The brokerage firms Redfin and Compass announced layoffs on 14th June 2022. As reported by CNBC, the moves come amid rising mortgage rates and a slowdown in the housing market. Redfin, which just the other week announced it was rescinding job offers to cut costs, has announced that 8% of its workforce is being eliminated. “…We don’t have enough work for our agents and support staff,” its CEO Glenn Kelman said. Compass announced it is letting go 10% of its staff due to “clear signals of slowing economic growth.”
While we are truly sick to our stomach by the impact on the individuals that have lost their jobs — and the effects on their families and everyone else in their broader communities, we are not surprised by this. The writing was clearly written on the wall and it was ominous given the lack of a path to profitability. Burning cash to show growth is not a recipe for building a sustainable business.
Similarly, Redfin’s 2022 First Quarter’s Real estate services gross profit was $23.7 million, a decrease of 41% year-over-year, and the real estate services gross margin was 13%, compared to 24% in the first quarter of 2021.
Their Net loss was $90.8 million, compared to a net loss of $35.8 million in the first quarter of 2021. Things are most likely are going to become worse in the next couple of quarters due to how quickly the market has shifted.
Unfortunately, these layoffs are just the beginning.
The traditional real estate agents will be exposed in this market.
They are going to be caught flat-footed on this one.
Listings that used to sell in less than a week, could take months to sell.
Primary homebuyers will view dozens and dozens of homes with no urgency to make an offer.
The traditional real estate agents’ transaction volume will go down and with that their commission too. Their buyers will demand more rebates.
No innovation, no enduring business.
Their own businesses as well as their agents’ businesses have not been built to not just survive, but thrive despite uncertain economic times.
We find it inexplicable and inexcusable that all the legacy, as well as new companies/brokerages, didn’t respond to the changing needs of the consumers – the buyers, sellers, and the homeowners. Their focus has been to look for the next transaction and make their split without providing real value.
In the coming years, don’t be surprised that 70 to 80% of the traditional agents will be out of business given the higher expectations that the clients have of them and the rapid digital transformation of the industry. Not to mention the Department of Justice’s lawsuit against the National Association of Realtors and other such lawsuits.
However, not all is lost.
Consider these facts:
- The typical US homeowners are not retiring on their 401K/IRA. At retirement over 80 percent of their net worth is built by their home(s) but no one is helping them buy true wealth-building homes.
- The US homeowners are sitting on record home equity of $26.3 Trillion but most of them don’t know how to leverage this equity to build more wealth.
- These homeowners are losing over $150 billion of potential wealth every year since there is no solution to manage their homes as assets.
- The traditional real estate agents can’t help. They are drowning in the “sea of sameness”. They lack the toolset and the mindset to help their clients with smart data-driven decisions to build wealth with a smart real estate portfolio.
These facts represent a huge untapped opportunity.
The need of the hour is for the real estate agents to:
- elevate themselves as premium, trusted Real Estate Wealth Advisors,
- provide superior differentiated services that their clients cannot find anywhere else, and
- enable their clients to live the life they dream of with a smart real estate portfolio.
America’s Real Estate Wealth Advisor
This is exactly what we do at BricksFolios, America’s Real Estate Wealth Advisor.
#Elevate #Differentiate #ChangeTheGame is the core premise on which we have built our business.