Redfin said it cut about 8% of its workforce and Compass said it would reduce its workforce by 10%.
The cuts are the latest indication that the red-hot housing market is showing signs of slowing down.
In a memo to employees Tuesday, Redfin CEO Glenn Kelman said the company won’t lay off employees unless it’s absolutely necessary — but that time has come.
“We’re losing a lot of good people today, but for the rest to stay we need to add value to Redfin,” he wrote. “We owe it to everyone who has put their time or treasure into this company to become profitable, and then very profitable.”
Demand for Redfin’s services in May was 17% below expectations, Kelman said. As a result, the company isn’t generating enough work for agents and support staff, and less revenue means less money for larger projects.
“Today’s layoff is a result of revenue shortfalls at Redfin, not layoffs,” he said.
Departments that saw large increases during the housing boom are being hit hardest by the layoffs, Kelman wrote in the memo. Because many of the tools needed to complete transactions have already been developed, there is less need for engineers. He said the company would also spend less on analytics and user research.
“When we turned away tens of thousands of customers in 2020 and 2021, we had to hire a thousand people each month to catch up, which took an insane amount of recruiting, training and licensing,” Kelman wrote. “It’s inevitable that these groups will be hit the hardest today.”
Kelman said the company will continue to invest in its online presence, on-site tours and RedfinNow, the company’s iBuying arm, which buys homes for cash and allows homeowners to sell their home without listing it.
This is the second time Redfin has announced layoffs in the past three years. In the early days of the April 2020 pandemic, Redfin cut staff and furloughed more than 40% of its agents as the housing market faltered.
At Compass, 450 of its 4,500 employees will be cut “due to clear signs of a slowdown in economic growth,” according to a spokesman. The layoffs will come in divisions across the company, but without agents, the company said.
In addition to the layoffs, the company said it is pausing hiring, expansion, and mergers and acquisitions until the end of 2022.
These cuts follow other contractions in the real estate industry as the blistering housing market has begun to smolder.
Earlier this spring, several mortgage lenders pulled out of operations they had previously expanded to adjust to the huge volume of mortgages as the market warmed up over the past two years.
Last fall, Zillow shed 2,000 jobs, about 25% of its then workforce, as it ended a foray into an ibuying business and refocused on its core business.