After predicting that the sluggish housing market had started to rebound in January, Redfin this week blamed real estate market conditions as part of the reason for its latest round of layoffs.
The Seattle real estate company downsized on Tuesday by 201 employees, or about 4% of its workforce, marking its third round of cuts in less than a year.
The layoffs come despite the company’s declaration at the beginning of the year that the housing market had begun to recover. “We’re not out of the woods yet, but homebuyers are coming off the sidelines,” Redfin deputy chief economist Taylor Marr wrote. He cited increases in the number of users requesting tours and contacting agents to start the home-buying process.
Redfin CEO Glenn Kelman said during the company’s first quarter earnings that tour scheduling, a “leading indicator” of market trends, was on the rise. Tour requests experienced a year-over-year decline of 40% in November, whereas in January and February, the decline was around the 20% range.
After the market “bottomed out” in November, when mortgage rates were over 7%, buyer demand started to return when rates eased, Alina Ptaszynski, a Redfin senior communications manager, told GeekWire on Thursday. But as the year goes on, buyers are struggling to find homes because rate-locked sellers are holding back and constraining transaction volume, she added.
“At that time, we also acknowledged then that we weren’t out of the woods yet and the market was still touch and go,” Ptaszynski said. “We stand by that and continue to track and report on the market weekly.”
The company has consistently cited lagging supply as a key factor in declining home sales. In a report released Thursday, Redfin data journalist Dana Anderson wrote: “People are reluctant to sell because they don’t want to give up their low mortgage rate, it’s hard to find another home to buy and many Americans recently moved.”
For eight consecutive months, new listings of U.S. homes for sale have been declining at double-digit rates, with a 25% drop from the same period last year in the four weeks ended April 9, the report found.
Stubborn inflation, high interest rates, and a crisis in confidence in the banking system are also keeping many would-be buyers and sellers sidelined, the spokesperson noted.
Thirty-year fixed mortgage rates dropped to 6.3% in the period ended April 7. That was the fifth consecutive weekly decline and the lowest levels reached in two months. The rates are still higher than pandemic lows, when rates dropped to the 3% range.
Redfin said last year that it expected the market in 2023 to contract 30% from 2021 during its third quarter earnings announcement. That expectation has not changed and the company believes that sales could remain sluggish into 2024, Ptaszynski said.
Other forecasters have reported conflicting predictions for home values in 2023. Zillow economists predict a 0.5% increase in home prices between January 2023 and January 2024. Meanwhile, economists at Moody’s Analytics expect prices to drop 4.2% between December 2022 and December 2023.
Redfin has already made a series of cost-cutting measures in response to its predictions of a declining housing market. The company said last November that it would wind down its home-flipping program RedfinNow and eliminate 862 positions, or 13% of its workforce. That came after an 8% workforce reduction last June.
Redfin revenue fell 25% in the fourth quarter. The company also reported a net loss of $61.9 million, compared to $27 million in the year-ago quarter.
Housing market conditions have not been uniform in various geographies. Some local markets are performing even weaker than national numbers, leaving excess staffing in those areas, Ptaszynski said.
“That being said, there are some markets that are doing better than the national numbers, but we need to staff appropriately and respond to economic conditions,” Ptaszynski said.
