Real estate company Redfin announced on Tuesday that it will lay off about 8% of its staff amid a downturn in the housing market.
Driving the news: The booming housing market started cooling this spring, evidenced by increased supply of new homes, a declining pooler of buyers and rising mortgage rates.
- The broader economy is contending with decades-high inflation and rising interest rates. On Monday the S&P 500 tumbled into bear market territory.
The big picture: Redfin CEO Glenn Kelman announced the layoffs in a letter to employees that was later posted on the company's website.
- "I’m sorry to say that we’re asking about 8% of our employees to leave Redfin today, or about 6% if you include the people of RentPath and Bay Equity," Kelman wrote.
- Redfin saw demand come in at 17% below expectations in May and the company doesn't have "enough work for our agents and support staff," Kelman said, later adding that the layoffs were a result of revenue shortfalls.
- Laid off employees will be offered 10-15 weeks of of severance pay, depending on how long they've been at the company. For agents and support roles, the severance packages will also include the estimated value of sales and productivity bonuses.
- "We’ll also pay departing employees the cost of extending our healthcare coverage for three months. This should give you until the end of the summer to find work," Kelman wrote.
What they're saying: "A layoff is always an awful shock...But mortgage rates increased faster than at any point in history. We could be facing years, not months, of fewer home sales, and Redfin still plans to thrive," Kelman wrote.
The bottom line: "We’re losing many good people today, but in order for the rest to want to stay, we have to increase Redfin’s value. And to increase our value, we have to make money," he added.
Go deeper: The real estate frenzy is over
