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A falling housing market means the mortgage industry faces massive layoffs

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While many employees in the crypto industry dread that invitation from the 4 p.m. calendar 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 shedding staff faster than you can tell “market conditions.”

  • Last week, JPMorgan laid off 1,000 employees from its home loan division, according to Bloomberg.
  • Wells Fargo laid off hundreds of employees in April after its mortgage income fell 33% from the first quarter of 2021 to 2022, according to Insider.

How we got here: This month, the Fed raised interest rates by the largest amount since 1994, and Chairman Jerome Powell signaled that there was much more tightening on the horizon to help fight inflation. at its highest for 40 years. 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 just under 6%, compared to just under 3% at the same time last year, and that’s starting to seriously scare off buyers.

Boom and bust

Historically low interest rates during the pandemic have helped fuel an extremely competitive housing market, prompting mortgage lenders to recruit staff in order to meet the increased demand for housing finance.

  • From March 2021 to February 2022, the number of mortgage and non-mortgage brokers jumped 8%, according to the Bureau of Labor Statistics.
  • 1.8 million people worked in real estate last month, the highest number on record.

But like so many tech companies, these companies also realized they may have overhired during their pandemic growth spurt…

Better.com, the mortgage startup infamous for laying off people en masse on Zoom, has hired nearly 7,000 employees during the pandemic. But after three rounds of layoffs in the past six months, the company, which had around 10,000 employees in December, now has less than 5,000.

Joanna Yu, mortgage originator for US Bancorp, told Bloomberg: “In 2021, we basically had no life. …But from April, it was totally dead. It’s like vacation time.

Big picture: The housing market could see 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 are seeing this kind of normalization in many areas. … And I think housing is one of them. For example, more than 40% of door-to-door sellers in pandemic favorites such as Salt Lake City, Boise and Denver lowered their prices in May, according to Redfin.

However, these price cuts have not yet spread across the country. The median price of an existing home in the United States hit a record high of $407,600 last month.—MM

Mary Cashion

The author Mary Cashion