Housing Market Braces For Rising Layoffs ‘Soon’ As Mortgage Lenders, Home Sellers Cut Thousands Of Jobs

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Although the overall resilience of the labor market continues to baffle experts, the plight of rising interest rates, which are causing a historic drop in home sales, could soon lead to a series of more severe job cuts in the housing sector, which, along with the tech industry, has already seen companies lay off thousands of workers in recent months.

key facts

Despite a stronger than expected job report On Friday, Pantheon Macro Chief Economist Ian Shepherdson says resilience is “likely to change in the next couple of months” as the impact of rising rates ripples across the economy, with sensitive sectors expected to to rates, such as housing, are the most affected.

“It’s a certainty that layoffs across the entire housing ecosystem will soon be on the rise,” says Shepherdson, warning that the struggles will be similar to those illustrated by the much-publicized tech layoffs, which hit giants Stripe and Twitter last week and could go on this week with the father of Facebook Meta.

“The housing market has cooled off as interest rates scare away new buyers,” explains Andrew Challenger of the professional services firm Challenger, Gray & Christmas, noting that housing starts and permits have declined as brokerage firm Redfin reports existing home sales plunged 35% in the year to the end of October, the biggest drop since it began collecting data in 2015.

It is still unclear how many jobs could be at stake, but already a number of companies in the housing sector have started to implement large layoffs, with the Opendoor home sales platform last week. saying was cutting about 18% of its workforce, some 550 workers, as the company navigates “one of the most challenging real estate markets in 40 years.”

Lenders have also been hit hard: This summer, mortgage giant LoanDepot Announced thousands of job cuts, and Wells Fargo is reportedly looking to lay off some 2,000 loan officers as mortgage volume plummets 90% year over year.

“The changes we have made recently are a result of the broader rate environment and are consistent with the response of other lenders in the industry,” a Wells Fargo spokesperson told CNBC in a statement, adding that the bank “regularly ” adjusts staffing levels to align with market conditions.

pivotal appointment

“Layoffs are not rising yet, and the bar for letting people go is probably higher than in previous cycles, given how much trouble companies had rehiring people after the initial impact of Covid, but that it will probably change in the next two months,” says Shepherdson. .

What to watch

Home improvement giants Home Depot and Lowe’s are sure to give an update on how the housing market downturn has impacted the business when they report earnings next Tuesday and Wednesday, respectively.

key background

Soaring prices have forced central banks around the world to reverse pandemic-era policy measures intended to boost markets, with the Fed’s rate hikes particularly hitting the previously sluggish housing market. booming. New home sales plunged to a six-year low this summer and mortgage applications plummeted. suggest the collapse will only get worse. Fed Chairman Jerome Powell has alluded to to the “complicated situation” in the housing market this summer, saying prices will cool off as mortgage rates normalize to higher levels after remaining historically low during the pandemic.

Other readings

Fed Chairman Jerome Powell Haunted by the Ghost of Paul Volcker Could Sink the Economy (Forbes)

Housing market collapse: ‘Sharp’ slowdown in house prices as warning signs become ‘eerily similar’ to 2000s crash (Forbes)

The labor market added 261,000 jobs in October, while unemployment rose to 3.7% (Forbes)

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