or about 450 employees. The company said it also planned to shut down Modus Technologies Inc., its title and escrow software company, though the company "continues to plan to offer these services in every market in which the Company operates."
Flyhomes, which has a cash-offer program for buyers as well as a mortgage division, laid off approximately 20% of its staff in July, according to Geekwire. In an open letter on LinkedIn, the company said "market conditions that have not been seen in the recent past" necessitated the cuts.
Keller Williams has had multiple rounds of layoffs since late 2021. In August, the company cut 23 of the 498 employees from its Austin headquarters, the Austin American-Statesman reported.
Knock, a home-buying startup, laid off half its staff last spring, Bloomberg News reported. The company was in 70 markets at the end of 2021 and had hoped to go public before the real estate market softened. The company received $200 million in venture capital funding in June, Crunchbase reported.
Pacaso, a company selling fractional ownership of second homes, announced in October that it was reducing its workforce by one-third, laying off about 100 employees. In an open letter, CEO Austin Allison said Pacaso's "business expansion and headcount were designed for [the] hyper-growth environment" of early 2022. "Fast forward ten months and we now must prepare for a recession. This change … right-sizes our team for the immediate road ahead."
Realtor.com announced an undisclosed number of layoffs across most departments in early September, as it braced for a market downturn. In a companywide email, CEO David Doctorow said the staff reduction was in response to a drop in sales.
Redfin said in June it was laying off 8% of its workforce. "To all the departing people who put your faith in Redfin, I'm sorry we can't keep our commitment to you. With May demand 17% below expectations, we don't have enough work for our agents and support staff, and fewer sales leaves us with less money for headquarters projects," CEO Glenn Kelman said in a companywide email.
RE/MAX Holdings will reduce its workforce by 17% by the end of this year, which will total about 120 employees, according to an SEC filing by the company in June. Most reductions are in technology. RE/MAX will shift some technology services to Inside Real Estate, developers of kvCORE, according to the filing.
Zillow laid off about 2,000 employees with the shutdown of Zillow Offers. The layoffs started in late 2021 and continued through much of 2022. Zillow announced in November 2021 that it was exiting the iBuying sector of real estate, and the company sold its last home under the program in October 2022.
On October 26, Zillow laid off an additional 300 employees.
Rising interest rates and a homebuying slowdown have hit many fintech and traditional mortgage companies especially hard. Linda McCoy, president of the National Association of Mortgage Brokers, said on nbcnews.com that "layoffs are a common occurrence right now." She added, "It's scary, because you just don't know where or when it's going to stop."
AmeriSave Wholesale Mortgage Solutions went out of business in September, after launching a year ago. A notice on the company's website stated that AmeriSave was "closing its doors effective immediately." A team was remaining in place to complete existing loan applications. The company was a subsidiary of AmeriSave Mortgage Corp.
Better.com, which provides mortgage financing, announced last March it was laying off 3,000 workers, a third of its staff. The announcement followed a decision by the company in January to let go 900 workers. Employees were terminated via a Zoom call in the earlier round of layoffs, prompting criticism against the company.
Homepoint, a major wholesale mortgage lender, announced in September that it would reduce its workforce by nearly 1,000 by Nov. 1, according to the National Mortgage Professional. The company filed plans for the layoffs through the government labor departments in Florida, Arizona, Michigan and Texas.
loanDepot has laid off several thousand workers since the summer. The company had announced in July it was downsizing to adjust to changing market conditions. According to loanDepot, it planned to "rightsize" staff from a high of 11,300 in 2021 to 6,500 by the end of 2022.
Sprout Mortgage, a six-year-old company based in Long Island, announced in July it was going out of business, putting more than 300 employees out of work, according to National Mortgage Professional, a membership organization for the industry.
Tomo, a fintech startup, cut about a third of its workforce in June. "The reason we are taking such strong measures is to ensure Tomo has enough of a runway for the business to succeed in its mission," co-founder Greg Schwartz said on Linkedin.