Increased Layoffs Show Further Signs of Housing Correction

By Doug Katz – 06/16/2022

Two large players in the housing market announced layoffs this week and this is not the first companies to trim their workforce. In their announcements, Redfin and Compass communicated job cuts of 8% and 10% respectively. This is on the heels of some pretty substantial layoffs in the lending sector (below) announced over the last few months.  Any of these is alarming in what is generally accepted to be a tight labor market.  In aggregate, this is a harbinger of some tougher times to come for housing.

Regardless of what you read in the media about optimistic views of a soft landing for housing and mortgages, sometimes you need to see past the hype.  Companies, especially ones with workforce elasticity like lending, do not cut their workforce over temporary factors.  They do radically cut when the indicators point to lower demand to reduce overhead and maintain profitability.  In this case, they are also ruling out potential rate reductions that could restart the refinance market.  Some reports have communicated an over 40% decrease in new loan applications.

What does this mean in the big picture?

  1. Buyers will have less choices for loan origination as some of the refinance heavy focused players are unable to adapt to a purchase market.
  2. Loan fulfillment turn times could be impacted as loan companies adjust to the changes in the workforce.
  3. The lenders who buyers do use will likely be the ones who survive the natural selection process.  Those who are lean, mean and good enough will make it and those are usually better options for the consumer.
  4. Some lenders will gravitate toward specialization in an effort make up for the loss of refinance activity.  This is also good for the consumer as a specialized lenders, like me as a Certified Divorce Lending Professional, is the best to meet unique needs.
  5. There will be a rise in non-standard lenders and programs to help counterbalance the adverse impact of a tougher economy.
  6. Layoffs will likely spread to industries who support lending and real estate.

I keep communicating that is not a panic point.  The shrewd ones out there are taking information like this and integrating it with other data to make the best decisions.  What they should be taking from this is that tougher times are ahead and the buying and financing process may be more complex, difficult and costly.  Also that the possibility of a recession is more and more likely and we should all plan accordingly especially when planning and budgeting.