Topline
Although the overall resilience of the labor market continues to surprise experts, the challenge of rising interest rates, which is causing a historic decline in home sales, could soon lead to even more drastic job cuts across the housing sector – which is next to the technology industry. it has happened before. saw the firm lay off thousands of workers in recent months.
Last week, real estate platform Opendoor blamed “one of the most difficult real estate markets in the world … [+]
The main facts
Despite a stronger-than-expected jobs report on Friday, Pantheon Macro chief economist Ian Shepherdson says resistance “may change over the next few months”, as the impact of rate hikes affects the economy as a whole, including rate-sensitive sectors. such as houses. among those expected to be hit the hardest.
“There is no doubt that layoffs will increase across the housing ecosystem in the near future,” says Shepherdson, warning that the struggles will be similar to those revealed by tech layoffs last week at giants Stripe and Twitter hit and can continue this week. Facebook-dad Meta.
“The housing market has cooled as interest rates scare away new buyers,” said Andrew Challenger of career services firm Challenger, Gray & Christmas, noting that housing starts and permits both fell as brokerage firm Redfin reported that sales of existing homes decreased by 35 percent. year to the end of October – the biggest drop since data began to be collected in 2015.
It’s unclear how many jobs could be on the line, but already a number of companies in the housing sector have begun implementing mega-layoffs, with home sales platform Opendoor last week saying it was cutting nearly 18% of its workforce. does , about 550 workers, as the company navigates “one of the most difficult 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 nearly 2,000 loan officers as mortgage volume is down 90% year over year.
“The changes we have recently made 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 match. with market conditions.
Crucial Quote
“Layoffs are still high – and the burden of letting people go is probably higher than in previous cycles, given how many firms had to rehire people due to the initial shock of Covid – but that will change in the next few months.” Shepherdson says.
What to Watch
Home improvement giants Home Depot and Lowe’s are sure to give an update on how the housing market downturn has affected business when they report next Tuesday and Wednesday, respectively.
Key Background
Rising prices have forced central banks around the world to roll back pandemic-era policy measures meant to bolster markets — and the Federal Reserve’s rate hikes have hit the already booming housing market in particular. New home sales fell to a six-year low this summer, and a drop in mortgage applications suggests the slump will only get worse. Fed Chairman Jerome Powell has repeatedly referred to the “complex state” of the housing market this summer, saying prices will cool as mortgage rates normalize to high levels after remaining historically low during the pandemic.
Further Reading
Fed Chairman Jerome Powell – Haunted by the Ghost of Paul Volcker – Could Crash the Economy (Forbes)
Housing Market Crash: A ‘Severe’ Rally in Home Prices as Warning Signs Become ‘Similar’ to 2000 Crisis (Forbes)
Labor Market Adds 261,000 Jobs in October as Unemployment Rises to 3.7% (Forbes)
