• Mon. Nov 28th, 2022

Redfin to reduce its workforce by at least 13% and end its house flipping initiative | New

ByWillie M. Evans

Nov 12, 2022

SEATTLE — A cooling housing market is prompting another round of layoffs at a Seattle-based company.

Online real estate brokerage Redfin plans to lay off 862 employees nationwide and shut down its house flipping business, RedfinNow, the company announced on Wednesday. The layoffs will reduce the company’s workforce by at least 13% and include 75 jobs in Washington.

The cuts are “awful but we can’t avoid them,” CEO Glenn Kelman told employees in an email sent before 6 a.m. PST. They come in response to the housing market downturn, Kelman wrote, and “this layoff assumes the downturn will last at least through 2023.”

Kelman thanked the departing employees. “I’m sorry we don’t have enough sales to keep paying you,” he wrote.

Workers will be laid off across multiple divisions of the company, including 264 people working on RedfinNow and 197 master agents, or about 9% of the company’s master agents. Of the total job cuts, 218 employees will be offered a different role at Redfin, a company spokesperson said.

The job cuts follow an earlier round of nearly 500 layoffs at Redfin in June and dozens of other real estate job cuts as fewer people buy homes and prices houses begin to fall.

Zillow, also based in Seattle, cut 300 employees nationwide in late October. Brokerage firm Compass has laid off 84 employees in Washington. And Flyhomes, a Seattle startup that promised to make average buyers competitive with all-cash deals, cut its staff by a fifth 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 today than when the 2008 housing crash approached, but that number has fallen from 63,000 to 60,900 since June. The data, from the state’s Department of Employment Security, includes various real estate and rental-related occupations, including agents, appraisers and landlords. Most real estate agents and appraisers are independent contractors, although Redfin employs agents directly.

Redfin’s employee count has fallen 27% since April due to layoffs and attrition, including the latest cuts, and that would drop to 29% if all employees offered new jobs choose to leave, said writes Kelman. The company will announce its quarterly results on Wednesday afternoon.

Redfin’s stock price has been steadily falling from a high of nearly $97 in February 2021 to below $4 on Tuesday. Zillow experienced a similar freefall, falling from a high near $204 to lows of $33.

RedfinNow was an attempt at iBuying, a new approach to house flipping that relies on algorithms to help determine prices.

After competitor Zillow shuttered its iBuying division last year, Redfin executives defended their turnaround efforts, saying they were buying and reselling homes on a smaller, more manageable scale.

Now Kelman describes the venture as “a staggering amount of money and risk for now uncertain profit.”

“We’ve tied up hundreds of millions of dollars in homes you wouldn’t want to own right now,” Kelman wrote to employees.

RedfinNow properties are expected 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 homes it now thinks they could sell, according to an SEC filing.

The company said it was sitting on about $265 million worth of homes at the end of October and was under contract to sell another $92 million. Redfin plans to complete the purchase of the homes it has agreed to buy, then renovate and sell those properties “quickly”.

Redfin is counting on the rapid unloading of houses. The company said it expects to have about $85 million in inventory by the end of January and complete the sale of all homes by mid-2023.

The “bulk” of the layoffs will take place on Wednesday, although some will take place next year after the house-turning business has closed completely.