WASHINGTON — As home sales slow amid higher interest rates, thousands of workers who found jobs in the pandemic’s booming housing market now face widespread layoffs with cuts more important expected in the future.
Some of the biggest players in the real estate industry, including RE/MAX, Redfin and Wells Fargo, have announced layoffs totaling thousands of jobs in recent months. Industry analysts predict the cuts could eventually match what was seen during the 2008 property crash.
According to the National Association of Realtors, the number of homes sold in the United States fell nearly 20% between August 2021 and August 2022, largely due to the Federal Reserve’s decision to start raising interest rates. interest in March with the aim of lowering decades. -high inflation. As a result, mortgage interest rates have doubled this year, shutting an increasing number of buyers out of the market.
“It’s going to be tough, layoffs are commonplace right now,” said Linda McCoy, head of the National Association of Mortgage Brokers, who has worked in the mortgage industry for 30 years. “It’s scary, because you just don’t know where or when it’s going to end.”
This is a sharp reversal from the housing labor market over the past two years. As more people found themselves working from home and interest rates hit record highs, a wave of buyers entered the market in search of new homes. Last year, existing home sales hit their highest level since 2006.
The demand for housing and the jobs that have been created have provided a silver lining in a sluggish job market for workers in the first two years of the pandemic. Many of them were looking to steer away from sectors hit hard by the pandemic, such as hotels, restaurants, healthcare and education, industry analysts said.
During that time, 200,000 people became real estate agents, according to data from the National Association of Realtors.
In addition to the demand for homes, many homeowners sought to refinance their mortgage. Mortgage companies quickly began hiring workers, some straight out of college or with little experience, McCoy said.
The number of people employed as loan originators or processors increased by 31% between the start of 2020 and the end of 2021, according to data from SimpleNexus.
Some companies offered five-figure bonuses to new hires and thousands of dollars a month in bonuses, said Myiesha Lacy, who has worked in the home finance industry for 20 years and was recently laid off from her job at Sprout Mortgage when he went bankrupt.
As the overall job market remains strong, with the economy adding 315,000 jobs in August, industry analysts warn trends in the housing sector could have a wider ripple effect as fewer people buy homes , which means spending cuts in other areas, such as appliances, furniture and renovations.
“The housing market is kind of holding back economic growth or even pushing the overall economy down a bit, and that’s having a ripple effect,” said Lawrence Yun, chief economist of the National Association of Realtors.
Mortgage workers have been among the hardest hit by falling refinance demand and home sales. More than three dozen mortgage companies have closed, been acquired or announced job cuts in the past six months, eliminating thousands of jobs, according to an NBC News tally.
The number of people employed as loan originators or loan processors has fallen 10% since the start of the year, according to SimpleNexus estimates.
“We had a binge and it came to a screeching halt,” said McCoy, who runs a mortgage business in Mobile, Alabama. “It’s going to be tough for people who have gotten into the business in the last two years and don’t have a following yet. I feel sorry for those people in a way because it felt like the best thing that ever happened to you.
Lacy, who was laid off in July along with more than 300 other Sprout Mortgage workers, said the recent boom and bust in her industry is reminiscent of the housing crash that began in 2007.
“Business was going well, it was like before in 2006, that’s how they were busy. But now it has almost come to a screeching halt,” Lacy said. “At the start of the year, I started seeing these signs, and it was like, oh my God, it’s coming back.”
With widespread cuts in the industry, she is now struggling to find a new job. At 43, she is seeking certification to work in another field, such as health care or information technology.
Lacy said he saw a large number of people lured into the industry with big bonuses and the promise of remote work during the hiring boom, including his daughter and his daughter’s friends, who were also made redundant. and find it difficult to turn to a new profession.
Real estate brokers have also been affected, said Ken H. Johnson, a former real estate broker who is now associate dean at Florida Atlantic University, where he studies the real estate industry.
Even in the best of times, it can be difficult for new brokers to make a full-time living selling real estate. Now, with sales steadily falling, he predicts that the number of estate agents, which currently stands at around 1.6 million, could fall by 25% over the next three to four years – similar to what has observed after the real estate crash of 2007 and 2008.
“It’s not going to be a hiccup,” Johnson said. “It’s going to hit the strength of real estate agents very hard, and as the number of transactions goes down, the number of people working in the mortgage industry, working with third-party information providers, those Zillows and Redfins of the world, all those numbers will go down.
So far, the picture has been mixed for homebuilders. New construction rose in August, but permits for new housing projects fell to their lowest levels since the spring of 2020.
The industry continued to add construction jobs largely due to demand for multi-family rental properties and renovation projects, but hiring could be flat or decline in the second half and into 2023 if employment rates continue. Interest remains high, said Robert Dietz, chief economist for the National Association of Home Builders.
Still, given the housing shortage in the United States, he doesn’t expect a repeat of the Great Recession when the industry lost 1.5 million jobs.
“We think the market is about a million homes short,” Dietz said. “So we’re expecting to see some price weakness, but we’re not going to see the kind of price decline that we did at the time.”