Economist, Solvang Chamber of Commerce

Spending by consumers seems likely to continue to grow in 2022. The rate of growth is expected to be slower than in 2021, as predicted for the United States by The Conference Board.

Real consumer sending in 2021 is expected to be 7.9 percent greater than its negative growth of 3.8 percent in the COVID-19 pandemic of 2020. Growth of 3.3 percent is expected in 2022, and growth of 2.7 percent in 2023.

Yearly rate of hotel occupancy in the U.S. is expected to be 54.7 percent in 2021, growing by 13.0 percent in 2022 and nearing full recovery in 2023. Estimates are from STR and Tourism Economics.

Revenues from all sales of luxury wines to consumers in the U.S. are expected to regain in 2021 part of 7.2 percent lost in 2020 because of oversupply and the COVID-19 pandemic. Full recovery is expected in 2022, according to Silicon Valley Bank. Wine Institute reported good quality and drought restricted volume of the California crop of wine grapes in 2021. California produces about 80 percent of the wine in the U.S., according to Wine Institute.

Resales of single-family homes in California are expected to decline 5.2 percent in 2022, as estimated by California Association of Realtors. Median price is forecasted to rise 5.2 percent to $834,400.

Please see websites of The Conference Board, STR, Silicon Valley Bank, Wine Institute, and California Association of Realtors for details.

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Economist for the Solvang Chamber of Commerce

Where we live determines, in part, the middle incomes of our neighbors. Here are six nearby communities, each of which had a different median household income in 2018. 

Graph Contributed

Thousands of dollars a year separated these middle incomes from each other. 

Median income of a community is the middle income when all incomes in the community are ranked in order from lowest to highest. 

Income includes salaries and wages, rents, dividends, interest and transfer payments. Social Security income is an example of a transfer payment. 

Each community had a range of incomes that differed greatly from its middle income. Poverty as measured by household income ranged from 3.1 percent of households to 21.5 percent. 

Median household income in the United States was $65,712, while that in California was $80,440. All these six local communities had median household incomes above that of the U.S. Four of the six communities had larger median household incomes than that of California. 

The Santa Ynez Valley economic area included the six communities. Geology defined Los Alamos as being in the valley of San Antonio Creek, while the five other communities were in Santa Ynez Valley. 

Please go online to Bureau of the Census, American Community Survey 2018, Table DP 03, for details. 

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Economist, Solvang Chamber of Commerce

Santa Barbara County led our three-county area in per capita personal income in 2017. The chart shows estimates of those incomes.

Per capita personal income was calculated with dollars of total personal income divided by population. Personal income included net earnings; dividends, interest, and rent; and transfer income such as that from Social Security.

Yearly per capita personal incomes were similar in California ($59,776), Santa Barbara County ($59,460), and Ventura County ($59,178). San Luis Obispo County ($55,328) followed, and the United States ($51,640) was smaller.

Much of the difference between the United States and places in California seemed to be related to the higher prices of land and buildings in California’s coastal economic zone.

Retailers and others might find in these incomes a basis for seeking customers through advertising and promotion. 

California had larger per capita personal income than that in Santa Barbara County. After the recession of 2007-2009, per capita personal income grew faster in the state than in the county. California and the three coastal counties led the United States in 2017.

For more details, go online to U. S. Department of Commerce, Bureau of Economic Analysis, use the Tools tab to get to BEARFACTS, and then sort the data by county.

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Economist, Solvang Chamber of Commerce

We seem to live on an economic mountain. Median household incomes in 2017 were higher here than in the United States as a whole. 

Los Olivos had a median household income 85 percent higher than median income in the United States. Santa Ynez was 60 percent higher, Buellton 34 percent higher, Solvang 27 percent higher, and Los Alamos 19 percent higher.  

Worldwide economic geography puts about half of all economic activity within 62 miles (100 kilometers) of a seacoast in temperate zones. That’s where we are. Real estate is more expensive here because of higher economic activity and moderate climate.

Another contributor to higher cost of real estate is governmental regulation. High standards of regulation produce higher prices of real estate, as well as safer and more durable housing. Santa Barbara County is notable for its zoning regulations.

The median value of owner-occupied housing in Solvang, for example, was $689,700 in 2017, more than three times the comparable median value of $193,500 in the United States.

