Posted by: Prashant Gopal on October 20, 2008
Seattle-based Zillow.com is the latest real estate web site to announce major layoffs in the wake of the recent Wall Street meltdown.
Zillow said that it is cutting 40 people or about 27% of its staff. Redfin, also based in Seattle, said last week that will would be eliminating 20% of its employees. Florida-based ForeclosuresDaily.com, which provided listing information and classes on how to invest in Foreclosures, said last week that it laid off all employees other than the five owners.
The Web sites are concerned that tight credit conditions will result in significantly slower home buying. ForeclosuresDaily.com told the Tampa Tribune added that it is tougher to get loans to cover business expenses. It’s also likely that the Web sites’ advertising revenue will take a hit as we move into a recession.
The cutbacks come as the Web sites were reporting big increases in traffic. Zillow said it had 5.4 million unique vistors in September, a 42% increase from a year ago.
“The unprecedented economic events that are playing out on a global stage began in our industry and have made a prolonged recession likely, in our judgment,” Zillow CEO Rich Barton wrote Oct. 17 on the company’s blog. “Despite having sizable cash reserves, we deemed the responsible course was to meaningfully reduce expenses.”
I spoke today with Pete Flint, CEO and co-founder of Trulia, who said he has no plans to cut his 80-person staff. But he conceded that the environment is likely to be difficult in coming months.
Trulia, a private company, said it has raised more than $33 million from investors such as Sequoia Capital and Flint said it is in a strong financial position.
“With the tightening of the credit market, it’s more difficult for people to buy properties,” Flint said. “And there’s a crisis of confidence in housing market that’s driven by the stock market and personal financial positions. This is a perfect storm for a lot of companies.”
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.