Another day, another real estate company making moves to cope with rising mortgage rates.
Proptech startup Divvy Homes laid off 12 percent of its staff on Tuesday, the Information reported. The cuts impacted roughly 40 employees at the five-year-old company.
Divvy executive Kyle Zink cited inflation and elevated mortgage rates as rationale for the layoffs.
“Realistically, the macro environment is likely to remain volatile and challenging for the foreseeable future,” Zink told the outlet. “As a result, we needed to adjust headcount to reflect the new reality today.”
Divvy’s business aims to turn renters into homeowners. The company purchases homes on behalf of customers and locks them into three-year leases. The firm collects a deposit of roughly 1 to 2 percent of the property’s value and charges monthly rent, which can partially be earmarked towards a down payment.
Divvy makes money from rental income revenue. When leases expire, customers can either cash out or buy the home directly from Divvy. Some buy the home from the company prior to the lease expiration.
Read more
Residential
New York
Divvy Homes hits $2B valuation on new fundraising round
Residential
New York
Mortgage rates jump, but so do applications
Commercial
New York
Proptech firm Juniper Square lays off 14% of staff
Last August, Tiger Global Management and Caffeinated Capital led a $200 million round for the San Francisco-based company, which also has the backing of Andreessen Horowitz. The fundraise brought the company’s valuation to $2 billion.
But the downturn in the housing market has roiled the company, along with firms across the sector. The slowing market has homebuyers are feeling the pinch of inflation and mortgage rates that have jumped from pandemic lows. Two weeks ago, the Mortgage Bankers Association recorded an average contract interest rate for a 30-year fixed-rate mortgage at 6.25 percent.
Divvy is the latest proptech company to turn to layoffs to counteract the volatile market, but it is far from the only. San Francisco-based firm Juniper Square recently cut 14 percent of its staff. In August, digital mortgage company Blend Labs eliminated 220 jobs.
Rising interest rates, high home prices and a shortage of listings meant hundreds of employee cuts earlier this summer from home loan firms. Layoffs have also hit the brokerage world, with Anywhere Real Estate and Compass announcing cuts in recent months.
— Holden Walter-Warner