Amid rising mortgage rates, Redfin and Compass — two real estate companies — announced Tuesday they would be laying off employees, according to USA TODAY.
According to a blog post by Redfin CEO Glenn Kelman, 6% of the company’s employees were laid off after the month of May came in 17% below expectations. That’s about 470 employees, USA TODAY wrote.
“A layoff is always a terrible shock,” Kelman wrote. “But mortgage rates rose faster than at any time in history. We could be looking at years instead of months with fewer home sales, and Redfin still plans to thrive. If going from $97 a share to $8 doesn’t screw a company up, I don’t know what will.”
Real estate prices are also rising in Massachusetts. According to The Boston Globe, the price of a single-family home in the greater Boston area rose 15.1% year over year in May and continues to rise.
All employees laid off by Redfin will receive two to four months’ severance pay and be covered by the company’s health insurance for three months.
“We are losing a lot of good people today, but for the rest to want to stay, we need to add value to Redfin. And to increase our value, we need to make money. We owe it to everyone who put their time or treasure into this company to become profitable and then very profitable,” Kelman wrote.
According to the Wall Street Journal, Compass is laying off 10% of its workforce, or 450 people.
“With clear signs of slowing economic growth, we have taken a number of measures to protect our business and cut costs, including halting expansion efforts and making the difficult decision to reduce the size of our workforce by approximately 10%,” a Compass, a spokesman told CNBC.