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Opendoor lays off 18% of staff amid real estate market slowdown, rising mortgage rates

Yahoo Finance Live anchors discuss how rising mortgage rates are wreaking havoc on the housing and real estate market.

Video Transcript

[AUDIO LOGO]

DAVE BRIGGS: Rising mortgage rates have soured housing demand recently, but there is some good news, a glimmer today, if you will, with the 30-year fixed falling a bit to 7.6% from 7.16 a week ago. That's according to the Mortgage Bankers Association. Now, rates are still near two-decade highs. And we also saw applications decreasing for the sixth straight week.

And now, lenders and other companies in the industry are reeling amid the broader slowdown. CNBC reporting Wells Fargo was processing about 18,000 retail loans early in the quarter, down almost 90% from a year earlier. And mortgage staff at the bank are bracing for layoffs.

It's not just the big lenders. Opendoor, a home flipping company, announcing layoffs of 18% of its employees. That amounts to roughly 550 people. And the stock is down 4.5% on the news and extending losses in the wake of the Fed decision.

And look, when we bake in the 75-point hike and the fact that it is, again, premature to think about pausing, you've got to factor 30-year fixed driving up at least a quarter of a point. They're going to continue to go up, and the housing market will continue to slow. And Rachelle, that probably is going to cost thousands of jobs in the mortgage industry.

RACHELLE AKUFFO: I mean, you referenced that CNBC article. Obviously, when you have this slow down, think of where we were during the pandemic-fueled boom in the housing market. It was just a matter of time when you now see the downside of that. You're also seeing the higher mortgage rates. And so they're obviously far off their peak.

And we know that they began cutting workers in April, Wells Fargo did. And so a lot of people, some of the sources mentioned in the article there, saying that some of these, though, have been a mix of some voluntary bankers sort of seeing the writing on the wall and moving on to other positions. So kind of clouding the picture as to how much of this has been voluntary versus how much of these layoffs had to be done.

Now, we know that last month CFO Mike Santomassimo told analysts that we expect it to remain challenging in the near term. It's possible we have a further decline in mortgage-banking revenue in the Q4, when originations are seasonally slower, so certainly bad timing on top of everything else. But obviously, a very tough time there, and a lot of people at Wells Fargo concerned about job security, Seana.

SEANA SMITH: Yeah. And I don't think this comes as a huge surprise given the massive slowdown that we've seen in the industry. We've been talking to a number of guests about what we are seeing play out in the mortgage industry specifically and how challenging it's likely going to be over the coming quarters, given the fact-- what we just heard from Jay Powell today, that he is going to remain hawkish, or it's still premature to talk about pausing rates or even any sort of pivots. And certainly, it's going to be a tough time ahead.

There was recent data out from Black Knight saying that just 133,000 US homeowners at this point can save money by refinancing at today's rates. And that's down, Dave, from a peak of over 19 million in late 2020. So really see-- that really just illustrates how dramatically this industry has changed over the last year and a half or two years from the peak of the pandemic to this-- really, this-- I don't want to call it a bust. It almost seems a little bit too aggressive at this point, but a significant slowing that we are seeing play out in the mortgage industry and layoffs as a result.

DAVE BRIGGS: And Powell said they're looking for some softening in the labor market. If they're looking really hard, they should look at the mortgage industry. That's where you'll see the beginning of some cracks in the labor market.