Connect with us

Real Estate

Mortgage Layoffs Surge As Rising Rates Crush Lending Activity

Published

on


Stocks are in bear market territory, crypto is crashing and recession fears keep rising. Adding to 2022’s turmoil, the housing market is showing troubling signs as rising interest rates result in reduced mortgage activity and job cuts after two years of surging growth.

Major brokerages, mortgage lenders, and property-tech companies have all announced varying degrees of layoffs over the last few months and experts expect the trend to continue. The layoffs are a response to the cooling housing market, where rising mortgage rates and inflation are pushing some buyers out of the market.

Mortgage lenders are being hit hard by rising interest rates since applications and refinance applications tend to fall amid increasing rates. “We saw an exceptional wave of demand for two years when the Fed cut short term rates down to zero,” says Adam DeSanctis, vice president of communications at the Mortgage Bankers Associations. “The lenders tried to ramp up to meet this demand, and they were bringing on new employees.”

That’s changing now that the average rate on a 30-year fixed mortgage exceeds 6 percent- the first time in more than a decade. Experts are forecasting a 35 to 50 percent dropoff in mortgage origination this year, from almost $4 trillion in 2021 to as low as $2 trillion in 2022. Most of the drop is due to a decrease in refinancing, which is expected to fall to $730 billion in 2022 from $2.3 trillion in 2021, according to estimates from the Mortgage Bankers Association. Meanwhile, mortgage refinance applications are down nearly 80% from a year ago, according to the group.

“All mortgage providers are still in this process of rightsizing capacity for what everyone expects to be a smaller market,” Michael Santomassimo, the CFO of Wells Fargo, said at a real estate conference on June 14. Wells Fargo laid off at least 114 employees in its mortgage lending team this year following a 33 percent drop in first-quarter revenue to less than $1.5 billion, down from over $2.2 billion a year ago.

Wells Fargo isn’t alone. JPMorgan announced its most recent round of layoffs in its home lending department this Wednesday, affecting more than 1,000 employees. The bank says some of those employees will be let go, while others will be moved to new teams.

Layoffs are often much worse at non-bank lenders, where a less diversified business makes the companies more susceptible to fluctuations in mortgage rates. They are also more likely to serve first-time buyers, who experts say are the first to get pushed out of the housing when rates rise. Non-bank lenders also rely more heavily on refi mortgages, which made up 63 percent of all mortgages last year and are expected to continue falling this year.

Online mortgage lender Better.com has let go of the most employees in the industry, totaling more than 3,900 workers over three rounds of layoffs starting in December of last year. The first round, which came when rising interest rates were barely on the horizon, brought attention to the company’s CEO, Vishal Garg, who announced the layoff during a now-infamous Zoom call.

“If you’re on this call, you are part of the unlucky group that is being laid off,” Garg said on the call, which included 900 employees. “Your employment here is terminated effective immediately.”

According to HousingWire, other mortgage lenders conducting layoffs in 2022 include New Residential Investment Corp. (386 positions), Owning Group (189 employees), Pennymac Financial Services (474 positions), Interfirst Mortgage Co. (491 workers), Mr. Cooper (about 670 positions), and Stearns Lending (348 employees). Dozens of other smaller lenders throughout the country have also let employees go in recent months.

Rocket Mortgage, the nation’s largest home lender, has avoided layoffs, but still offered a voluntary buyout to at least 8 percent of the company’s employees.

Real estate brokerage firms are also starting to feel the heat. Redfin and Compass both made headlines when they announced more than 900 job cuts on June 14. “We could be facing years, not months, of fewer home sales,” Glenn Kelman, the CEO of Redfin, said in a written statement after announcing the brokerage would be laying off 470 employees, or about 8 percent of its workforce. “We don’t have enough work for our agents and support staff.”

Compass announced the impending layoff of 450 employees, or about 10 percent of its employee base. A spokesperson for the company said in a statement the layoffs were “due to the clear signals of slowing economic growth.”

It doesn’t end there. Zillow, the real estate marketplace, announced layoffs of 2,000 employees, or 25 percent of the company, in late 2021. The layoffs were largely the result of Zillow shutting down its home buying program. The San Francisco-based brokerage Side announced on June 1 that it would be laying off 10 percent of its workforce. Rental platform Zumper is among the most recent to let employees go, after announcing that it would get drop about 15 percent of its headcount.

The downward shift in the mortgage industry is also evident in the stock market. The Vanguard Real Estate ETF, which tracks the prices of the largest real estate investment trusts and other large real estate firms, is down 23 percent for the year. Zillow is down 50 percent year-to-date. Rocket Companies is down almost 60 percent, and Redfin is down nearly 80 percent this year.

“If falling from $97 per share to $8 doesn’t put a company through heck, I don’t know what does,” Redfin CEO Kelman said in his statement.

There is one bright spot in the housing space. Home builders are adding jobs in 2022 despite a drop in new residential construction projects. “The home building industry has been just desperate for skilled workers,” says Robert Dietz, chief economist at the National Association of Home Builders. Rather than overhiring during the housing boom of the last year, residential construction companies struggled to add headcount. There are currently 450,000 job openings at residential construction and renovation companies, according to the Bureau of Labor Statistics.

