Home prices increased nearly 15% from April 2020 through the end of the year, and another 18% in 2021. Collectively, home prices appreciated 40% between April 2020 and April 2022. 2021 actually had the highest level of existing home sales since 2006, the height of the previous homebuying boom.

As a result, the number of people working in the real estate industry exploded. For some context, loan processor employment increased 23% from Q3 2020 to Q3 2021 as companies scrambled to meet the growing mortgage demand.

However, 2022 has not been as friendly to the real estate industry. Rapidly rising home prices, coupled with high mortgage interest rates, greatly reduced homebuying and mortgage demand. After a 15-year high for home sales in 2021, existing home sales fell 23.8% from September 2021 to 2022.

Mortgage applications were also way down from a year prior, falling 42% from October 2021 to October 2022 to a 25-year low. During the same period, refinance applications were down a whopping 86%.

“The ongoing trend of rising mortgage rates continues to depress mortgage application activity, which remained at its slowest pace since 1997,” Joel Kan, Vice President and Deputy Chief Economist at the Mortgage Bankers Association, said in a statement.

Widespread Industry Layoffs

After a recent jobs boom, the number of loan originators or loan processors has been down 10% since the beginning of 2022. According to reporting from NBC News, there are about 1.6 million realtors, but that number could decline by 25% come 2025 or 2026 due to decreasing homebuying demand.

Many major real estate firms will have reduced their workforce in 2022. In July, RE/MAX announced that 17% of its staff, or 120 employees, would be let go by the end of the year. Wells Fargo began reducing their mortgage staff in April and expects more layoffs shortly as mortgage originations at the firm are down an astonishing 90% from a year prior.

In October, Zillow laid off 300 employees, while Realtor.com laid off an undisclosed number of employees in September. Compass, a large real estate brokerage, also announced that they were going through with a round of layoffs in September.

Layoffs from many prominent real estate brokerages and mortgage firms reflect a tightening housing market with declining demand. Unaffordable home prices, high-interest rates, and low housing inventory will keep homebuying and mortgage demand down. As a result, economists predict home prices will decline substantially in 2023. For example, Moody’s Analytics predicts that home prices will fall 10% next year.

The post Large Real Estate Firms Reduce Workforce as Homebuying Demand Cools appeared first on CitySignal.

Fintech startups were one of the most financially backed industries of 2021, securing 21% of all venture capital dollars worldwide. Across 4,969 deals, fintech startups received a generous $131.5 billion in financing. Yet, in 2022, they’re accounting for the third largest number of layoffs globally. Proptech companies raised a record-breaking $32 billion in 2021 but are laying off employees in droves in 2022.

Auspicious startups that were well on their way to billion-dollar valuations and international expansions are now backtracking on hiring promises. An alarming amount of layoffs, hiring freezes, and rescinded offers have spread the tech industry in the last few months. 

Analysts are comparing the phenomena to the dot-com bubble of the late ’90s, where Nasdaq lost two-thirds of its value in just three years between November 1999 and May of 2002. Notable dips in economic activity and talks of a possible recession further exacerbate founder and investor anxieties. 

With venture capital funding down 20% across all industries, founders are cutting costs in case their investors start to get cold feet. 

U.S. Jobs Are Abundant, Unless You Work In Tech 

Fintech has been especially plagued by a lack of investment. The total dollar volume raised by private fintech companies is down 31%, having only reached $27.5 billion so far in 2022. Given that we’re already two quarters into the year, it’s not likely this year’s numbers will be able to compare to last year’s.

Proptech startups, on the other hand, have managed to secure $13.1 billion investment dollars in just the first half of 2022—marking a 5.65% year-over-year increase. Despite these funding wins, several proptech companies have decided to follow the herd and lay off large portions of their workforce. 

As the U.S. economy continues to struggle with the highest inflation since the 80s, investors are strategically shying away from risky investments such as early-stage VC funding and placing their bets on more stable assets. However, newbie startups aren’t the only ones feeling the effects. Established tech companies such as Netflix, Salesforce, and Meta have announced hiring freezes and layoffs, as well. 

The economy doesn’t look great. That’s no secret. But it’s not exactly tanking. Following the Great Resignation, American employees have managed to shift the balance of power back to themselves. Job seekers are experiencing a considerable amount of bargaining power in the quest for new employment. 

