U.S. housing hold-ups put thousands of jobs on the line
Send a link to a friend
[July 01, 2022] By
Niket Nishant and Abhijith Ganapavaram
(Reuters) - U.S. mortgage lenders,
refinancing companies and real-estate brokers may lay off thousands of
employees in the coming months, industry sources said, as many Americans
put off buying a home.
Low interest rates, stimulus payments and working from home during the
coronavirus pandemic had prompted many millennials to hunt for new
homes, fuelling a red-hot U.S. housing market.
But the market is now cooling amid economic uncertainty resulting from
the Ukraine conflict and a jump in mortgage rates as the Federal Reserve
raises the cost of borrowing.
"We're seeing a reduction in buyer interest because of the cost of
buying home and that's due to both the run up in interest rates as well
as the ongoing high cost of actually building a home," said Robert
Dietz, chief economist at the National Association of Home Builders.
![](http://archives.lincolndailynews.com/2022/Jul/01/images/ads/current/graue_22SILVERADO_061822.png)
U.S. existing home sales tumbled to a two-year low in May but the median
house price rose 14.8% from a year earlier to an all-time high of
$407,600, passing $400,000 for the first time.
Ratings agency Fitch expects new home sales this year to fall 2%,
compared to its earlier forecast of a 1.8% rise.
The U.S. housing industry, which employs hundreds of thousands of
people, is responding by shrinking.
This month, real estate brokers Compass Inc and Redfin Corp both
announced hundreds of job cuts.
And as the rate for the most popular U.S. home loan nears its highest
level since November 2008, the effects may spread to mortgage companies
as demand for refinancing wanes.
Interest rate % on 30-year fixed rate mortgage
https://graphics.reuters.com/USA-MORTGAGE/LAYOFFS/
znvnegnmgpl/chart.png
JPMorgan Chase & Co, the largest U.S. lender, has started laying off
employees in its mortgage arm, citing "cyclical changes in the mortgage
market".
More than 1,000 employees would be affected by the move with about half
of them moving to different divisions within the bank, a source familiar
with the matter said.
[to top of second column] |
![](../images/070122PIX/busine41.jpg)
A house under construction is seen in Los Angeles, California, U.S.,
June 22, 2022. REUTERS/Lucy Nicholson
![](http://archives.lincolndailynews.com/2022/Jul/01/images/ads/current/humanesociety_sda022411.png)
Executives at mortgage firm loanDepot Inc said in an earnings call last month
that they were expecting to cut headcount to manage costs as market volumes
drop. A source at Ally Financial Inc said it was focusing on "prudent and
essential hiring only".
Both firms added about 1,000 employees last year.
"There is almost no incentive to refinance. So that drop off in business, in
addition to our view of slowing (home) sales, suggests there will need to be
layoffs across the industry," Douglas Duncan, senior vice president and chief
economist at Fannie Mae, said.
Even if home sales stabilize, refinance volumes are going to be significantly
lower than where they were the last couple of years, Leonard Kiefer, deputy
chief economist at Freddie Mac, said.
The Southern, Midwest and Western parts of the United States will likely see
more housing-related job losses than other areas as they significantly ramped up
construction since the pandemic, Olu Sonola, Fitch Head of US Regional
Economics, said.
On Thursday, Texas-based mortgage lender First Guaranty Mortgage Corp said it
had filed for Chapter 11 bankruptcy and filed a WARN (Worker Adjustment and
Retraining Notification Act) notifying layoffs of 428 employees.
Homebuilders, who are already reeling under labor shortages, may not announce
layoffs due to backlogs, Sonola said.
To be sure, healthy backlogs at some homebuilders, who have learnt their lessons
from the global financial crisis of 2008, show it is not all doom and gloom.
"There's still a lot of people who want a single family home," Dietz added.
![](http://archives.lincolndailynews.com/2022/Jul/01/images/ads/current/LPL_small%201.gif)
And some sub-sectors like manufactured homes and recreational vehicle (RV) sites
may be insulated from the job cuts as most residents are retired, CFRA analyst
Kenneth Leon said.
(Reporting by Niket Nishant, Abhijith Ganapavaram and Kannaki Deka in Bengaluru;
Editing by Saumyadeb Chakrabarty)
[© 2022 Thomson Reuters. All rights
reserved.]This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |