WASHINGTON — As housing sales slow amid higher interest rates, thousands of workers who found jobs in the booming housing market of the pandemic are now facing widespread layoffs with steeper cuts expected ahead.
Some of the biggest players in the real estate industry, including RE/MAX, Redfin and Wells Fargo, have announced layoffs in recent months totaling thousands of jobs. Industry analysts are projecting the cuts could eventually be on par with what was seen during the housing crash of 2008.
According to the National Association of Realtors, the number of homes being sold in the U.S. fell nearly 20% between August 2021 and August 2022 in large part because of the Federal Reserve's decision to begin raising interest rates in March in an effort to bring down decades-high inflation. As a result, home mortgage interest rates have doubled this year, pricing an increasing number of buyers out of the market.
“It’s gonna be tough, layoffs are a common occurrence right now,” said Linda McCoy, head of the National Association of Mortgage Brokers, who has been in the mortgage industry for 30 years. “It’s scary, because you just don’t know where or when it’s going to stop.”
It’s a stark reversal from where the housing-related job market has been over the past two years. As more people found themselves working from home and interest rates hit record lows, a surge of buyers entered the market looking for new homes. Existing home sales last year reached their highest level since 2006.
The demand for housing, and the jobs that were created, provided a bright spot in a bleak job market for workers during the first two years of the pandemic. Many of them were looking to pivot from industries hit hard by the pandemic, such as hospitality, food service, health care and education, according to industry analysts.
Over that period, 200,000 people became real estate agents, according to data from the National Association of Realtors.
In addition to the demand for houses, many homeowners looked to refinance their mortgages. Mortgage firms rapidly started hiring workers, some straight out of college or with little experience, said McCoy.
The number of people employed as loan originators or processors grew 31% from the start of 2020 to 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 bonus pay, said Myiesha Lacy, who has worked in the real estate finance industry for 20 years and was recently laid off from her job at Sprout Mortgage when it went out of business.
While the overall job market remains strong with the economy adding 315,000 jobs in August, industry analysts warn the trends in the housing sector could have a wider ripple effect as fewer people buying homes means cuts to spending in other areas, such as appliances, furniture and renovations.
“The housing market is in a sense holding back the economic growth or even pushing the overall economy slightly negative, and it has a ripple effect,” said Lawrence Yun, chief economist for the National Association of Realtors.
Workers in the mortgage industry have been among the hardest hit as demand for refinancing and home sales tumble. More than three dozen companies in the mortgage sector have shut down, been acquired or announced job cuts in the past six months, eliminating thousands of jobs, according to a tally by NBC News.
The number of people employed as loan originators or loan processors has fallen 10% since the start of the year, according to estimates by SimpleNexus.
“We’ve had a frenzy and it’s come to a screeching halt,” said McCoy, who runs a mortgage business in Mobile, Alabama. “It’s going to be tough for those people that got in the business in the last two years that don’t have a following already. I feel sorry for those people in a way because it looked like the best thing that ever happened to you.”
Lacy, who was laid off in July along with more than 300 other workers at Sprout Mortgage, said the recent boom and bust in her industry is reminiscent of the housing crash that began in 2007.
“Business was great, it was just how it was before in 2006, that’s how busy it got. But now it just came to almost a screeching halt,” Lacy said. “Beginning of the year, I started seeing those signs, and it was like, oh god, here it comes again.”
With widespread cuts across the industry, she’s now struggling to find a new job. At 43 years old, she is looking to get certified to work in another field, such as health care or information technology.
Lacy said she saw large numbers of people drawn into the industry with big bonuses and the promise of remote work during the hiring boom, including her daughter and her daughter’s friends, who have also been laid off and are struggling to pivot to a new profession.
Real estate brokers have also been affected, said Ken H. Johnson, a former real estate broker who is now an associate dean at Florida Atlantic University, where he studies the real estate industry.
Even in the best of times, it can be a struggle for new brokers to be able to make a full-time living selling real estate. Now, with sales steadily dropping, he anticipates the number of realtors, which currently stands at around 1.6 million, could shrink by as much as 25% over the next three to four years — similar to what was seen following the housing crash of 2007 and 2008.
“This isn’t going to be a hiccup,” said Johnson. “This is going to hit the real estate agent force really hard, and as the number of transactions go down so do the number of people working in the mortgage industry, working with third party information providers, those Zillows and Redfins of the world, all these numbers are going to go down.”
It has been a mixed picture so far for home builders. New construction rose in August, but permits for new home projects fell to their lowest levels since spring 2020.
The industry has continued to add construction jobs largely because of demand for multifamily rental buildings and remodeling projects, but hiring could be flat or decline in the second half of the year and into 2023 if interest rates remain high, said Robert Dietz, chief economist for the National Association of Home Builders.
Still, given the shortage of housing in the U.S., he's not expecting a repeat of the Great Recession when the industry lost 1.5 million jobs.
“We think the market is short by about a million homes,” said Dietz. “So we expect to see some price weakness, but we’re not going to see the big kind of price declines that we did back then.”