Utah real estate market disruptor Homie announced companywide layoffs last week as the tech startup reduced its workforce by some 28% amid unprecedented conditions for home buyers and sellers in Utah and around the country.
Homie co-founder and CEO Johnny Hanna said the staff reductions impacted 119 employees across the company’s operations in Utah, Arizona, Colorado, Idaho and Nevada. Hanna, a veteran Utah entrepreneur, said a confluence of market conditions put the company in a position of needing to make critical changes he described as the hardest decision he’s had to make in his career.
“Record low inventories have absolutely played a role in this,” Hanna said. “2021 was already an incredibly competitive year and we started out this year with even fewer homes than the same time last year. And it’s even more competitive.”
The shift in U.S. homes-for-sale inventories was highlighted in a National Association of Realtors report issued last week that found striking reductions in available homes since the start of the COVID-19 pandemic.
In just one category, properties affordable to households earning $75,000-$100,000 annually, the realtors’ analysis found 400,000 fewer affordable homes available for sale compared to the start of the pandemic — 245,300 in December 2021 vs. 656,200 in December 2019.
For potential home buyers in that income category, there was one affordable listing for every 65 households at the end of last year, versus the 2019 ratio of one affordable listing for every 24 households.
Hanna noted other factors are at play in the residential real estate market, including huge growth in homeowners’ equity amid skyrocketing values. The newfound house wealth, Hanna said, is lessening concern among sellers about how much they’re paying out in traditional real estate agent contracts, which can run as high as 6% of the home’s sale price. And, Hanna noted that in market conditions in which most home sellers are entertaining multiple, and sometimes dozens, of offers, those able to pay in cash were trumping bank-financed buyers.
Homie’s staff reduction represents a pivot for the company that, just before the COVID-19 pandemic began altering the world, was celebrating a venture investment milestone.
In February 2020, Homie announced a $23 million Series B funding round that, following a $10 million Series A in 2018, would help fuel the company’s plans to grow its current bases in Utah and Arizona into new arenas, including Las Vegas, Boise, Idaho, and Colorado Springs, Colorado.
Homie has built a residential real estate transaction system that dispenses with the commission-based approach used by legacy real estate brokers who typically charge a combined 5% to 6% of a home’s sale price. Instead, Homie employs a flat-fee system of $1,500 for sellers and offers rebates on the buyer side of the equation and uses a software system, along with agents and lawyers, to optimize efficiencies for a complex process that, for most people, represents the biggest financial transaction of their lives.
Since its launch in 2016, the company has also added Homie Loans, Homie Title and Homie Insurance in an effort to create a one-stop, “end-to-end real estate experience.” Homie said in early 2020 it had saved clients some $55 million in commission fees and had $1 billion in real estate transactions in 2019. The company also reported it grew its revenues by some 150% that year.
Following the 2020 funding announcement, Hanna said the key to his company’s success has been finding the right marriage of technology, services and real-world expertise.
“Buying or selling a home is expensive and time-consuming because of all the different companies you have to work with,” Hanna said in a statement at the time. “Communication becomes a game of telephone because of all the parties involved. We are disrupting the traditional model and saving customers thousands of dollars by combining technology, a team of experts and a one-stop shop for real estate.
“Technology has changed everything except the real estate business model. That time has finally come.”
On Monday, Hanna also highlighted another relatively new Homie service option, where the company helps buyers make a bank-backed cash offer, a strategy that’s become increasingly relevant in a market in which potential buyers far outnumber sellers. Hanna said the ability for those looking for a new home to compete with an all-cash offer was no longer a nicety, but virtually required, amid record competition for every home that goes on the market.
Hanna also noted how thankful he was for the work all of Homie’s current and past employees have done in growing the company and said the response he received from a social media posting about the layoffs gave him encouragement that the former workers would find new opportunities.
“I posted on LinkedIn that we were going to let go of almost 120 employees and asked the community to come together,” Hanna said. “And I was blown away at the responses and the supportive environment that we have here. Parting ways with people I love is really difficult but knowing they’re being reached out to is a comfort.”