Redfin and Compass lay off hundreds of workers as housing market cools, inflation spikes

Both real estate firms blame cooling housing market and rising inflation

Two well-known real estate companies fired hundreds of people on Tuesday because they expected home sales to slow down across the country and interest rates to go up

Redfin and Compass, two companies that make software for the real estate industry, each let go of more than 900 employees.Glenn Kelman, the CEO of Redfin, said in a blog post that the company is letting go of about 470 workers, or about 6 percent of its staff, because demand in May was 17 percent lower than expected.

"We raised hundreds of millions of dollars so we wouldn't have to let people go after just a few months of uncertainty," Kelman said. "But mortgage rates went up more quickly than ever before in history. We could have fewer home sales for years, not just months, and Redfin still wants to do well. I don't know what puts a company through hell more than going from $97 per share to $8 per share."

In an email to USA TODAY, Compass said that the company is letting go of about 450 people, which is about 10% of its staff.Most Americans say now is not a good time to buy a house.

JOY AND PAIN: For crying out loud, a recent survey found that most US home buyers in today's market were moved to tears

The layoffs are happening at a time when the housing market, which used to be very hot, is starting to cool down because of high mortgage rates and inflation rates of about 6%. On Tuesday, the stock of both Redfin and Compass went down. Redfin's stock went down nearly 5%, and Compass's stock went down more than 10%.

Kelman said that the laid-off Redfin employees will get 10 weeks of base pay, plus an extra week of pay for every 12 months of service beyond the first year, up to a maximum of 15 weeks of pay. Kelman said the Seattle-based company is also giving its former employees three months of health insurance, which should last them through the end of summer.

"Today's layoff is due to shortfalls in Redfin's revenue, not the people being let go," Kelman said. "But our culture has been making an important shift toward performance and profits for a while now."

In an email, a Compass representative said, "Due to clear signs of slowing economic growth, we've taken a number of steps to protect our business and cut costs. These include putting an end to expansion plans and making the hard decision to cut the number of employees by about 10%."

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