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Redfin is slashing 13 percent of its staff and shutting down its iBuying program, Redfin Now, the company announced in a SEC filing Wednesday morning.
As many as 264 employees impacted by the cuts were from Redfin’s iBuying division, while a total of 862 positions were eliminated, the company said in a blog post. An additional 218 employees have had their positions eliminated but were given the option to take on another role within Redfin.
Other eliminated positions came from the real estate services and headquarter staff departments, with 197 lead agent positions being let go, representing 9 percent of the total amount of lead agents, according to the SEC filing.
“To prosper in a housing downturn that could last at least through 2023, we have to simplify our business. We’re closing our iBuying business, RedfinNow, because maintaining a profit with rising interest rates would make our offers on homes insultingly low,” a spokesperson for the company said in a statement. “We’re laying off employees beyond RedfinNow because we expect to sell fewer houses, even as we keep taking market share.”
Laid off employees were given ten to fifteen weeks of severance pay depending on tenure and three months of healthcare coverage.
“None of this makes a layoff any less heartbreaking. The people leaving Redfin have been brilliant, loyal colleagues. We will give them several months of severance pay and health insurance, and hope we can one day employ them again,” the company spokesperson said.
The announcement comes two days after Redfin’s stock hit a record low, bottoming out at $3.32, with analyst Jason Helfstein, head of internet research at Oppenheimer & Co. calling the stock “fatally flawed” because “the company continues to use a fixed-cost model for agents” which in turn “prevents the company from optimizing margins when the housing markets decline and limits share gains when markets rebound.”
The Wednesday announcement is not the first time the company has shed staff this year as rising mortgage rates have hampered real estate industry profits after a record-setting 2021.
The online brokerage laid off 8 percent of its staff in June, in a round that impacted agents, support staff and product engineers. The company has declined in size by 27 percent since April 30. If the additional 218 employees who had their positions eliminated chose to leave the company, it will have shrunk by 29 percent since April.
While the June layoff was a response to the expectation that the company would sell less houses in 2022 than in 2021, the November layoff was a response to the expectation that the downturn would last into 2023, CEO Glenn Kelman wrote in a message to employees.
The shuttering of the RedfinNow mirrors Zillow’s closing of its iBuying program Zillow Offers in 2021, which saw the proptech giant lay off 2,000 staffers and estimate that it would be forced to write down as much as $569 million on the thousands of homes on its books, underlining the inherent riskiness of large scale iBuying.
“The share gains we could attribute to iBuying have become less certain as we rolled it out more broadly, especially now that our offers are so low,” Kelman said in the blog post. “iBuying is a staggering amount of money and risk for a now-uncertain benefit. We’ve tied up hundreds of millions of dollars in houses that you yourself wouldn’t want to own right now.”
Not including overhead expenses, the company anticipates that its RedfinNow properties will lose $22 – $26 million dollars by the end of 2022.
November’s layoffs came ahead of its third-quarter earnings call, which is set to take place Wednesday afternoon.
