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Crisis hit the true estate business

Data: Mortgage Bankers Association; Note: Adjusted to August 2022 dollars; Chart: Kavya Beheraj/Axios

After getting let go from her job at mortgage provider Better.com in March, Charmaine Steele interviewed at eight other mortgage companies. Each one of these subsequently announced layoffs of these own, she tells Axios. A minumum of one went out of business.

Why it matters: It’s lean times in the true estate business. The slowdown is really a warning for the economy more broadly, and a rare labor market weak spot at the same time of strong overall employment.

  • With interest levels hitting 14-year-highs, and lending activity way down from the peaks of days gone by 2 yrs, layoffs and shutdowns are happening with alarming frequency.

“The housing marketplace will lead the broader economy both into and out of recessions,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, tells Axios.

  • It had been a grim job search, says the 30-year-old Steele, who lives in Charlotte, NEW YORK. “Nobody was hiring anybody.”

State of play: On Tuesday, property brokerage Compass announced the next round of layoffs. Just your day before, Opendoor that is available of shopping for and flipping houses announced it lost money on 42% of its transactions in August.

  • Steele’s former employer Better.com did four rounds of headcount cuts, like the famously botched mass layoff via Zoom in December 2021, Tech Crunch reported.
  • Property company Redfin let go 8% of its staff in June.
  • Rocket, among the largest non-bank mortgage brokers, did two rounds of cuts. Briefly a meme stock in 2021 when it traded at over $25, Rocket is currently at significantly less than $8.
  • Small fintechs in the mortgage space, like Reali, closed up shop. Sprout, a home loan company, also went of business. First Guaranty Mortgage Corp. filed for Chapter 11.

By the numbers: “Mortgage banking and brokerage shops trimmed 3,600 full-timers from their payrolls in July,” reports Inside Mortgage Finance, citing the newest BLS data. “Hardly anyone is immune. In case a lender isn’t cutting staff, it’s offering early buyout packages.”

Catch up fast: Mortgage companies hired constantly in the last year or two, as low-interest rates drove a surge in refinancing. For some time, things were ideal for workers in the market some companies were paying seven-figure signing bonuses, Fratantoni told MarketWatch recently. (A spokesman for the MBA confirmed the eye-popping number with Axios Tuesday.)

  • Steele says she was earning around six figures at Better.com, her first job at a lender after working as an agent. She’s now employed in the tiny business lending space, making 50% less.

Underneath line: For all those getting financial meltdown flashbacks, that is different. Two-thirds of the mortgage business is currently the province of small non-bank lenders and Fratantoni estimates you can find 4,500 companies in the area.

  • Though banks have made cuts with their mortgage businesses, too, lately, they’re significantly less subjected to housing overall.
  • And there’s much less likelihood of the type of systemic spillover we saw nearly 2 decades ago. Improved underwriting standards mean borrowers have better credit (foreclosure rates remain low), & most of these have mortgages with rates under 5%.

Editor’s note: This story was corrected showing the Redfin layoffs happened in June, not August.

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