In fact, job opportunities outside the tech industry are growing at a healthy pace. According to the Bureau of Labor Statistics, U.S. employers added 428,000 jobs in April alone, marking the 12th straight month of job growth above 400,000. Average hourly wages are also growing (although not at the pace of inflation).

The Economy Doesn’t  Make A Lot of Sense Right Now

More than uncertain, the economy is slightly contradictory. Events that are supposed to be occurring in tandem, aren’t, which makes it that much harder to predict an outcome and answer the golden question–are we headed into a recession?

In periods of inflation wages are supposed to grow. This is because the cost of living rises as our purchasing power declines. However, when adjusted for inflation, weekly earnings growth has actually been falling, even as the job market continues to grow. Growth in the labor market is supposed to indicate economic growth, yet the economy is shrinking.

The numbers are at odds. 

The national unemployment rate is currently 3.6 percent. It’s one of the lowest unemployment rates we’ve seen since the end of World War II. In June of 2020 when the pandemic was at its peak, the unemployment rate shot up to 11 percent. That’s an impressive turnaround in just 2 years. 

But, despite this healthy growth in job opportunities, economic growth has been lagging. The Atlanta Fed’s unofficial GDPNow forecast suggests that GDP is contracting by 1 percentage point annually. Two consecutive quarters of negative growth usually indicate a recession, although not always. 

So if there’s no certainty of a recession on the horizon and jobs are growing in various industries, why is the tech industry witnessing a massive wave of layoffs?

Are Layoffs and Hiring Freezes Necessary?

Financial uncertainty is hardly a deterrence for tech investment. After all, tech investors need a high-risk tolerance, given that startups can take years to finally turn a profit. When the economy is actively expanding, some investors will even forgo profitability for long-term growth. 

However, the investing landscape starts to shift when borrowing becomes more expensive, as it is now. High inflation and high-interest rates aren’t supportive of startup founders in need of funding, leading them to cut back on their most costly expenditures—salaries. 

High-interest rates are particularly unfavorable for proptech startups who work with homebuyers, a demographic heavily impacted by mortgage rates. Many prospective homeowners are waiting for the average 5.70% interest rate on a 30-year fixed mortgage to drop, causing a number of proptech employees to sit idle. 

In 2021, not a single fintech employee was laid off, and in just the first half of this year, a total of 4,189 fintech employees were let go. When looking at the U.S. tech sector as a whole, that number jumps to a shocking 32,000 tech layoffs. 

Tech companies cite lingering effects of the pandemic and overhiring during periods of growth as two of the main reasons for widespread layoffs. Even the most promising tech companies have made significant cuts. Many of these companies began announcing layoffs at the start of the Spring, after less than satisfactory Q1 reports rolled in for some of the companies mentioned below.

Loft

Having achieved a valuation of $2.9 billion in April of 2021, Sao-Paolo-based proptech startup Loft had high hopes for the near future. That same year the company acquired Mexico City-based startup, TrueHome, marking the start of its international expansion. 

According to TechCrunch, $700 million of its impressive $2.9 billion valuation had been acquired in just a matter of weeks. At the time, the company had also claimed it was “the real estate e-commerce platform with the highest revenue in emerging markets outside China.”

On July 5th, Loft announced it had laid off 380 employees, citing “a reorganization of its operation.” In April of this year, Loft had already cut 159 jobs, bringing the total number of layoffs in 2022 to 540. The company currently has about 3,200 employees. 

HomeLight

Real estate referral company, Homelight, laid off 19% of its workforce in mid-June. This came as a surprise to some, given that the proptech startup had successfully secured $60 million in its most recent round of funding. 

In an interview with TechCrunch the company’s founder and CEO, Drew Uher, stated that “This fundraise and acquisition allow us to play both offense and defense — expanding our business while also positioning the company to weather uncertainty this year and into next year.”

Compass

Residential brokerage company, Compass, recently laid off 450 employees representing 10% of its workforce. Having debuted on the stock market at $20 a share in April of last year, Compass is now down 80%, trading at less than $5 a share. In addition to the layoffs, Compass plans to pause its expansion plans to acquire other companies and combine some of its offices. 

