In early June, both Redfin and Compass announced employee layoffs as a result of rising interest rates and falling consumer demand – and it's only the most recent shift in this market. Mortgage and Title companies have also been downsizing their overhead and laying off employees throughout the spring. Included in these recent layoffs is Compass' Modus Title Company. And to add fuel to the fire is the fact that consumer sentiment is at the same level as it was during the Great Recession.
Consumer sentiment is something all of us need to watch. Both in people's purchasing power and in their willingness to invest in real estate in an increasingly unaffordable market. Technically, the real estate market is in a much healthier place than it was leading up to the Great Recession. Buyers have more equity in their homes and more stable financial environments. But startled consumers can quickly crash the market. And without a doubt, Redfin's economist, Daryl Fairweather, is probably seeing this in real life. Ms. Fairweather is one of the leading economists in the real estate industry. In much of her early work she studied what led people to go into foreclosure during the Great Recession.
Meanwhile traditional brokerages like Coldwell Banker Bain and a few others have many legacy brokers and managers who were actively working during the Great Recession. They understand a pivot is coming and are prepped to support their brokers through the process. These traditional brokerages already have tried and true structures to support them in a shifting market. But there is a risk in naively assuming that this recession will be like the last one.
One model to weather a shift in the real estate market is to better understand how Coldwell Banker Bain's Capitol Hill office remained in the black throughout the Great Recession. They had a group of brokers who had both old school negotiation skills and the capacity to adapt to new technologies. The management team also maintained staffing and retained the bulk of their brokers throughout the recession. It is much easier to go fast when a market turns positive and you are fully staffed. Thankfully, many of these brokers and managers are still in the business making the ability to manage this shift easier.
More traditional real estate brokerages also practice old school client relationships. Something that many disruptors in the real estate industry didn't fully grasp is the client experience AFTER they bought a home. During times of uncertainty consumers want to know you are a place of resources and stability.
Meanwhile the layoffs at Redfin are having an immediate impact and interrupting clients' buying and selling transactions. Coldwell Banker Bain Broker Kim V. Colaprete was recently interviewed on King 5 news about the real estate shift. Right after her interview she received a call from a Redfin broker who is representing a buyer on one of her listings. The broker called her to let her know she had been laid off and didn't know who would be taking over for the transaction. Going back to consumer confidence levels means that a client can and will worry about a sudden shift in their transaction. Interruptions like this have a huge impact on the clients as they go through the very stressful experience of buying a home.
Redfin's brokers are employees and not contract workers like legacy real estate firms. Not only are these layoffs impacting the clients they will also leave a large gap in the skill set of these brokers. It is in shifting markets that you learn negotiation skills to help you better represent your clients. Missing out on this moment means you are not built for the "next" market. That leaves you as a broker with a skill set that only works in a multiple offer market.
There are opportunities in a shifting market. Anne Jones, owner of Windermere Abode is currently opening a new office. Anne noted that "People need help navigating this market more than ever - and I think having a Realtor who will get in the trenches with them matters. But knowing your market, having people who will answer your calls (vendors, lenders, appraisers and other Realtors) is critical." And from a tech development perspective, who will develop that transformative tech that helped many real estate brokers during the Great Recession? DocuSign and Dropbox are two companies that seem old school now, but were game changers when they came out in the real estate industry.
Chavi M. Hohm is a broker and team lead at Team Diva Real Estate with Coldwell Banker Bain. Team Diva is a top producing Seattle real estate team who is known for advocating for diversity and inclusion in the real estate industry. Over the years Team Diva has been recognized as one of the most innovative real estate marketing organizations by Inman News and is often a speaker at various real estate events. Chavi's great passion is mentoring the next generation of real estate brokers who come from a diverse background. In her free time you will often find Chavi taking long dog walks with her rescue dogs, hanging out at shows with her wife Kim, and spending time thrifting with her teenage nephew that Kim and her are raising.