Citing conditions in the economy and housing market, real estate companies Redfin and Compass both said they will cut their workforces.
Redfin said in a blog post on Tuesday that they have asked 6% of their employees to leave the company. In an 8-K filed Tuesday, the company said the decision was due to market conditions. Redfin said it expects the workforce reduction, which equals about 470 people, to be completed by the end of the month.
“To keep Redfin on a path to profit while home sales are falling due to a historic jump in interest rates, we’re laying off six percent of our employees. We’re offering the good people leaving several months of severance pay and healthcare benefits. We extend our deepest apologies; there is nothing worse in business than a layoff,” Redfin said in an email statement to Barron’s.
In the blog post, Redfin Chief Executive officer Glenn Kelman wrote that “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.”
Mortgage rates have hit 6%, and recent data have shown that home sales have slowed as higher mortgage rates and the rising prices of homes have pushed some buyers to the sidelines.
Compass (COMP) said in an 8-K that it was committed to a workforce reduction plan and will eliminate roughly 450 positions, which is approximately 10% of the company’s current workforce.
“Due to the clear signals of slowing economic growth we’ve taken a number of measures to safeguard our business and reduce costs, including pausing expansion efforts and the difficult decision to reduce the size of our employee team by approximately 10%,” a Compass spokesperson said in an email to Barron’s.
Redfin stock fell 4.9% to $8.13, while Shares of Compass dropped 10.5% to $4.26.