Homie’s Struggles in the Real Estate Market
Erik Ostebo loved working at Homie, a real estate technology company based in Utah. He enjoyed the company culture and working with his colleagues. However, as the company experienced multiple rounds of layoffs in recent years, Ostebo’s enthusiasm turned into apprehension. As the IT manager, he was responsible for handling the termination process for employees, which took an emotional toll on him.
Homie’s workforce has significantly decreased from employing around 600 people to approximately 40, according to anonymous sources. The challenging real estate market, characterized by rising interest rates, competition from cash-rich investors, and a decline in first-time homebuyers, has posed hurdles for Homie. Other similar property tech firms have also scaled back or shut down.
Homie’s Journey and Business Model
Homie entered the real estate industry in 2015, aiming to disrupt the market with its low-fee model. The company expanded to five states and promised to eliminate high fees and commissions by charging a flat fee instead of a buyer agent commission. Homie claimed to have saved sellers over $10,000 per transaction.
While Homie’s model seemed innovative, industry experts question its viability. Real estate tech strategist Mike DelPrete argues that Homie’s business model is similar to traditional brokerages, with few real innovations. Consumers may prioritize quality and expertise over cost savings when it comes to important transactions like buying a home.
The Challenging Market Landscape
The real estate market took a troubling turn in 2021 as interest rates rose and first-time homebuyers and sellers struggled to compete with cash offers from investors. Homie experienced a decline in transactions, leading them to seek additional financing. However, the market conditions made it difficult to obtain investment, and the layoffs began.
Utah’s housing markets are currently the least affordable in state history, further complicating Homie’s operations. The company has made adjustments, switching some agents from salaried employees to contract workers.
Homie’s Future and Ongoing Operations
Despite the challenges, Homie continues to operate as a full-service brokerage with low fees. The company still has full-time W-2 agents in five western states and operates various business lines, including Homie Real Estate, Homie Loans, Homie Title, and Homie Insurance. While the company has rehired some employees, it remains uncertain how many have been brought back on board.
Homie has secured capital from its existing investors to support its commitment to helping customers save money in the difficult real estate market. However, for former employee Erik Ostebo, it is time to move on and search for a new job given the current market conditions.
As Homie navigates the obstacles in the real estate industry, only time will tell if it can sustain its operations and overcome the challenges it faces.