A cooling housing market is trickling down to startups involved with residential real estate, leading Austin-based Homeward Inc. to announce it is laying off 20% of its team.
"Despite having a strong financial start to the year, we are currently staffed for more growth than we’re now forecasting," Homeward founder and CEO Tim Heyl wrote in an Aug. 10 blog post.
Homeward offers homebuyers financing to make all-cash offers, which became common in hot housing markets like Austin during the pandemic. Homeward had been one of Austin's fastest-growing startups since its founding in 2018.
Last year, the company announced it had secured $136 million in series B equity funding, in addition to $235 million in debt financing, that gave the company a valuation north of $800 million. As of May 2021, the company had 161 employees with plans to hire 250 more over the course of about a year. Its investors include Norwest Venture Partners, Blackstone, Breyer Capital, Adams Street, Javelin and LiveOak Venture Partners.
Employees voted Homeward one of Austin Business Journal's 2022 Best Places to Work in May. At that time, the company had 207 Austin-area employees. Based on that, a 20% staff reduction would pencil out to about 41 employees.
TheRealDeal.com reported that Homeward has about 600 employees total, meaning the layoffs would impact about 120 people across the country.
Homeward declined to detail how many employees will be impacted, but it noted that it operates remotely and the reductions weren't specific to a region or department. A company spokesperson said roughly 15% of the people laid off are based in Austin.
In Heyl's letter to employees, he said Homeward had been growing at a remarkable pace, and May was the company's strongest month ever.
"At that time, we felt confident that we were armed with the necessary cash to keep the business humming," Heyl wrote. "We planned for a future built upon our strengths and the desire to help more customers, in more states, with more innovative products. Given our Q2 results, I do not believe that our optimism and excitement about the road ahead was misguided."
But the market cooled quickly, and it has taken a toll on the proptech industry. In June, active listings in the Austin area increased to 7,090, according to the Austin Board of Realtors. That was up from 4,173 in May and a 217% increase year over year. But fewer homes are being sold. ABOR stats showed 3,441 home sales closed in June, compared with 3,633 in May. Pending sales also dropped from 3,643 in May to 2,887 in June. At the same time, the median price across the five-county metro hit $537,475.
Nationally in June, existing-home sales declined for the fifth straight month, with sales down 5.4% from May and 14.2% from one year prior, according to the National Association of Realtors.
"Falling housing affordability continues to take a toll on potential home buyers," NAR Chief Economist Lawrence Yun stated in late July. "Both mortgage rates and home prices have risen too sharply in a short span of time."
Meanwhile, REX Homes, Flyhomes, Sundae, Bundalow, Zumber and Redfin are among the real estate tech startups that have made significant job cuts in the past few months.
Homeward's layoffs are among 63 rounds of layoffs at real estate startups globally since 2020, and count among 14 U.S.-based real estate tech companies to lay off workers since the start of June, according to Layoffs.FYI, an organization that has been tracking layoffs at tech startups based on public reports since early in the Covid-19 pandemic.
Heyl said inflation, interest rates and affordability concerns reduced the number of buyers seeking homes, reducing demand for Homeward's cash offer service. Meanwhile, the company said its original product, called Buy Before You Sell, has remained as popular as ever.
"Moving forward, we will concentrate investments on more evergreen solutions that provide value to our agents and their clients in any market, while reducing our spend in areas that aren’t as essential to this promise," Heyl wrote. "We're doubling down on efforts to achieve profitability and ensuring our team is properly staffed to match these goals."
Homeward said it will give laid-off employees severance pay based on tenure, as well as health benefits through the end of August. It will also offer outplacement services with its recruiting team and remove its non-compete clause for laid-off workers.
Startup employees often consider stock options as a potential bonus or even as part of their overall compensation. As such, Homeward said it is removing the vesting cliff for laid-off workers so they will be vested based on months worked at the company. It also extended its timeline for exercising stock options from 90 days to one year.
"For those of you leaving, I am sorry," Heyl wrote. "I know that you put your faith in us by joining our mission. And I let you down. Please know that your time here mattered and that your contributions will continue to serve as the groundwork for the next chapter of Homeward."
Homeward's layoffs come at a time when many Austin startups are cutting expenses to buffer against slowdowns in the market, as well as reluctance to invest among some venture capital firms. Other companies making cuts in Austin recently include F45 Training, Oracle and REX Homes.
