August 26, 2023 | Home Sales, Durable Goods, Pay Decline and Tax-Gain Harvesting

Smart Investing with Brent & Chase Wilsey

Home Sales
Existing home sales fell 2.2% in the month of July from June. Compared to July 2022, sales were down 16.6% and homes sold as the slowest July pace since 2010. Demand has definitely been hit by rising interest rates and on Monday, the average interest rate on 30-year mortgages rose to 7.48%. This was the highest level since November 2000. It will be interesting to see how home sales are impacted in the reports over the next couple months as existing home sales are based on closings which means these contracts for the current report were likely signed in May and June. The supply of homes has also been a heavyweight on the sales levels as there were just 1.11 million homes for sale at the end of July. This is down 14.6% compared to last July and is the lowest level since 1999. Looking compared to pre-Covid levels, there are half as many homes available for sale. While the tight inventory has depressed the sales rate it has kept prices elevated and there was actually a 1.9% increase in the median price of a home compared to last July.
Durable Goods
The headline number for durable goods orders may worry some and give them reason to question the strength of the economy, but as always you have to look deeper into those numbers. The headline showed orders fell 5.2% in the month of July, but much of this decline came from Boeing. Orders for commercial planes can be extremely volatile and in the month of June they soared 71%, but then in July fell 44%. If the volatile transportation sector, which includes automobiles and planes, is excluded orders actually increased 0.5% in the month. Excluding the volatility created by Boeing, durable goods orders have now increased three months in a row. With all the volatility from Covid, I do believe the manufacturing sector and the overall goods economy can continue to strengthen from a challenged level over the past year.
Pay Decline
We said a few years ago that eventually workers would be coming back to the office and they would not have the same leverage for getting higher pay. That time may be just around the corner. According to ZipRecruiter, the average pay for the majority of jobs has declined from last year with some of the steepest declines being seen in technology, transportation, and other jobs that had big hiring back two years ago. ZipRecruiter conducted a survey in July with about 2000 employers and the results revealed that nearly half of the employers said they had reduced the pay for recent job openings. I don’t see the this reversing. I think in the next year or two we will see further declines in pay as competition for jobs comes back to a more normal level.