Redfin CEO Glenn Kelman sent a letter to employees, also published on the company’s website, about the layoffs. He indicated 13% of staff, or about 862 people, will be fired.

We’re laying off 862 brilliant, loyal people and also closing RedfinNow.

We’ll still need home-services employees for our concierge service to fix up brokerage customers’ listings, but since that group spent most of its time renovating RedfinNow homes, it will get much smaller.

Kelman explained the layoffs are equivalent to about 13% of the workforce. Since April 27, about 27% of the total workforce has been reduced — this coincides with a rising interest rate environment and souring macroeconomic backdrop for the economy forced on by the Fed’s monetary tightening.

The top-level executive made a bold prediction about the 2023 housing market:

A layoff is awful but we can’t avoid it. We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30% smaller than it was in 2021. The June layoff was a response to our expectation that we’d sell fewer houses in 2022; this layoff assumes the downturn will last at least through 2023. 

Besides reducing headcount, Redfin is also exiting iBuying, a large-scale home-flipping operation, because it’s been a massive money pit for the company. Kelman said:

RedfinNow Is Too Much Money and Risk: And the second problem is that 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. Even before its overhead expenses, the RedfinNow properties segment will likely lose $22 – $26 million dollars in 2022. However small our iBuying loss may be compared to others, that loss is still larger than we could afford to bear again.

Redfin’s troubles also come as the lagged Case-Shiller Index showed US housing prices dropped 1.3% from their June 2022 peak in August. This is the biggest monthly decline since the Lehman collapse.

The national home price index growth has slowed for five straight months (below 13% YoY for the first time since Feb 2021). The absolute drop in the growth rate of 2.62 percentage points is the largest ever…

Researchers at Goldman Sachs forecast home prices could slide 5-10% from peak to trough — with their official forecast model predicting a 7.6% decline.

Given the unprecedented explosion in mortgage rates and near-record-high prices, contributing to the worst affordability crisis ever for future homeowners, Redfin’s decision to substantially reduce headcount this year and exit the home flipping industry comes as 2023 could be a year of turmoil for the housing market.

Add Redfin to the list of mounting layoffs across tech.