Tech layoffs continue as stocks fall and interest rates rise

Tech layoffs continue as stocks fall and interest rates rise

Tech layoffs continue as stocks fall and interest rates rise

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“High rates are painful for almost everyone, but they’re especially painful for Silicon Valley,” said Kairong Xiao, associate professor of finance at Columbia Business School. “I expect more layoffs and investment cuts unless the Fed reverses its tightening.”


At the moment, there is little chance of that happening. The market expects two more rate hikes by the Federal Reserve this year, to at least 5%.

In real estate, this is a problem for anyone expecting a quick recovery. Low rates not only drove up house prices, but also made it irresistible for companies such as Zillow as well as Redfin, Opendoor Technologies and others to engage in a business once considered slightly unsavory: flipping houses.

In 2019, Zillow estimated it would soon have $20 billion in revenue from selling 5,000 homes a month. That delighted investors, who pushed the Seattle-based listed company to a $45 billion valuation and created a hiring boom that took the number of employees to 8,000.

Zillow’s idea was to use artificial intelligence software to make a chaotic real estate market more efficient, predictable and profitable. This is the kind of innovation venture capitalist Marc Andreessen spoke of in 2011 when he said digital insurgents would take over entire industries. “Software is eating the world,” he wrote.

As of June 2021, Zillow owned 50 homes in California’s capital, Sacramento. Five months later, there were 400. One was an ordinary four-bedroom, three-bathroom house in the northwest corner of town. Built in 2001, it is close to several parks and the airport. Zillow paid $700,000 for it.

Zillow put the house on the market for months, but no one wanted it, even at $625,000. Last fall, after leaving the market unceremoniously, Zillow unloaded the house for $355,000. Low rates had made it seem possible that Zillow could aim for the moon, but even they couldn’t make it a success.


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