 |
| A man leaves American Home Mortgage Investment in Melville, N.Y., which is cutting staff. David Karp/AP |
Layoffs spreading in the housing industry
The 21,000 job cuts this month are almost equal to the number for all of 2006.
By Ron Scherer and Ben Arnoldy | Staff writers of The Christian Science Monitorfrom the August 23, 2007 edition
Page 1 of 2
New York; and Oakland, Calif. - Just a few years ago, mortgage salesman Terry Orlowski rode the housing boom and a six-figure income down to the car dealership and bought a new Audi A6.
Now, the soaring market and the fast car are gone. Last week he lost his job, along with 6,000 other employees of First Magnus Financial Corp., a mortgage lender. With a 1999 Dodge Grand Caravan, he plans to move back in temporarily with his ex so their two children can stay in private school.
"My first thought was this was one of the bigger companies. No one is safe," Mr. Orlowski says.
The flood of layoffs – some 21,000 since the beginning of the month in the real estate, construction, and mortgage-lending industries – is one way the Federal Reserve can see real impact on the economy from the turmoil in the markets. It's not just guys in hard hats looking for work; it's also white-collar workers. Many of these jobs in finance and real estate are relatively high paying, which has helped car dealerships and high-end retailers. To be sure, all sorts of jobs are affected, because when a house changes hands, a small army of brokers, appraisers, pest-control inspectors, title searchers, and lawyers send out invoices.
"Unlike a lot of other businesses, real estate is everywhere," says economist Bob Brusca of Fact & Opinion Economics in New York. "Even if this turns out to be small potatoes in one place, it has a fairly big impact."
A simple real estate transaction can involve up to 20 people, says Steve Walsh, president of Scout Mortgage in Scottsdale, Ariz. "An escrow officer may make $1,000, the county recorder gets a few hundred, the appraiser makes $300 to $400, the termite man $50 to $100, and there are movers and landscapers and decorators."
Mr. Walsh says his accountant told him of some real estate agents who had been making $200,000 a year but are down to a $15,000 income. He says his firm, with business down 40 percent, has cut staff, too.
For many companies, it's not a select few who are being let go. Instead, entire divisions or even the entire company is shutting its doors. Yesterday, Accredited Home Lenders Co. in San Diego said it would eliminate 1,600 jobs – about two-thirds of its workforce. On Monday, Capital One Financial in McLean, Va., announced it would ax an entire mortgage division with 1,900 people.
The 21,000 layoffs that the real estate and related industries have announced so far this month are almost equal to the number for all last year – 22,814.
"It's only going to get worse," says John Challenger, CEO of Challenger, Gray & Christmas. "It's already much worse for the year than last year."
Last week, First Magnus announced it would let go 99 percent of its 6,000 employees. That implosion, which swept away Orlowski's job in Arvada, Colo., also wiped out Ron Gapp's role as vice president and the 600 positions underneath him on the West Coast.
RSS feed
