WASHINGTON, July 1 (BNA) – US mortgage lenders, refinance firms and real estate brokers may lay off thousands of employees in the coming months, as many Americans put off buying a home, industry sources said.
Low interest rates, stimulus payments and working from home during the coronavirus pandemic have prompted many millennials to look for new homes, fueling the US housing market, Reuters reports.
But the market is now calming amid economic uncertainty stemming from the conflict in Ukraine and a jump in mortgage rates as the Federal Reserve raised the cost of borrowing.
said Robert Dietz, chief economist at the National Association of Home Builders.
US existing home sales fell to a two-year low in May, but the median home price rose 14.8% from a year earlier to an all-time high of $407,600, topping $400,000 for the first time.
Rating agency Fitch expects new home sales to fall 2% this year, compared to its previous forecast of a 1.8% rise.
The US housing industry, which employs hundreds of thousands of people, is responding with a downturn.
This month, both real estate brokerage Compass Inc (COMP.N) and Redfin Corp (RDFN.O) announced hundreds of job cuts.
And as the most popular US mortgage rate nears its highest level since November 2008, the effects could spill over to mortgage companies as demand for refinancing wanes.
JPMorgan Chase & Co (JPM.N), the largest US bank, has begun laying off employees in its mortgage arm, citing “cyclical changes in the mortgage market.”
A source familiar with the matter said that more than 1,000 employees will be affected by the move, with about half of them moving to different departments within the bank.
Executives at mortgage lender Depot (LDI.N) said in an earnings call last month that they expect to cut staff to manage costs as market volumes decline. A source at Ally Financial Inc (ALLY.N) said it was focusing on “prudent and essential hiring only.”
Both companies added about 1,000 employees last year.
“There is almost no incentive to refinance. So this downturn in business, combined with our view of slowing (home) sales, indicates that layoffs will be needed across the industry,” said Douglas Duncan, Senior Vice President and Chief Economist. In Fannie Mae said.
Even if home sales stabilize, refinancing volumes will be significantly lower than they have been in the past two years, said Leonard Kiefer, deputy chief economist at Freddie Mac.
Olu Sonola, Fitch’s head of US regional economics, said the southern, central and western parts of the United States will likely see more housing-related job losses than other regions where construction has ramped up significantly since the pandemic.
On Thursday, Texas-based First Guaranty Mortgage Corp. said it has filed for Chapter 11 bankruptcy and filed a warning (Worker Retraining Amendment and Notice Act) notifying the layoffs of 428 employees.
Homebuilders, who are already understaffed, may not announce layoffs due to the backlog, Sonola said.
Sure enough, the healthy backlog of some homebuilders, who learned their lessons from the 2008 global financial crisis, shows that it’s not all disaster and bleak.
“There are still a lot of people who want a single-family home,” Dietz added.
Some sub-sectors such as manufactured homes and recreational vehicle (RV) locations may be insulated from job cuts because most residents are retired, CFRA analyst Kenneth Lyon said.
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