Redfin is laying off 470 employees, roughly 8% of its workforce – or about 6% if including those employed by RentPath and mortgage lending arm Bay Equity, according to an SEC report filed on Tuesday.
The brokerage cited housing demand being 17% below Redfin’s expectations in May as the main reason for the layoffs.
“To all the departing people who put your faith in Redfin, I’m sorry we can’t keep our commitment to you. With May demand 17% below expectations, we don’t have enough work for our agents and support staff, and fewer sales leaves us with less money for headquarters projects,” Glenn Kelman, the firm’s CEO, wrote in the 8K.
In a statement to RealTrends, a company spokesperson said, “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.”
According to the SEC filing, most of the cuts will affect software engineers, as well as those employed in the recruiting, training and licensing departments.
Redfin attributed the engineering layoffs to many of the firm’s software projects reaching completion, while the other layoffs were attributed to the drop in housing demand.
“When we were turning away tens of thousands of customers in 2020 and 2021, we had to hire a thousand employees a month to catch up, requiring berserk levels of recruiting, training and licensing. There’s no avoiding that those groups will be hardest hit today,” Kelman wrote.
Rising mortgage rates – now at 6% – were also to blame for the layoffs, according to Kelman.
“We raised hundreds of millions of dollars so we wouldn’t have to shed people after just a few months of uncertainty,” he wrote. “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. If falling from $97 per share to $8 doesn’t put a company through heck, I don’t know what does.”
In the filing, Kelman stressed that the layoffs were part of Redfin’s goal of becoming profitable and that they were a result of shortfalls in Redfin’s revenue and not a reflection of the performance of the people being let go.
Redfin is offering laid-off employees 10 weeks of base salary, with an additional week of pay for every 12 months of service beyond one year capped at 15 weeks of pay. The firm will also extend health care coverage for laid off employees by three months.
Kelman said the firm expects to grow more slowly as the housing market slows down.
