Erik Ostebo loved working at Homie, a real estate technology company born in Utah.
“I made a lot of friends working there,” Ostebo said. “It was a good culture.”
He regularly worked 50-hour work weeks and was passionate about his job. “I really just wanted to see a lot of my friends that work there succeed,” Ostebo said. “I wanted good things for them.”
But as the company announced round after round of layoffs beginning in 2022, he began to dread his job. As the IT manager, Ostebo had to reach out and walk employees through the practical process of leaving the workplace.
“I oversaw the terminations of 500 some accounts, meaning I closed everything down, backed everything up, contacted them to help them wipe their computer,” Ostebo said, “all of the IT work involved with terminating someone was all me.”
Ostebo went from managing a team of six to spending the last year running the IT department alone. “I was very involved in all that stuff,” he said, “and so the numbers really hit me.”
But then Ostebo, too, was laid off this October.
The company went from employing around 600 people to 130, and now, to likely around 40, multiple sources who asked to remain anonymous for fear of employment and legal repercussions told The Tribune. Those sources estimated that roughly 90 other employees were let go last month. (Homie would not tell The Tribune how many employees were laid off).
“Similar to many companies in Utah, Homie has made the necessary changes to continue to operate in this challenging real estate and high-interest rate environment,” Sarah Edelman, vice president of marketing for Homie, wrote in an email. “In a real estate pullback, Homie’s low-fee model gives sellers the flexibility to lower their listing price and still net more from the sale of their home compared to a traditional real estate agent.”
Salt Lake City-based Homie entered the fickle and deeply personal real estate industry in 2015 with a promise to disrupt it. But as 2023 winds down, the company appears to be colliding with tough market forces: Escalating interest rates, competition from cash-rich investors and fewer first time homebuyers.
In recent years, other similar property tech firms have scaled back their services dramatically or shut down.
Now with just a sliver of its original work force, and a plan to keep its low fees while offering a “full-service brokerage,” Homie may be faced with determining its ability to survive at all.
In early marketing materials, Homie described itself as “a real estate technology company changing the way real estate is bought and sold by eliminating high fees and commissions.”
In tech jargon, Homie and others with a similar business model are “proptech” – property technology companies that use platforms or automation. The company quickly grew and expanded into five states — Arizona, Colorado, Idaho, Nevada and Utah.
The company boasts that “Homie saves sellers over $10,000 per transaction” by charging a flat fee rather than a 3% buyer agent commission.
In a 2021 press release, Homie announced its aim to hire 1,000 buyer agents, noting that they employed more than 440 people. “Homie has extended its employee base by over 76% in just five months,” the company wrote.
In an interview on the “Meat and Potatoes” podcast, Homie co-founder Mike Peregrina explained that indeed, 2020 was a good year for business. As it was for all of the home sales market.
“June of 2020 we did almost 500 transactions, most of those sale side,” Peregrina said at the time. “We had market share north of 5% in Utah, which was crazy. And that carried us through the middle of 2021 and then that’s when things started changing. Every year we’ve been doubling revenue ever since.”
The market takes a troubling turn
Peregrina claimed on the podcast that revenue per unit increased, but as interest rates rose and first time homebuyers and sellers were priced out of the market in 2021, transactions decreased. Peregrina claimed that 30% to 35% of Homie’s customers were first-time homebuyers and first-time home sellers, a group that was priced out of competing with investors offering cash.
So at the end of 2021, Peregrina said, Homie decided to ask for another round of financing.
“We went out to market and it was unlike something I’d ever seen before. I think we had nine meetings and every single one of them were like ‘you know what, we’re just not going to deploy capital right now. Something feels wrong and off, especially in real estate.’ And then we heard it again and again and Johnny [Hanna] and myself looked at each other like ‘oh crap.’ Like that never happens.”
The market got worse and interest rates kept climbing. And so the layoffs started.
In February 2022, Homie announced it laid off nearly 28% of its staff. Then-CEO Johnny Hanna told the Deseret News “Record low inventories have absolutely played a role in this. 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.”
