Redfin shutting home-flipping business and pares headcount by 13%
Redfin (NASDAQ:RDFN) is following in Zillow's (Z) (ZG) steps by shutting its iBuying business, as home prices drop with the surge in mortgage rates. Its shares slid 8.9% in Wednesday morning trading.
The move is part or a larger headcount reduction plan at the real estate brokerage company that will result in cutting 862 jobs, representing 13% of its employees. The wind-down of RedfinNow, the home-flipping part of the company, accounts for 264 of those job cuts. In addition, Redfin (RDFN) said the current roles of 218 employees will be eliminated, but they'll be offered new positions in the company.
The fresh round of job cuts follows its June workforce reduction. "Since June, mortgage interest rates have continued to climb and expectations for home sales have come down even further. Today’s workforce reduction assumes a housing downturn that lasts at least through 2023," the company said.
Redfin (RDFN) will record an $18M write-down of inventory related to RedfinNow, a result of purchasing homes during 2022 at higher prices than it currently estimates it can get for them, net of selling costs.
The workforce reduction and RedfinNow closing is expected to result in pretax charges of ~$21M-$23M, primarily in Q4 2022 and Q1 2023. An estimated $19M-$20M of the charges relate to one-time termination benefits consisting of severance and related costs and an estimated $2M-$3M of charges associated with long-lived assets pertaining to RedfinNow.
The company may incur additional charges as it evaluates alternative courses of action to wind down the RedfinNow business.
The real estate sector is weak all-around in Wednesday trading, especially for iBuyers Opendoor Technologies (OPEN), -7.3%, and Offerpad Solutions (OPAD) -4.9%. Compass (COMP) is down 7.6%, Zillow (Z) -3.3%, Anywhere Real Estate (HOUS) -3.3%.
About a year ago, rival real estate app Zillow (Z) made the decision to exit iBuying due to unpredictable home prices.