With just three weeks to go until 2023 arrives, housing industry executives are adjusting their operations to weather what is expected to be another challenging year.
The Federal Reserve will continue its fight to bring inflation under control – with its seventh consecutive interest rate hike expected from its December 13-14 meeting – despite looming fears of a prolonged recession.
US GDP is expected to decline 1.3% in 2023 with inflation below 3% on an annual basis by the end of the year and a federal funds rate of 3.50% to 3.75%, after a peak of 4.50% in early 2023, according to a Wells Fargo Investment Institute report released Friday.
What does this mean for mortgage companies?
“Profitability is expected to remain very constrained through 2023, until excess origination capacity in the industry declines significantly,” Moody’s said analysts in a recent report on non-bank mortgage finance companies.
With still-high interest rates depressing both refinances and purchases due to challenging housing affordability and heightened economic uncertainty, origination volumes will likely continue to moderately decline in 2023, explained Moody’s.
In the context of this difficult economic and real estate environment, companies in the housing sector have continued to restructure and downsize to better position themselves.
CoStar cuts jobs after Resi reorganization
CoStar Groupa provider of online real estate markets, information and analysis on the commercial and residential real estate markets, cut around 100 jobs as it announcement Homesnap’s integration with its Homes.com brands late last month.
CoStar purchased Homesnap – an online and mobile software platform that aims to provide user-friendly applications to optimize the workflow of residential real estate agents – in 2020 and a year later purchased Homes.com, a platform which provides real estate professionals with residential advertising and marketing services.
Because Homes.com is “the most agent-friendly real estate portal alternative,” it has taken steps to combine and streamline the operations and functionality of Homes.com and Homesnap, the company said in a statement. November 30.
“Over the next 12 months, CoStar Group expects to increase the net number of employees building Homes.com by 700 following today’s reorganization and reduction of approximately 100 duplicate positions.”
On the day CoStar announced the integration, the Virginia-based company submitted a Worker Adjustment and Retraining Notice (WARN) to the California Department of Employment Development (EDD).
The company, a housing industry giant with a market capitalization of $32.8 billion on Friday, decided to “reorganize and permanently eliminate its residential customer services, sales and product training operations in San Diego,” according to the WARN review reviewed by HousingWire. .
A total of 14 employees – seven customer service positions, six sales positions and one product trainer position – will be laid off, which is expected to happen on or around January 30, 2023.
A 25% drop at UpEquity
Austin-Based Mortgage Technology Platform UpEquity had another round of layoffs this week, affecting 25% of the total number of employees across all functions.
“We have made the difficult decision to reduce our workforce to ensure that we have the ability to accomplish our mission of creating more equal access to the American Dream, regardless of external market forces,” the co-wrote. founder Tim Herman in an email to HousingWire. .
Over the past two years, UpEquity has raised over $70 million from investors, including $50 million in a series B fundraising led by the venture capital firm S3 companies.
To manage its cash position in a declining mortgage market, the company laid off nine of its 93 employees in June. This week, the company cut additional staff, including several high-level positions.
Layoffs this week, which affected 25% of staff, included Ricky Puente, a former head of mortgage operations, and Dani Hernandez, its former vice president of mortgages.
UpEquity is offering former employees term-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 buyers to make cash offers to compete with institutional investors.
The company then receives monthly payments with interest from the purchasers, who can avoid going through a bank to get a mortgage. UpEquity claims that it takes 17 days, on average, to complete a transaction, while the industry average is closer to 50 days.
UpEquity earns a commission by negotiating or selling the mortgages buyers take out to purchase their homes. In states where purchase agreements cannot be assigned, UpEquity purchases the home upfront and underwrites the mortgage after the deal closes.