People who live here need higher incomes to meet the costs of coastal location and governmental regulation. We appear to live on an economic mountain.

For more information: Estimated median household incomes in 2017 are online at U. S. Census Bureau Quick Facts, as are median values of owner-occupied housing. See The Oxford Handbook of Economic Geography (2000), Chapter 9, for details of coastal economic geography. For details of zoning and affordability see Janet Furman Spreyer, “The effect of land-use restrictions on market values of single-family homes in Houston,” Journal of Real Estate Finance and Economics, June 1989.

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Economist, Solvang Chamber of Commerce

Solvang’s economy should continue to grow in 2019, with real spending by residents and visitors paralleling that of the United States.

Real spending is the current or nominal rate of spending less the rate of inflation. The rate of growth in real spending by consumers in 2019 is expected to be higher than in 2017 or 2018.

Favorable effects of lower prices for gasoline, and slowly rising interest rates, should help to balance possible negative effects of barriers to international trade, and a slowing world economy.

We enter 2019 with strong economic confidence among consumers in the U.S., and spending by consumers accounts for nearly 70 percent of economic activity in this country.

Estimates of consumer spending are by The Conference Board, a nonprofit membership and economic research organization, as of November 2018. Often the forecasts by The Conference Board are closer to actuality than forecasts by the U. S. Federal Reserve Board.

California Association of Realtors expects the number of single-family homes resold in the state to fall 3.3 percent in 2019, while median price is to rise 3.1 percent to $593,450.

Visitors to Solvang and the Santa Ynez Valley are expected to pay 3 percent more for hotel rooms in 2019 than in 2018. CBRE Hotels also forecasts occupancy rate to be 73.8 percent in 2019, up from 72.0 percent in 2018.

Economic activity in the wine industry of the U. S. should continue to improve in 2019, bolstered by strong economic confidence of consumers. Premium red blends are popular among wine club members who receive direct shipments from wineries. The most usual price for such a bottle in October 2018 was $175, according to Wines and Vines metrics.

Please see The Conference Board’s website for the economic forecast, and for a metric of consumer confidence. See the website of California Association of Realtors for the housing market outlook. Go to the website of Visit Santa Barbara for the 2019 travel outlook. Wine industry analytics are on the website of Wines and Vines.

Kenneth Harwood is the economist for the Solvang Chamber of Commerce.

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Economist, Solvang Chamber of Commerce

Santa Barbara County is an expensive place to live, but not the most expensive in California. We rank 16^th in the state for high cost of living, among 58 counties. Forty-two other counties are less expensive. Fifteen are more expensive.

Monthly cost of a couple was $5,219, or $1,232 more than that of one person, whose cost was $3,987. Two parents and one child had a cost of $6,987, or $1,768 more than a couple. Two parents and two children had a monthly cost of $8,033, or $1,046 more than two parents and one child.

Some results seem to stand out. For example, the cost of adding a child to a couple was more expensive than adding another person to a one-person household. The cost of adding a second child to a family of two parents and a child was less expensive than the cost of adding one child to a couple. The largest change was in adding the first of two children to a couple.

These monthly amounts are at neither a poverty level nor a wealthy level. They represent a modest yet adequate standard of living in Santa Barbara County.

The monthly budget for two parents and two children is $1,520 for housing, $817 for food, $1,184 for child care, $1,338 for transportation, $1,109 for health care, $1,122 for taxes, and $943 for other needs. That comes to $8,033 a month and $96,396 a year.

The largest amount in the budget is for housing, and the smallest for food.

The whole budget is 2.5 percent higher in February of this year than a year ago because of the yearly rate of inflation in smaller cities of the West.  The increase is $2,410 a year, or $201 a month.

For details, go online to Economic Policy Institute Family Budgets. See online Bureau of Labor Statistics for the Consumer Price Index for all urban consumers.

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Solvang Chamber of Commerce

A few kinds of industries were leaders of real economic growth in Santa Barbara County in 2016. The chart shows the percentage of their contributions to change in our Gross Domestic Product.

Government services contributed 0.42 percent to the rate of real economic growth. Private education, health, and social assistance services contributed 0.28 percent. Durable goods manufacturing contributed 0.20 percent, and construction 0.15 percent.