Robinhood

Popular trading app Robinhood laid off about 9% of its full-time workforce in late April. CEO Vlad Tenev disclosed in a company blog post that after a period of hyper growth, the company was forced to cut down duplicate roles in order to “improve efficiency, increase our velocity, and ensure that we are responsive to the changing needs of our customers.” Although the total number of layoffs was not mentioned in the article, Techcrunch reports the layoffs affected about 340 Robinhood employees.

Knock

Back in March, Knock laid off 46% of its staff, about 120 employees in total. That same month the company had plans to go public at a $2 billion valuation. However, the company instead only managed to raise $70 million in equity and $150 million in debt via private funding. The proptech startup helps homeowners make an offer on a new house before selling their old one. 

Understanding How Tech Companies Work

In their public announcements, CEOs and founders frequently reference the need to “remain lean” and “improve operational efficiency.” While they can’t come out and explicitly say that tech salaries are an expense they simply can’t afford at the moment, that’s what’s happening. 

Worker wages are large expenditures for any company—but especially tech companies—who are known to offer new employees alluring, six-figure salaries. In the wake of a massive (perhaps miscalculated) amount of growth, tech companies are now struggling to fulfill their promise to rookie employees. 

With the prospects of new investor dollars looking weak and talks of a recession on the rise, founders can’t risk not having enough cash to stay afloat, should the economy tank.  

At the end of the day, startups dance to the beat of the drum of their investors. Founders need to be able to show that they can weather periods of economic distress to secure the trust of existing and future investors. Many startups, if not most, aspire to go public, further extending their financial responsibility to shareholders. 

The Desire To Go Public

Going public provides startups two key advantages: increased capital and a higher market value. When a company goes public, they’re granted liquidity to invest in the company’s growth. Increased liquidity and transparency strengthens trust among investors, resulting in more frequent investments and ultimately, increasing the company’s overall market value. 

Now that Nasdaq Composite is down 22.4% for the second quarter, and has lost 30% of its total value since January, the likelihood of going public is well out of reach for new startups this year. 

“Many technology startups that saw tremendous growth in 2020, particularly in the real estate, financial and delivery sectors, are beginning to see a slowdown in users,” says Andrew Challenger, senior vice president at Challenger, Gray & Christmas. 

Challenger’s statement to Yahoo Finance aligns with what tech leaders have been saying in their company announcements—they simply grew too fast. 

The Effect On Wall Street

Talks of hiring freezes and layoffs have even reached Wall Street, as desires for IPOs and other corporate investments die down. The NY Post reports that in early July, JP Morgan’s investment banking fees had slumped to 54% in the second quarter, and that Morgan Stanley’s equity underwriting fees were off an alarming 86%. 

In June, JP Morgan began laying off hundreds of bankers in the mortgage division. There’s concern that bankers focused on special purpose acquisition companies—a new vehicle for taking companies public, popular among early-stage startups—will be next. 

SPACs, also known as “blank check companies,” allow for startups to bypass the traditional public offering process. Having accounted for half of all U.S. initial public offerings last year, SPACs quickly became a viable alternative for early-stage startups to access capital without having to face the many regulatory hurdles associated with traditional IPOs. 

To meet demand, big banks such as JPMorgan, Morgan Stanley, and Goldman Sachs offered existing and new employees lofty bonuses, making 2021 an exceptional year for the investment banker. Now that SPAC deals are drying up, bonuses are much less likely this time around. 

The Financial Logic Behind Cutting Jobs As A Tech Startup

Latch, a proptech company that raised $152 million in private capital before its debut on the stock market as a SPAC in 2021, has already conducted multiple rounds of layoffs this year. The company recently announced it has reduced 28% of its workforce, amounting to 130 employees. 

Having decreased a stark 80% in value since its June 2021 debut, from $11 to just $2 per share, Latch had to quickly cut costs in order to regain investor confidence and achieve a leaner state. 

Severance payments and operational restructuring is expected to cost the company between $4 and $6 million in cash. However, once the workforce reduction is complete, Latch anticipates it will achieve an annual run rate cost savings of $40 million across multiple departments. Financially, it’s not hard to see why cutting salaries is the best option for startups.

A Call For Hiring Transparency In Tech

When it’s all said and done, startups respond first and foremost to their investors. And when veteran venture capital firms such as Sequoia urge you to cut costs or face a “death spiral” amid economic turbulence—you fall in line. 

