- New aid program called Pandemic Unemployment Assistance (PIA)
- Paycheck Protection Program and its designated $349B designed to aid small businesses ran out of money as of last week
- Latest unemployment figure now totals +22M
- Brokerage firm layoffs & deferring payments
This piece, Outlook 2, is the second in a weekly series that is a summary of key topic points that directly relate to real estate. This week we’re featuring a new relief aid program, latest unemployment statistics and changes in brokerage operations.
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Relief Aid Packages:
Of the two main Small Business Administration’s financial relief packages for small businesses under the auspices of the CARES Act, one of them is now completely depleted. The Paycheck Protection Program ran out of its $349B as of last week. The program is currently unable to receive and process new applications from small business.
Do not give up hope on this program, however, because Congress is currently negotiating on terms that would pump more money in this program. We’ll definitely keep you posted on when the Senate and House of Representatives can get together on how much and to whom.
A new relief package, the Pandemic Unemployment Assistance (PUA), will begin taking applications as of April 28.
Click here for the latest available information on the PUA.
Currently, only 29 states are eligible to disperse these funds so keep in close contact with the above website.
Realistically, get your application for the PUA in by April 28 but don’t expect to receive any funding aid until mid-May.
All relief loans, grants, UI benefits have been excruciatingly slow in getting out money to people who need it most due to overwhelming demand, outdated equipment and software, confusing guidelines and instructions for funds dispersal, etc.
The operative words here: persistence and patience.
The latest number of jobless people filing for Unemployment Insurance Benefits over the last four weeks is +22M people.
The only analogy we have for this level of unemployment is the Great Depression in the 1930’s. But even the Great Depression’s volume of unemployment is different from our current level of unemployment. During the 1930’s the number of unemployment increased over time…over weeks, months, years. Our current level of unemployment has happened almost instantly. One moment in late February 2020, unemployment numbers stood at record lows; one moment in late March 2020, employment numbers stood at unprecedented highs of +22M people.
And this level of unemployment now includes workers who earlier thought they were “safe” from becoming unemployed or having their hours drastically reduced…lawyers, IT professionals, non-emergency doctors and epidemiologists, etc.
Predictions from economic experts see unemployment figures reflect worsening statistics and higher casualties in the coming months.
Brokerage Firm Layoffs and Payment Deferrals
RE/MAX announced that it is suspending its popular 401K matching program, all company bonuses and is instituting a hiring freeze.
Compass has laid off 15% of its 2,500 employees and Realogy, the owner of the Realogy Brokerage Group (Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, Corcoran, ERA, Sotheby’s International) announced that it is reducing the salaries of a “majority” of its some 10,000 employees.
Opendoor most recently announced a massive layoff of 600 people, 35% of its employees. This layoff announcement comes on top of the company pulling signed contracts on homes it had committed to purchase pre-COVID.
Mike DelPrete, a strategic adviser and global expert in real estate tech, believes that the largest “workforce reduction” will occur in slow motion over the next six months as real estate agents simply “disappear.”
DelPrete reminds us that there were some 1.3M agents working in the US in 2019. These agents were supported by approximately $70B in commissions ($54,00/agent). As the number of transactions in 2020 is expected to drop by nearly 50%, all of these agents may have -$35B less in commissions to support them.
DelPrete offers us these comparative workforce reductions to help us get a visual sense of what is happening and what may happen in terms of real estate agents “disappearing:”
- Compass – -375 agents
- Opendoor – -600 agents
- Redfin– -850 agents
- Real estate agents – -300,000
Thanks to the Department of Labor, InmanNews, HousingWire, BloombergNews and the Small Business Administration.