At the Silicon Slopes Summit in October 2022, Hanna announced that he was stepping down as CEO. Peregrina replaced him. According to Hanna’s LinkedIn profile, he is now the Chief Revenue Officer at Funnel, a property management software company.
“There are now 7,984 active homes for sale,” a marketing manager who was laid off told The Tribune last October, “more inventory means homes will sit on the market longer — a trend we are starting to see in Salt Lake City.”
Since then, the housing market has remained difficult. Utah housing markets are the least affordable in state history, The Tribune reported in September.
“Right now, the market is very quiet and interest rates are now around 8%,” longtime Utah real estate broker Babs De Lay said. “And every time we get an interest rate hike, the market slows, and more buyers are thrown out of the market.” Homes are taking longer to sell.
Some agents were switched from salaried to contract workers, multiple sources told The Tribune.
In the last month, former employees have flooded LinkedIn with posts announcing the end of their tenure at Homie. The Tribune reached out to several employees on LinkedIn who announced they’d been laid off. A few employees responded that merely a month later, they had been rehired at the company.
Homie did not tell The Tribune how many employees were rehired, but confirmed they still had full-time W-2 agents in five western states. On Oct. 31, Edelman wrote in an email “Homie continues to operate four business lines in five markets, including Homie Real Estate, Homie Loans, Homie Title, and Homie Insurance.”
Does Homie have a viable business model?
Real estate brokers and academics are fierce critics of prop-tech businesses like Homie and question their viability in less robust markets.
“Two things come to mind when I think about Homie,” said Mike DelPrete, a real estate tech strategist and scholar-in-residence at the University of Colorado Boulder. “One is: the business model is the same as any other real estate brokerage that’s been around for decades.”
Ultimately, Homie agents are still helping consumers navigate the home buying process. Unlike traditional brokerages, Homie charges a flat rate fee rather than a commission based on the home’s sale price. (Homie also advertises giving consumers 25% of the buyer commission and operates HomieLoans and a ‘buy before you sell’ program.)
“Consumers tend to be less price conscious than we think they are when it comes to real estate,” DelPrete said. “If you need brain surgery, are you going to try to find a discount brain surgeon?”
DelPrete said despite the hype, there have been few real innovations in real estate aside from electronic signatures and Zillow’s “zestimate” which allowed anyone to see the value of a home and online listings. This “democratized” a previously closed ecosystem.
And Homie isn’t unique, DelPrete said. “I’ve looked at and studied and talked to dozens of companies around the world that are doing this exact same thing. And they never get anywhere.”
Reali, a proptech company that also offered “‘buy before you sell’ and ‘cash offer’ programs to homeowners” shut down in August 2022, according to TechCrunch. And Redfin and Zillow both closed their home-flipping businesses and laid off workers, Axios reported.
While companies like Homie may experience initial success in one city and garner market share, very few successfully expand to new markets, DelPrete explained.
“I think a rising tide lifts all boats and 2021 was like the best real estate market ever,” DelPrete said, “everybody’s going to do well.”
What’s next for Homie?
One former employee posted on LinkedIn last week that there had been yet another round of layoffs at the company. That was a few days after Sarah Edelman, the Vice President of Marketing who had previously been laid off, told The Tribune she’d been recently rehired by Homie.
“The business model has evolved from a ‘do it yourself’ option to a full-service brokerage without all the cost and hassle,” Edelman wrote in her email. “The company lists hundreds of homes per month and has served over 15,000 customers to buy or sell a home.”
The Tribune asked if the company had secured any more investment dollars. Edelman wrote that “Homie has secured capital from its existing investors, confirming its ongoing dedication to helping customers save money in this difficult real estate market.”
But for Ostebo, it is time to search for a new job.
“Knowing what I know now, I would have been looking [for a job] last year, right,” he said. “But I think last year, the market was just a heck of a lot better than it is at this point in 2023.
“I was getting headhunted like crazy at this time last year, and I was saying no. And I wish I had said yes.”
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