In times of inflation, high-interest rates, and stock market lows, investors want to see founders take initiative. Right now, a startup’s success has less to do with how innovative or popular the company is among customers—and more to do with how investors feel about what startups are doing with the money they’ve already been given. To be able to grow in the future, startups feel the need to lay low now.

Still, it’s hard to justify massive and rapid layoffs such as the ones at Coinbase, who laid off 1,100 employees in June, alone. CEO Brian Armstrong cited the possibility of entering a “crypto winter” and the mistake of having “over-hired” as the reason for the cutbacks. 

Most startup founders and CEOs say they now understand that they grew too fast and, unfortunately have to conduct layoffs to achieve sustainability. They’re all saying the same thing in different words. 

It’s unlikely they had no idea whatsoever that widespread tech layoffs were a possibility, if not a probability. If this is the reality of the tech job market, then perhaps startup leaders should be more forthcoming about the longevity of life-changing, six-figure salaries they’re offering new employees.

Tech salaries are enough to change an employee’s life, motivating them to relocate and make life decisions based on the assumption that they are going to stay for at least a few years. 

In an unpredictable environment such as startups and an uncertain economy like now, tech companies could be more transparent in the hiring process, or at least not bite off more than they can chew.

The post Widespread Tech Layoffs and Hiring Slowdowns: Could They Have Been Avoided? appeared first on CitySignal.

The lawsuit alleges that CEO Garg, several executives, and the company itself knowingly misled investors before their SPAC merger deal and fired Ms. Pierce when she raised the alarm. Her lawsuit is asking for $195 million in compensatory and punitive damages. A company lawyer for Better says the lawsuit has no merit, and they will vigorously defend themselves against it. However, the SEC isn’t so sure about that.

Better.com, The SEC & The SPAC

According to the Wall Street Journal, the Securities and Exchange Commission, better known as the SEC, has requested documents from Better and Aurora Acquisition Corp., their blank-check company, concerning their business activities. Additionally, they seek information on CEO Vishal Garg and his business activities in light of Pierce’s allegations in her lawsuit. While Better released a statement saying, “the company is confident in our financial and accounting practices, and we will vigorously defend this lawsuit,” there seem to be reasons as to why that might not be the truth.

Inman reports that the banks, CitiGroup and Barclays, who were advising Better and Aurora, have now officially resigned their positions, waiving over $16 million in fees. The fees would have been paid after the companies completed their SPAC merger. Even Bank of America, which was not officially retained by Better, indicated it was resigning from any role it may have had, implied or otherwise. Yet it was confirmed in a legal filing on July 14th, 2022, that they are still attempting to move forward with the deal. They must complete the merger by a deadline of September 30th, or it will be null and void.

Background On Better.com

We’ve covered Garg’s shady behavior in the past, so his current unscrupulous dealings are not a shock. His leadership has been less than savory, saying crazy things to employees, like the email sent company-wide reading in part:

“You are TOO DAMN SLOW. You are a bunch of DUMB DOLPHINS and…DUMB DOLPHINS get caught in nets and eaten by sharks. SO STOP IT. STOP IT. STOP IT RIGHT NOW. YOU ARE EMBARRASSING ME!”

Or perhaps you remember Garg’s prediction for this year’s interest rates, citing they would stay low because President Biden would die from COVID. He is clearly a man who struggles with impulse control. But what is surprising is that he’s still pushing ahead with the SPAC merger, despite the overwhelmingly bad press both he and his company have drawn.

Since Garg’s fateful Zoom call in December 2021, when Better had 10,400 employees, they’ve laid off 7,500–a loss equal to 72% of its workforce. At the end of May 2022, they had about 2,900 employees in both the U.S. and India, where Garg was born. The Indian Express has also revealed that Garg had employed about 1,100 people in India, where employees received a stipend from Better/Garg during the pandemic of 10,000 rupees (Rs) a month, equal to about $125 U.S. dollars. They were also given money from Better for costs to get themselves set up to work from home. Oddly, the article said Better originally recruited those in India who had been laid off from the hospitality industry.

All of this financial turmoil, particularly surrounding Vishal Garg, certainly begs the question,

Just how badly did Garg mishandle his own company’s funds?

