Redfin to cut an additional 13% of its workforce, closes RedfinNow

WASHINGTON (AP) — Online real estate brokerage Redfin is cutting 862 employees and closing its instant cash offering subsidiary RedfinNow, another victim of two-decade high interest rates fueled by the Federal Reserve’s fight against inflation. .

The job cuts represent 13% of Redfin’s workforce, the company said in a regulatory filing. Redfin also laid off 470 employees in June, blaming slowing home sales.

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

The average long-term mortgage rate in the United States is hovering around 7%, partly due to the Fed raising rates six times this year, which has been trying to stem high inflation for four decades. Fed officials have raised their benchmark lending rate by three-quarters of a point in its past four meetings, sowing fears that its authoritarian policies could tip the United States into a recession.

More rate hikes are expected next year, although inflation data from the government on Thursday could play into the Fed’s strategy.

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

Home sales have slowed for eight straight months as would-be first-time home buyers pull out of the market, with borrowing costs dramatically diminishing their options and inflation already taking a bite out of their income. Homeowners looking to upgrade are also waiting for interest rates to peak, not wanting to jump into a higher rate on their next mortgage.

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

Redfin writes down $18 million of inventory associated with RedfinNow, due to homes losing value since they were purchased earlier this year. Redfin said it will continue to buy houses under contract, renovate them and sell them quickly.

The Seattle-based company hopes to reduce its RedfinNow inventory to about $85 million of homes by the end of January 2023. It currently has about $265 million of homes through RedfinNow, with an additional $92 million under contract.

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

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

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