Redfin is furloughing 41% of its real estate agents and 7% of its overall staff because the novel coronavirus pandemic has severely curtailed homebuying and selling this spring.
The company is also temporarily slashing all salaries by 10%-15% and canceling bonuses for the remainder of the year.
The company announced the reductions Tuesday in a Securities and Exchange Commission filing. Redfin chief executive Glenn Kelman also revealed the move in a blog post on the company’s website titled “A Big Redfin Furlough, With Some Permanent Departures.” He stated the furloughs will begin Friday and last through Sept. 1.
“The level of uncertainty that businesses have isn’t just about whether demand will be up 3% or down 2%,” Kelman said in a phone interview. “It’s about whether they can operate at all. That level of uncertainty is behind these furloughs.”
A Redfin spokesperson declined to say how many of those laid off worked at the company’s Seattle headquarters.
Unlike real estate agents at most brokerage firms, Redfin agents are employees who are paid salaries and receive bonuses for sales. They also are provided benefits such as health insurance. Other brokerage firms classify agents as independent contractors who receive commissions rather than fixed salaries.
Kelman said some of the agents furloughed could come back sooner.
“Having a thousand people on the sideline waiting to come into the game is a really comforting capability,” he said. “We want to bring them back. They want to come back. And my guess is that some people will come back early.”
Kelman was pressed if all furloughed agents would return.
“You’re asking me if we can commit that every single person will absolutely come back on September 1, there’s no CEO in America that can make that commitment,” he said.
Kelman also declined to speculate on what level of demand he would need to see to bring back the furloughed agents.
“I know you want a formula,” he said. “Every market will be different. The simple rule is just because you are busy for a day, doesn’t mean that furloughed employees are coming back. I think we would have to feel that it was busy for several weeks and maybe even several months because we don’t want to bring someone back and then send them out again.”
Furloughed Redfin agents will receive a minimum $1,000 transition bonus. The company will also pay health benefits through the summer. The agents can apply for unemployment benefits through their state as well as the federal government’s CARES Act.
It was less than a month ago that Kelman sent a letter to Redfin customers, reassuring them about what he was seeing in the market. It noted that homebuying demand was moderating but still mostly strong and that listing activity had increased.
Whatever optimism he expressed in that letter was gone by last week. Redfin reported that pending sales were down 42% compared with the previous year, homebuying demand was down 33% compared with the previous year, and new listings were down 33% compared with the previous year.
Despite the discouraging numbers, Kelman believes this downturn can’t be compared to what happened to the housing market during the Great Recession.
“It’s different because back then housing was the culprit,” he said. “The economy was going in only one direction. It was fundamentally unsound. … When demand was down 30%, 40% at Redfin in 2008, we didn’t think in two months it might go up to 20%. But here I think that’s very possible.”
Seattle Times business reporter Katherine Khashimova Long contributed reporting.