With only three weeks until 2023 arrives, housing industry executives are adjusting their operations to face what is expected to be another challenging year.
The Federal Reserve will continue its fight to tame inflation — with its seventh consecutive interest rate hike expected from its December 13 and 14 meeting — despite looming concerns of a prolonged recession.
The U.S. GDP is projected to decline 1.3% in 2023 with an inflation under 3% on a year-over-year basis by year-end and federal funds rate of 3.50%-3.75%, after a 4.50% peak in early 2023, according to a Wells Fargo Investment Institute report published Friday.
What does it mean for mortgage companies?
“Profitability is likely to remain very constrained well into 2023, until excess origination capacity in the industry declines materially,” Moody’s analysts said in a recent report on nonbank mortgage finance companies.
With still-high interest rates depressing both refinance and purchase originations due to challenged housing affordability and increased economic uncertainty, origination volumes will likely continue to decline moderately in 2023, Moody’s explained.
Against the backdrop of this challenging economic and housing environment, companies in the housing industry continued to restructure and cut workforce to better position themselves.
CoStar sheds jobs after resi reorg
CoStar Group, a provider of online real estate marketplaces, information and analytics in the commercial and residential property markets, cut approximately 100 positions as it announced the integration of Homesnap with its Homes.com brands late last month.
CoStar bought Homesnap — an online and mobile software platform that aims to provide user-friendly applications to optimize residential real estate agent workflow – in 2020 and a year later bought Homes.com, a platform that offers real estate professionals advertising and marketing services for residential properties.
Given that Homes.com is “the more agent friendly real estate portal alternative,” it took steps to combine and streamline the operations and functionality of Homes.com and Homesnap, the firm said in a statement on Nov. 30.
“Over the course of the next 12 months, CoStar Group expects to increase the net number of employees building Homes.com by 700 after today’s reorganization and headcount reduction of approximately 100 duplicative roles.”
On the day CoStar announced the integration, the Virginia-based firm submitted a Worker Adjustment and Retraining Notification (WARN) notice to California’s Employment Development Department (EDD).
The company, a giant in the housing industry with a market cap of $32.8 billion as of Friday, decided to “permanently reorganize and eliminate its residential customer services, sales and product trainer operations in San Diego,” according to the WARN notice reviewed by HousingWire.
A total of 14 employees — seven customer services, six sales and one product trainer positions — will be terminated, which is expected to occur on or about January 30, 2023.
A 25% cut at UpEquity
Austin-based mortgage tech platform UpEquity had a new round of layoffs this week affecting 25% of the total employees across all job functions.
“We made the difficult decision to reduce our workforce in order to ensure we have the ability to accomplish our mission of creating more equal access to the American Dream, regardless of external market forces,” co-founder Tim Herman wrote in an email to HousingWire.
Over the last two years, UpEquity raised over $70 million from investors, including $50 million in a Series B funding round led by the venture capital firm S3 Ventures.
To manage its cash position amid a shrinking mortgage market, the company laid off nine of its 93 employees in June. This week, the company cut additional staffers, including several high-level positions.
This week’s layoffs, which affected 25% of staff, included Ricky Puente, former mortgage operations lead, and Dani Hernandez, its former vice president of mortgage.
UpEquity is offering former employees tenure-based severance packages of four to six weeks, according to Herman.
Co-founded in 2019 by Herman and Louis Wilson, the lender and “power buyer” allows homebuyers to make all-cash offers to compete with institutional investors.
The company then receives monthly payments with interest from the homebuyers, who can avoid going through a bank to get a mortgage. UpEquity claims it takes 17 days, on average, to close a deal, while the average in the industry is closer to 50 days.
UpEquity earns a commission from brokering or selling the mortgage buyers take out to buy their homes. In states where purchase contracts can’t be assigned, UpEquity buys the home upfront and writes the mortgage after closing the deal.