Maybe this could be answered partly by the company’s over $300 million loss for 2021, despite posting profits of $172 million in 2020. Or possibly there are some answers in the several other lawsuits he’s targeted by multiple investors, including PIMCO and Goldman Sachs, according to TechCrunch, for misdealings in other companies he controlled. In fact, an extremely comprehensive article by Forbes that details all of Garg’s legal battles states: “Ongoing lawsuits accuse Garg or entities he controls of improper and even fraudulent activity at two prior business ventures, and of misappropriating ‘tens of millions of dollars’,” amidst many other facts of his dastardly behavior. And hey, if nothing else, perhaps looking back at our previous warnings could give us some clues. Until then, Better “better call Saul”–if they have any hope of survival.

The post Better.com Moves Forward With SPAC Despite Legal Issues and SEC Probe appeared first on CitySignal.

Boom to Bust?

For several years, the real estate industry has been hot, but signs have been pointing to a change in the market. Mortgage rates are on the rise and home sales have been down for several months in a row and are expected to fall further. This week alone mortgage rates went up more than half a percentage point. The average rate of a 30-year fixed mortgage was around 3.5% in January as compared to 6.28% as of Tuesday, according to Mortgage News Daily. This is the highest rate since 2008. At the same time, the demand for mortgages has fallen to its lowest level in over two decades. Home prices which are inflated as much as 20% as compared to last year at this time, coupled with high inflation this year, have made homes unaffordable.

Real Estate Firms’ Reaction to Market Changes

Concerned with the downswing of the market, Compass made the decision to cut their workforce. A spokesperson from the company explained, “Due to the clear signals of slowing economic growth we’ve taken a number of measures to safeguard our business and reduce costs, including pausing expansion efforts and the difficult decision to reduce the size of our employee team by approximately 10%.” This layoff will affect about 450 workers.

The company is also reducing other costs, such as the wind-down of the use of Modus Technologies, a real estate software platform the company purchased two years ago, when home sales were surging.

Redfin CEO Glenn Kelman posted in the weekly blog, “With May demand 17% below expectations, we don’t have enough work for our agents and support staff, and fewer sales leaves us with less money for headquarters projects.” Mr. Kelman also stated that since mortgage rates are increasing faster than at any point in history, it could be years of slower home sales.

The company laid off about 470 employees, which will take place throughout the month of June, or 8% of the total staff. The Redfin staff that is being laid off will receive a minimum of 10 weeks base salary in addition to three months of health care and severance pay that will be equivalent to sales bonuses.

Today, news broke of Zumper laying off 15% of their 300-person staff last Friday. Zumper, like the other companies, stated that these lay-offs were due to revenue, not performance-based.

Cooling U.S. Economy

The cooling off of the real estate market comes at the same time as other parts of the U.S. economy that are showing signs of heading to a potential recession. Many companies have initiated layoffs over the last few months, the most recent being cryptocurrency trading firm Coinbase also announced an 18% layoff of its workers on Tuesday. Latch, a proptech smart lock company that raised $152 million in known private capital cut 130 people, or 28% of its full-time employee base last month. Rhino, another proptech startup that offers an alternative to security deposits laid off more than 20 percent of its staff, or 57 employees, earlier this year.

As economic growth slows and labor costs increase, there will be more layoffs to come. Most likely with higher prices for goods, rising fuel prices, as well as higher mortgage rates, the real estate industry could be in for a rough patch this summer, and possibly beyond.

The post Real Estate Firms Compass and Redfin and More Announce Layoffs appeared first on CitySignal.

New Lawsuit

Recently, Better’s former Executive Vice President of Sales and Operations, Sarah Pierce, filed a lawsuit claiming Garg misrepresented the company’s business metrics in order to secure the SPAC merger enabling them to go public. Pierce also alleges that Garg assured other executives that company sales would increase because “President Biden will die of COVID”, which he believed would lower interest rates and save the company. Further, Pierce claims Garg repeated the bizarre prediction “on several occasions over a period of several weeks, to at least 50 other executives and senior employees of the company, and to the board of directors.”

The lawsuit goes on to claim that Pierce was forced out of the company as retaliation for her calling Garg out on the financial situation of the business, and raising concerns about misleading investors as to their financial status. And if that wasn’t enough, she says Garg then turned around and made her the scapegoat to other executives and the board, blaming the company’s deteriorating finances solely on her. There was a lot of tension reported between the two, when Pierce left the company with other executives after the Zoom call debacle.

