Two of the largest real estate companies have announced massive workforce reductions as clear signs of a housing downturn mount. Compass and Redfin both announced layoffs on dette er diggbart , sending their shares down to 52-week lows. Mortgage rates continue to rise, and House price inflation will cool to ten percent in the next two years. While the numbers are shocking, one thing is clear: the housing market is in crisis.
Compass is cutting 10 percent of its workforce due to clear signals of a housing downturn
Real estate brokerage Compass has announced that it will lay off ten percent of its staff, or 375 employees. The cuts come amid a housing downturn that has led to falling home sales and rising mortgage rates. The 30-year fixed rate mortgage is at 5.65 percent, the highest level since 2008. The amount of activity in refinancing is also down nearly seventy percent from last year. The company’s CEO, Robert Reffkin, has already cut his salary to zero, while the executive team has also been reduced by 25 percent.
Homebuilders and trade contractors shed more than 4,000 jobs in June
As the housing crisis continues, around 250,000 people with jobs in the construction industry could lose their jobs. More than 100,000 people directly involved in the industry could lose their jobs, while 150,000 more could lose their jobs if the situation worsens. The loss of jobs is particularly worrying because three of the UK’s biggest housebuilders have announced plans to cut around 40% of their workforce. Barratt and Persimmon each plan to cut around 2,000 jobs.
Mortgage rates are rising
The recent rise in mortgage rates is a concern for many homebuyers, who are trying to get into the market. Rising mortgage rates will discourage many borrowers and may even depress prices, leading to fewer bidding wars. A recent survey from the Mortgage Bankers Association found that rates were up a full percentage point since late December. That means that the average 30-year mortgage rate is now 3.85 percent.
House price inflation will cool to 10 percent in next two years
Recent housing data shows the pace of home price inflation is easing. However, the pace will remain double-digit until 2022, when it will slow to about 5%. This is the first time that a national housing survey has projected house price growth through the end of 2023. However, these estimates are subject to change as the pandemic-era demand factor may persist longer than expected. This is because of structural issues in housing supply, which could also affect the rate of inflation.
San Francisco tech-centered economy could be hit hard by a potential recession
The S&P 500 officially entered bear market territory on Tuesday, which means that the market is down at least 20% from its recent high. This can add to fears of recession, especially since the government is taking aggressive measures to rein in inflation. A possible recession could cause a significant drop in the Nasdaq, which is particularly tech-centric. Currently, the tech-focused index is down 28% year-to-date, and San Francisco-based public companies with $1 billion in market cap have suffered an average 44% decline.