US real estate robberies put thousands of jobs at risk
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July 1 (Reuters) – U.S. mortgage lenders, refinance companies and real estate brokers could lay off thousands of staff in the coming months, industry sources said, as many Americans delay buying a home. home.
Low interest rates, stimulus payments and working from home during the coronavirus pandemic had prompted many millennials to search for new homes, fueling a burning US housing market.
But the market is now cooling amid economic uncertainty stemming from the conflict in Ukraine and a spike in mortgage rates as the Federal Reserve raises the cost of borrowing.
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“We are seeing a reduction in buyer interest due to the cost of buying a home and this is due to both rising interest rates as well as the continued high cost of building a house,” 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, exceeding $400,000 for the first time. Read more
Rating agency Fitch expects new home sales to fall 2% this year, compared to its earlier forecast of a 1.8% rise.
The US housing industry, which employs hundreds of thousands of people, is responding by shrinking.
This month, real estate brokers Compass Inc (COMP.N) and Redfin Corp (RDFN.O) both announced hundreds of job cuts.
And as the rate for America’s most popular home loan nears its highest level since November 2008, the effects could ripple through to mortgage companies as demand for refinancing wanes.
JPMorgan Chase & Co
More than 1,000 employees would be affected by the move, around half of whom would move to different divisions of the bank, a source familiar with the matter said.
Executives at mortgage company loanDepot Inc (LDI.N) said on an earnings call last month that they expected to cut staff to manage costs as market volumes decline. A source at Ally Financial Inc (ALLY.N) said it was only focused on “careful and essential hiring”.
Both companies added about 1,000 employees last year.
“There is almost no incentive to refinance. So this drop in business, in addition to our view of slowing (home) sales, suggests that there will have to be layoffs in the industry,” said Douglas Duncan, senior vice president and chief economist at Fannie Mae, said.
Even if home sales stabilize, refinance volumes will be significantly lower than they have been for the past two years, said Leonard Kiefer, deputy chief economist at Freddie Mac.
Regions in the South, Midwest and West of the United States will likely experience more housing-related job losses than other regions, as they have dramatically accelerated construction since the pandemic, said Olu Sonola, head of of Fitch’s regional economy in the United States.
On Thursday, Texas-based mortgage lender First Guaranty Mortgage Corp said it had filed for Chapter 11 bankruptcy and filed a Worker Adjustment and Retraining Notification Act (WARN) notifying the layoffs of 428 employees.
Homebuilders, already suffering from labor shortages, may not announce layoffs due to backlogs, Sonola said.
Certainly, the healthy backlogs of some homebuilders, who learned the lessons of the 2008 global financial crisis, show that all is not catastrophic.
“There are still a lot of people who want a single-family home,” Dietz added.
And some subsectors like manufactured homes and recreational vehicle (RV) sites could be immune to job cuts because most residents are retired, CFRA analyst Kenneth Leon said.
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Reporting by Niket Nishant, Abhijith Ganapavaram and Kannaki Deka in Bengaluru; Editing by Saumyadeb Chakrabarty
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