According to Insider, after Garg’s Zoom call and resulting bad P.R., especially when he went on to accuse at least 250 of the employees of “stealing” from the company for not working a full 8 hours. Pierce, the COO at the time, went into damage control mode, she says, with zero cooperation. She confronted Garg and told him she would not enable his false narrative, who then turned his anger on her. Allegedly, the lawyers in the company took Garg’s side, attorney Paula Tuffin telling Pierce not to “contradict” the boss (Garg), and attorney Nicholas Calamari taking the initiative to put her on administrative leave.

Furthermore, Pierce claims she was “iced out” incrementally – but progressively – from there, primarily due to her raising red flags about the company’s financial situation. Pierce says she explained to the board it was Garg who wasn’t forthcoming about the company numbers, not her, additionally telling Tuffin Garg had made multiple misleading statements about the company finances to investors and the board. The response was that they were processing her resignation – one she never submitted. Pierce claims she was then locked out of her company email and accounts, forcing her to leave. This was just the latest of many lawsuits Garg’s been involved in, leaving most of us again wondering, when will it all finally end?

The post Lawsuit by Former Employee Brought Against CEO of Better.com appeared first on CitySignal.

Better Not Pout

Let’s see, so the last time we were drawn to Better Homes in the headlines, it was for their continued massive layoffs. (I remember thinking, when is it going to end, already?!) The TechCrunch article also contained multiple tidbits of new information as well, such as the fact that apparently, Better offered all its employees in India the “voluntary separation” package we reported on last time. The problem occurred when an overwhelming 90% of their 2,100 employees tried to take them up on it! However, only about half of them, 920, were accepted.

Better Not Cry

Additionally, “numerous” laid-off employees outside of their New York headquarters have now reported problems receiving unemployment pay due to Better not paying the appropriate taxes. Incidentally, that happens to be one of the charges in one of the multiple lawsuits CEO Garg is trying to stave off. But apparently, the original SoftBank investors are well aware of his involvement in litigation and furthermore have incentivized Garg to settle the lawsuits “quietly” for further voting rights in Better.com. Garg has also personally guaranteed the $750 million dollar infusion from late last year, an unusual arrangement.

Garg’s “Love Letter”

One other slightly humorous fact is that upon learning that the details of the financial situation were going to be published, Garg wrote an email to all the current Better employees. Within it, he acknowledges the responsibility of his debt to SoftBank for the $750 million in November 2021. He further explains it by saying he: “wanted the capital to build our dream,” because he knew “the world was about to get ugly.” He additionally stated, “I might be foolish, but I believe in us. I believe in you.”

Better Say Goodbye

Even TechCrunch noted Garg’s arrogance and the fact that regardless of the outcome of the lawsuits, he stands poised for possible financial ruin and devastation. His alleged crimes are with past business partners and investors from past companies Garg founded or co-founded. The accusations are centered around his misappropriation of funds and even call Better’s founding ethics into question. This will likely not be the last time we hear about Garg and his reprehensible behavior.

The post Better.com Layoffs Stir Up More Controversy appeared first on CitySignal.

Blend’s Story

It’s an all-too-familiar story we’ve been hearing lately, as we have watched with Better.com and many others in the PropTech and Fintech industry. They make a killing during housing market booms, as we saw in 2020 and 2021, but when the market cools, they often scale back as their revenue drops with demand. In this case, that’s exactly what happened. The company, in the SEC filing, said every affected employee would be eligible for at least 18 weeks of severance pay, continued health insurance, stock-based compensation where eligible, and 12 weeks of outplacement services. The cutbacks are expected to save the business $35.4 million annually. Blend Labs stock has dropped 35.7% YTD (year to date).

Blend Labs has multiple aspects of its business, but an important part is providing mortgage products for consumers, including closing, income verification for mortgages, homeowners insurance, realty, title search procedures for title insurance policies, escrow, and other closing and settlement services. It serves companies in the loan department industries such as banks, credit unions, financial technology companies, and other mortgage lenders. The company was founded in 2012 by Ghamsari, who had previously predicted the layoffs at their earnings call in March, and who further predicted the industry would suffer a 35% decrease in mortgage loan originations, in 2022. Some of Blend’s well-known clients are lenders like Wells Fargo and U.S. Bank.

