Redfin to cut another 13% of workforce, closes RedfinNow

Online real estate broker Redfin is laying off 862 employees and closing its instant cash offers subsidiary RedfinNow, another victim of two-decade high interest rates stoked by the Federal Reserve’s fight against inflation.

The job cuts amount to 13% of Redfin’s workforce, the company announced in a regulatory filing. red fin too laid off 470 employees in June blaming the slowdown in home sales.

Redfin has cut more than a quarter of its workforce since April 2022 under the assumption that the housing recession will last “through at least 2023,” it said in the filing.

The average US long-term mortgage rate hovers around 7% , partly as a result of the Fed raising rates six times this year in its bid to curb four-decade high inflation. Fed officials have increased their rate benchmark interest rates by three-quarters of a point in its last four meetings, sowing fears that its heavy-handed policy could push the United States into a recession.

More rate hikes are expected next year, though government inflation data on Thursday could weigh on the Fed’s strategy.

Although the government recently estimated that the broader US economy returned to growth last quarter, the Fed’s actions have cooled a once red-hot housing market.

Home sales have slowed for eight consecutive months as prospective first-time homebuyers pull out of the market, with borrowing costs greatly diminishing their options and inflation already taking a bite out of your income . Homeowners looking to upgrade are also waiting for the interest rate spike, not wanting to jump to a higher rate on their next mortgage.

In its filing, Redfin said it expected to incur charges of up to $23 million for the layoffs and settlement, most related to benefits and severance pay related to the layoffs.

Redfin is writing down $18 million in inventory associated with RedfinNow, as a result of homes losing their value since they were purchased earlier this year. Redfin said it will continue to buy homes under contract and quickly renovate and sell them.

The Seattle company expects to reduce its RedfinNow inventory to about $85 million worth of homes by the end of January 2023. It currently has about $265 million worth of homes through RedfinNow, with another $92 million under contract.

RedfinNow made quick cash offers to sellers for their homes without having to list them.

Redfin shares fell more than 8% in morning trading. They have lost about 90% of their value this year and were trading close to $100 each less than two years ago.