This week, Compass and Redfin announced they are laying off 8-10% of their workforces:
Compass lays off 10% of their staff
As mortgage interest rates surge past 6% and U.S. stocks enter a bear market, Compass announced Tuesday its decision to lay off about 10% of its workforce, affecting 450 full-time employees. Those departing will receive severance and healthcare.
Compass founder and CEO Robert Reffkin announced these layoffs in an email. In it, he spoke of making swift decisions during tough economic times:
“To make sure we are being decisive and responsibly planning to weather the economic uncertainty that so many companies are facing today, we have made the difficult decision to reduce the size of our employee team by about 10%.”
Reffkin also emphasized that Compass continues to know the importance of providing agents with adequate support. The majority of layoffs are for roles that do not directly support agents.
Reffkin concluded his email on a positive note, stating that the ability to make tough decisions quickly is what makes the company strong. “We are now the number one brokerage in the United States. We are investing more in a platform that helps our agents grow their businesses and save time than all the brokerages in our industry combined.”
Redfin lays off 8% of employees
Less than an hour after the announcement broke from Compass, Redfin CEO Glenn Kelman announced his company’s decision to lay off 8% of its workforce.
Over 500 Redfin employees – in both agent and support roles – will feel the impact, although support staff, including product engineers, are most affected. All will receive healthcare and severance packages.
Kelman pointed to weakening buyer demand as the key factor in these layoffs. With demand 17% below expectations in May, they “don’t have enough work for their agents and support staff,” Kelman said.
As with Compass, the layoffs follow a period of growth and expansion into tech developments. Kelman also said they would spend less on user research and analytics.
As CEO, he’s agonized over the layoffs, but with mortgage rates increasing at an unprecedented rate, he said it could be years – not months – of fewer home sales. And he intends to do everything possible to help Redfin thrive in spite of the challenges posed by today’s economic environment.
In the BAM Breaking Instagram post yesterday, Byron posed the question many are asking: “Will more brokerages soon follow suit?”
Here’s how agents responded:
“Not the ones with sound business models. SoftBank wants their money back.”
“I think more will follow suit. A lot of uncertainty right now and I believe a big shift is coming where agents will move to brokerages with more preferable (“Lean”) business models during hard times that give them the ability to diversify income streams.”
“WERE A FORTUNE 500 COMPANY!….now that we can say that, let’s fire people…”, said compass”
“This is the time where all the agents who jumped in for the easy money exit stage left! Those who understand real estate, know there are always ways to make money in real estate! Adapt and overcome!”
“It wouldn’t surprise me, however Compass was burning cash at a rapid rate so that could be part of it?”