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While many employees in the battered crypto sector are dreading that 4pm calendar invite on a Friday, the same can probably be said for people working in the mortgage industry. A cooling housing market has everyone from traditional mortgage lenders to hot startups dumping staff faster than you can say “market conditions.”
- Last week, JPMorgan laid off 1,000 employees from its home-lending division, according to Bloomberg.
- Wells Fargo cut hundreds of employees in April after its mortgage revenue fell 33% from Q1 2021 to 2022, according to Insider.
How we got here: This month, the Fed jacked up interest rates by the greatest amount since 1994, and Chair Jerome Powell signaled there’s plenty more tightening on the horizon to help combat 40-year-high inflation. This benchmark interest rate, which adjusts borrowing costs between banks, also influences borrowing costs across the economy, including mortgages.
The 30-year fixed-rate mortgage is now hovering right below 6%, compared to just under 3% at the same time last year—and that’s starting to seriously spook homebuyers.
Boom and bust
Record-low interest rates during the pandemic helped fuel a wildly competitive housing market—prompting mortgage lenders to staff up in order to handle the surge in demand for home financing.
- From March 2021 to February 2022, the number of mortgage and nonmortgage loan brokers jumped 8%, according to the Bureau of Labor Statistics.
- 1.8 million people were working in real estate last month—the greatest number on record.
But like so many tech companies, these firms also realized they may have overhired during their pandemic growth spurt…
Better.com, the mortgage startup infamous for firing people en masse over Zoom, hired nearly 7,000 employees during the pandemic. But after three rounds of layoffs in the last six months, the company, which had ~10,000 employees in December, now has less than 5,000.
Mortgage loan originator for US Bancorp Joanna Yu told Bloomberg, “In 2021, we basically had no life. …But starting from April, it was totally dead. It’s like vacation time.”
Big picture: The housing market may be seeing less of a crash and more of a return to typical conditions. Svenja Gudell, chief economist at Indeed and former chief economist at Zillow, told Bloomberg, “We’re seeing this sort of normalization in a lot of areas. …And I think housing is one of them.” For instance, over 40% of home sellers in pandemic faves such as Salt Lake City, Boise, and Denver dropped their prices in May, according to Redfin.
Those price cuts haven‘t spilled across the country yet, though. The median price for an existing US home hit a record high of $407,600 last month.—MM