The Role of Interest Rates

One of the big problems is that the housing market has been on a roller-coaster of a ride since the pandemic, creating instability and unpredictability. When the market’s hot, it’s hot! And when it’s not, it’s not. We’ve heard a lot about supply being down tremendously and demand being at a record high, both of which are true. However, the hike in interest rates is what’s driving the downturn more than anything else. In 2018, interest rates were at 4.54%, and then they started falling in 2019 when they got to 3.94%. But in 2020, they dropped to just 3.10%, and in 2021 even further, with the year averaging 2.96%. During this time we saw an incredible surge in refinancings, along with a booming housing market that drove up house prices at an alarming rate. This anomaly, accompanied by the highest inflation on absolutely everything in 40 years, is currently what prompted the Federal Reserve to take measures to slow it all down, by raising interest rates significantly.

Now, keep in mind that interest rates are different for everyone depending on a variety of factors, and they can literally change by the minute. At this moment, for a New Yorker with a 700-719 credit score borrowing $500K, a 30-year fixed-rate loan with a 20% down payment would get a 5.75% rate.

Do you see what we mean about variables? Even just one of those facts being slightly altered makes a big difference. For instance, changing the loan amount to $300K instead hikes the rate to 5.84%. How it’s all figured out mathematically can be extremely confusing for most of us. One thing history has shown is that eventually, the economy will stabilize itself. In the meantime, the government tries to implement measures that they know should help that process happen sooner, rather than later.

Businesses Cut Back for Self Preservation

The Mortgage Bankers Association (MBA) does a weekly survey on various things related to the housing market. For the week ending April 15th, mortgage applications decreased by 5.0% over just one week prior. So you can see how this extreme drop in consumer demand (for whatever reason) would affect numerous types of businesses related to the industry, in a dramatic way. This is evidenced by companies such as Blend Labs and Better.com, which we’ve covered here, but also others. The Real Deal reports Movement Mortgage, Interactive Mortgage, and Freedom Mortgage have had massive layoffs. Inman reports Pennymac, Guaranteed Rate, Keller Mortgage, and even Wells-Fargo have all reported having to scale back and cut costs.

Closing Remarks

There are literally hundreds of others who have had significant layoffs, including Knock and Homie, who we’ve also covered. The real estate business is volatile, and most people in the industry for any length of time understand that. Still, even though there were strong indicators that this kind of crash was inevitable, now that it’s happening, some businesses will not survive. Be that as it may, it’s still not pleasant going through these lows. But the housing market has seen its share of ups and downs, and like the stock market, will eventually right itself. Until then, we just have to ride it out and take measures to protect the investments we make. We will survive!

The post Blend Labs Lays Off Significant Workforce appeared first on CitySignal.

Tsk-tsk-tsk. As predicted, Better.com seems to be on the slippery slope of demise. We’ve all heard the death rattle, and been expecting the news for months now – but, struggling to hang on, they continue to drag out the inevitable. This week, yet another tip was given to TechCrunch that the mortgage lending company is poised for its fourth massive layoff since the beginning of December 2021.

What’s Going On

Unless you’ve been living under a rock, you probably already know that Better has been in the news for several reasons lately, but none of them are good. The company has already gone through two massive layoffs, bumbling exactly – oh, two of them. (Yikes!) Even still, this company sputters and gasps, somehow still breathing, and multiple sources on the inside tell of yet another round of layoffs ahead. This time, the Better real estate team and workers in the refinance department are expected to be targeted. This comes as one might expect, as Better has said the company suffered badly with the increase in interest rates and inflation issues.

This is expected to affect hundreds more of the remaining staff. Better started out with about 10K employees in the U.S. and India, but in December laid off a little more than 900 of them on a Zoom call in their first round of layoffs. Then in March of this year, they executed a second massive layoff, this time over 3,000 employees being affected. A third round was accomplished just last week, with the company offering a 60-day severance pay and health care coverage for anyone who wanted to voluntarily separate from Better.

Now, this – and amidst the toxic environment this business’s CEO Vishal Garg inhabits. Speculation is now about shutting down those sections of the business altogether, with many predicting imminent catastrophic failure. Surprisingly, however, speaking of Garg, during a company meeting regarding the layoffs he apparently told employees that although they made $250 million last year, they “pissed away” $200 million. He admitted lacking any discipline with spending company money on hiring new workers during the pandemic.