“There’s still a huge number of homes and apartments and remodeling projects that are in the construction pipeline, and you need workers to finish those projects,” Deitz says.



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published.

Real Estate

Here's what's keeping Tacoma's building boom on track (Photos)

Published

on



A wave of housing, retail and office development is underway in the City of Destiny — and the projects have a common link.



Source link

Continue Reading

Real Estate

Exclusive: Carrot Express secures second NYC location in Midtown

Published

on



The Florida-based fast casual concept has more than two dozens locations in the state and a storefront in Flatiron.



Source link

Continue Reading

Real Estate

Park Synagogue preservation project gains nearly $3M in state grants

Published

on



The future of Park Synagogue’s Conservative Jewish congregation lies in Pepper Pike, where it is expanding.



Source link

Continue Reading
Advertisement
Economy9 mins ago

US blacklists Chinese companies for allegedly supporting Russian army

Tech11 mins ago

Ben Silbermann is out as Pinterest’s CEO, to be replaced by Google’s Bill Ready

Metaverse19 mins ago

Where Does Education Fit in an Emerging Metaverse?

Ethereum31 mins ago

Devcon VI: First Tickets & FINAL WEEK of Speaker Applications

Real Estate32 mins ago

Here's what's keeping Tacoma's building boom on track (Photos)

Opinion38 mins ago

Never have I ever…. | Game Episode | The Unpopular Opinion UG

Markets40 mins ago

Share Market News Updates Live | Business News LIVE | 21 June 2022 | CNBC Awaaz Live | Stock Ideas

Economy1 hour ago

Value in the short(er) end

Tech1 hour ago

Sony’s new gaming brand merges the best of its PlayStation and consumer gear

Business1 hour ago

Bitcoin’s bottom might not be in, but miners say it ‘has always made gains over any 4-year period’

Metaverse1 hour ago

What is the future of life in the metaverse?

Real Estate2 hours ago

Exclusive: Carrot Express secures second NYC location in Midtown

Opinion2 hours ago

HDFC Life Insurance Company Ltd. के शेयर में क्या करें? Expert Opinion by Vaibhav Kaushik

Markets2 hours ago

ABC News Special Report: Day two of Jan. 6 hearing

Economy2 hours ago

The risk of a flip-flopping Fed

Tech2 hours ago

Montblanc Summit 3 will be the first Wear OS 3 smartwatch for iOS

Metaverse2 hours ago

KPMG enters the metaverse, invests $30M in Web3 employee training

Real Estate3 hours ago

Park Synagogue preservation project gains nearly $3M in state grants

Opinion3 hours ago

Reading Books Fast || Right or Wrong || My opinion || Sandip Paul

Markets3 hours ago

Small Cap केमिकल का महा मल्टीबैगर शेयर | Best Stock For 2022 | Investing | get Rich | Build wealth |

NFT2 weeks ago

Unity and Gala Games Join Forces to Build the VOXverse

Tech2 weeks ago

FAA wants dozens of changes before SpaceX expands Texas launch site

Opinion2 weeks ago

Electric switchboard manufacturer Expert Opinion | Best Plastic manufacturing business Idea

Opinion2 weeks ago

SOS Opinion | A fresh offering to the market

Metaverse2 weeks ago

REALM Metaverse Gaming to Launch Mobile Beta App on June 21 By CoinQuora

Metaverse2 weeks ago

KaraStar: A Metaverse Game with Specific Benefits For New Users

Tech2 weeks ago

Blizzard claims it won’t monetize ‘Diablo IV’ like ‘Diablo Immortal’

Metaverse2 weeks ago

L’Oréal’s Chief Digital Officer on Web3, the Metaverse – WWD

Tech2 weeks ago

Resident Evil Village Winters’ Expansion arrives on October 28th

Metaverse2 weeks ago

Here’s a Complete Guide to Investing in the Metaverse

Economy2 weeks ago

UK job vacancies at record high despite stalling economy

Metaverse2 weeks ago

Podcast: What does worship feel like in the Metaverse?

Metaverse2 weeks ago

ISG Launches Advisory Business to Help Clients Explore and Prepare for Web3, Metaverse Opportunities

Bitcoin2 weeks ago

The CFTC’s action against Gemini is bad news for Bitcoin ETFs

Economy2 weeks ago

FirstFT: The yen continues descent to 24-year low

Tech2 weeks ago

Sony would love if you bought its $3,700 Walkman for over-the-top audiophiles

Opinion2 weeks ago

MAD Armut & Mac Opinion On FNC vs G2 | LEC Post Game Lobby Interview

Economy2 weeks ago

Echoes of 1970s for UK economy

Real Estate2 weeks ago

After over a year of delays, $140M Bremerton project nears completion

NFT2 weeks ago

Upcoming Christie’s NFT Auction to Help Scientific Psychedelic Research

Trending

0