The North Bay’s housing market is making steady progress, but at a slower pace than ideal after two years of wildfires. That was the overall takeaway from the 26th Annual Sonoma State University Economic Outlook Conference & Housing Summit, hosted by the Business Journal Tuesday at Santa Rosa’s Hyatt Regency Sonoma Wine Country Hotel.
Generally, the six-county North Bay region looks healthy economically for the next 12 to 24 months, tracking with national and statewide trends, said Robert Eyler, director of the university’s Center for Regional Economic Analysis.
Similar to consensus of economists on the U.S. and California outlook, indicators point to the beginning of a slowdown for North Bay economies, with rural areas of the region having a tougher go, Eyler said. He and other economists are watching for the warning signs, particularly for noticeable slowing in San Francisco Bay Area technology employment. And another early sign of trouble that has emerged is a dwindling North Bay population.
Leading indicators show where an economy is headed, based on factors such as notices of default, building permits, new unemployment claims, help-wanted advertisements, the Federal Reserve’s U.S. leading indicator and an agricultural price index. Coincident indicators — what’s happening now — include nonfarm employment, retail sales and personal income.
When one group of indicators or the other is headed up or down, there might not be a problem, but when both head south, slowdown or recession could be in the wind, Eyler said. Leading and coincident indicators for North Bay counties have been mostly trending upward along with the national trends.
And the future and current indicators for Lake County have headed downward lately, Eyler said. Weighing on Lake’s economy are multiple years of massive wildfires, especially in 2015 and last year, he said.
“Our rural folks in the North Bay still suffer from recession-like qualities,” he said. “We’re not out of this yet.”
A standout in the region is Napa County, which over the past decade has enjoyed an economic surge, Eyler said.
“Before the recession, Napa was kind of rolling around, quasi-agricultural, had not really put a flag in the ground in terms of tourism, and then in 2010 it just took off like a rocket,” Eyler said. “If you think of where Napa was in 2008 and where it was in 2015-16, it’s like two different worlds.”
Recent California Department of Finance population estimates have created a stir in the North Bay, because they suggest that the number of residents in Napa and Sonoma counties has been declining since mid-2014, turning to negative growth in 2017-2018. Meanwhile, the estimated populations of San Francisco and California as a whole increased.
While the full picture of this shift won’t be known or confirmed until the results of the 2020 census are released, Eyler said. But some of that decline for Sonoma and Napa could be fire-related, yet the downward trend began before the disaster, he said.
“It wasn’t like we weren’t already on a path toward seeing relatively slow population growth,” Eyler said. “The fires just seemed to hammer that change through, all the way home.”
One troubling sign for North Bay economies is inflation-adjusted home values haven’t bounced back to the 2005-2006 peak, despite median values being higher, Eyler said, citing Zillow Research figures. For example, a median-priced home in Marin was $1.13 million in mid-2018, while the median value in 2009 dollars was $890,448, down from $962,900 in 2006. And in Napa, the recorded median last year was $672,400, compared with inflation-adjusted medians of $548,865 last year and $708,000 in 2006.
The lingering impacts of the wildfires will continue to be seen in North Bay economies, which mostly remain headed in a positive direction, but the disaster likely won’t be as devastating as it’s projected to be for the burned areas around Paradise. (Read Robert Eyler's presentation: nbbj.news/materials)
Permit Sonoma statistics show the agency issued 9,978 permits in 2018 versus 8,543 in 2017, and 8,241 in 2016 and has cut certain fees.
Sonoma County Winegrowers report 30 percent of farmers already provide employee housing, some giving each permanent worker the opportunity of a place to live. The group added about 150 units in the last 18 months, planning another 37 by this summer
Construction costs are rising and the wide swath of fire ravaged areas in California has set up a competition for some materials though technology advancements in materials as well as process of constructions is accelerating as a result.