WASHINGTON (AP) — Online real estate broker Redfin is cutting 862 employees and shutting down its instant-cash-offer subsidiary RedfinNow, another casualty 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. Redfin also laid off 470 employees in June, blaming slowing home sales.
Redfin has slashed more than a quarter of its workforce since April 2022 on the assumption that the housing downturn will last "at least through 2023," it said in the filing.
The average U.S. long-term mortgage rate is hovering around 7%, partially a result of the Fed raising rates six times this year at it tries to stem four-decade high inflation. Fed officials have boosted their benchmark lending rate by three-quarters of a point at its last four meetings, sowing fears that its heavy-handed policy could tip the U.S. into a recession.
More rate hikes are expected into next year, though inflation data coming from the government Thursday could play into the Fed's strategy.
Though the government recently estimated that the broader U.S. economy returned to growth last quarter, the Fed's actions have chilled a once red-hot housing market.
Home sales have slowed for eight straight months as would-be first-time homebuyers pull out of the market, with borrowing costs greatly diminishing their options and inflation already taking a bite out of their incomes. Homeowners looking to upgrade are also waiting out the interest rate crest, not wanting to jump into 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 wind down, most of those related to benefits and severance compensation related to the layoffs.
Redfin is writing down $18 million worth of inventory associated with RedfinNow, a result of homes losing their value since being purchased earlier this year. Redfin said it will continue to purchase homes under contract and renovate them and sell them quickly.
The Seattle company hopes 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 sellers quick cash offers for their homes without having to list them.
Shares of Redfin tumbled more than 8% in morning trading. They have lost about 90% of their value this year and traded close to $100 each less than two years ago.