Amazingly, Better says they are still planning to go public, in an attempt to boost their precarious financial position. Some people are speculating if Better fails, what does that mean for the proptech industry as a whole, moving forward? Perhaps it just means move over, Better – for better innovations and businesses to come.

The post Better.com Starts Round Four of Layoffs appeared first on CitySignal.

The company appears to be in its death throes. TechCrunch reports obtaining an email that was sent out yesterday to all remaining employees “level 10 and below” with an option to take a “voluntary separation” package. The copy is below, but outlines an offer of 60 days of severance pay and health coverage to “anyone who wants it.” 

It’s starting to get old. Come on, Better, there must be a better way. Admit defeat and let’s move on. Here’s the email: 

Team,

As many of you know, the uncertain mortgage market conditions of the last couple of weeks have created an exceedingly challenging operating environment for many companies in our industry. This is requiring many of them to make difficult decisions in order to sustain their businesses. Despite ongoing efforts to streamline our operations and ensure a strong path forward for the company, Better is no exception. 

For that reason, we are announcing a voluntary separation program to many US-based Better employees in Corporate and PDE who are Level 10 and below. The offer is for 60 working days of severance pay and health insurance coverage for those who leave the company. At some point later today, eligible employees will receive an email and a separation agreement offer with the terms that apply to them individually. Employees who are eligible and wish to accept the agreement can sign it using Workday. 

• Employees who are under 40 years old will have up to seven days from receipt of the agreement to accept the offer. The last day at Better for those who accept the offer will be Friday, April 15th. They will also receive their final payment on this date. 
• Employees who are 40 years old and above will have up to 21 days to accept the offer. Those who sign the separation agreement on a Wednesday or earlier will have a last day at Better on Friday of that week, with final payment on that date. Those who sign the agreement on a Thursday or Friday will have a last day at Better on Friday of the following week, with final payment on that date.
• Access to the Better system will be turned off shortly after signing the agreement, in accordance with financial, legal and security best practices and regulations for our industry. Departing employees should ensure their personal email and mailing address are updated in Workday.
• As always, adherence to our Code of Conduct and Employee Handbook will be enforced throughout this process.

While this voluntary separation exercise is difficult, we remain confident in the strong path ahead for Better. Given the headwinds facing our industry, collaboration and innovation – the hallmarks on which Better built its success – will be more essential than ever. For that reason, we look forward to returning to in-office mode in the coming weeks, with re-examined RTO policies.

Better has a tremendous future ahead, built on the ethos that made us so successful in the first place. That includes a culture that rewards high performance and excellent customer service. I look forward to sharing more information on that in the weeks ahead. 

Thank you for everything you do to serve our customers and support this business. We remain resolute in our commitment to making homeownership simpler, faster and more accessible for all Americans.

After Garg’s ill-fated Zoom call that went viral, firing over 900 employees just before Christmas in December 2021, and then his subsequent defamatory remarks about those employees “stealing” from the company by being unproductive and lying about the hours they actually worked, Garg took a one-month hiatus.

While he was gone, several key management staff resigned. Upon his return, though they put a different face handling things to the public, the company announced another massive layoff of over 3,000 employees on March 8th, 2022. Again, Better.com handled the situation poorly, making headlines. 

The post Better.com Offers Voluntary Separation To Emplyees appeared first on CitySignal.

This time, the company laid off some 3,000 employees and handled it poorly once again. Some employees found out they had been laid off when they were locked out of company accounts, and some by realizing their severance pay had been deposited in their bank accounts before they’d been informed. 

In a statement, the company said, “This was certainly not the form of notification that we intended and stemmed from an effort to ensure that impacted employees received severance payments as quickly as possible,” and blamed the upcoming interest rate hike as the problem, along with a fluctuating housing market. Better had a total of 9,000+ employees in the United States and India, and with the two layoffs constituting around 43% of the staff, this leaves approximately 5,100 employees. One is indeed left wondering how much of a company can be left, at this point.

Oddly, CEO Vishal Garg has stayed completely out of the spotlight since his return in January. But this time, at least the massive layoff was accompanied by a severance pay of 60-80 days, 3 months of health coverage, and support from a career transition firm called Randstad RiseSmart, also in a statement from Better – who is trying, albeit unsuccessfully, to do better. 

The post Better Butterfingers Another Layoff  appeared first on CitySignal.