Government included federal, state and local governments. Much of the output of government was local education, including kindergarten through higher education. Education, health, and social assistance included private services, usually through nonprofit organizations,

Durable manufacturing included goods having a probable life of three years or more, for example garden tools. Construction included residential, commercial and industrial structures.

Growth was the percent change from 2015 to 2016. Real rates of growth were percentage changes in dollars, less the yearly rate of inflation.

A way to measure yearly Gross Domestic Product of the nation, a state or a county is to add up the spending on consumption, investment, government outlays, and exports, less imports.

The graph shows that the first two leaders produced services, and the second two produced goods. Government contributed nearly three times more to positive growth rate than construction.

Some kinds of industries had negative growth rates. Their growth slowed instead of speeding up. An example was trade, including retail trade and wholesale trade, which had a negative growth rate of 0.25 percent.

Putting together all positive and negative growth rates, Santa Barbara County in 2016 had a negative growth rate of 0.70 percent. Ventura County had a negative growth rate of 2.70 percent, and San Luis Obispo County had a positive growth rate of 0.60 percent.  We were in the middle, geographically and in yearly rate of economic growth.

For details, go online to the U.S. Department of Commerce, Bureau of Economic Analysis, News Release BEA 17-48, Sept. 20, 2017, Table 3.

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This is a season when many people think of giving to private nonprofit organizations.    This chart shows examples of local leaders in yearly nonprofit revenue.

Locally, human services are by far the largest category of revenue, followed by education, chambers of commerce, and charitable social clubs. Nationally, the pattern of giving is to be most generous to religion, followed by education, human services, and foundations.

Religion may well be more important to local giving than suggested by the chart. Reported revenues are from the website GuideStar, which displays data from Internal Revenue Service form 990. Churches and similar organizations are not required to file tax returns with IRS.

Human services rank first locally and third nationally. Local prominence of human services seems to reflect our area’s long-time attractions as a place in which to retire, among other possible reasons. Human services rank ahead of education here, perhaps because of the unusually large numbers of the retired.

Yearly revenues in the latest reporting year appear to be related in part to size and wealth of community.

Our support of chambers of commerce and charitable social clubs seems to reflect our preferences for small businesses and civic responsibilities.

Our patterns of giving say much about us. They help to catalog our priorities in serving human needs and wants. They are an example of behavioral economics, a subject that won the Nobel memorial award in economic sciences in 2017 for Richard H. Thaler of University of Chicago.

Please go online to GuideStar and sort the entries by name of community to see federal tax returns of local private nonprofits. The website of Giving USA tracks national patterns of giving. Solvang Lutheran Home operates Atterdag Village retirement facilities, and its yearly gross revenues are combined with those of its foundation for purposes of this report.

Our local economic area includes Santa Ynez Valley and Los Alamos Valley.

Kenneth Harwood is the economist for the Solvang Chamber of Commerce.

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By Dr. Kenneth Harwood

Visitors to Santa Barbara, San Luis Obispo and Ventura counties spent some $4.5 billion here last year. Their spending in the three counties looked like this:

– Santa Barbara: $1.771

– San Luis Obispo: $1.371

– Ventura: $1.333

Total: $4.475

Of the nearly $4.5 billion, Santa Barbara County accounted for the largest share, almost $1.8 billion.

The local and state taxes on travel-generated spending in Santa Barbara County works out to $1,230 per household for every one of the 149,400 households.

Long-term growth of visitor spending in Santa Barbara County was 3.7 percent a year from 1994 through 2016. Spending in this county was up 4.5 percent between 2015 and 2016, well above the long-term rate of growth, and much above the 3.1 percent growth of spending in California from 2015 to 2016.

A visitor is a person who is 50 or more miles away from home.

Visitor spending (destination spending) was spending on goods and services at the destination. Transportation spending such as for airline tickets was separate from the amounts in the table above. Air travel increased faster than travel by road.

The largest spending was for food and accommodation, followed by transportation, recreation, and retail purchases, including gasoline. Gambling was part of recreation expenses.

For more information, go online to Visit California, Travel Impacts by County 1992-2016, Damon Runyan Associates, May 2017.

Dr. Kenneth Harwood is the economist for the Solvang Chamber of Commerce. 

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