The pandemic that began in March of 2020 shifted the entire playing field of all markets, especially housing and the stock market. Without a crystal ball, nobody could foretell how these markets would end up taking off, rising to levels that have not been experienced. Pandemic influenced, yes. But there is another component that seems to be forgotten. We have a whole new generation of people involved in all markets these days and they come with a new mindset, different rules and a vision coupled with a voracious tenacity for growth and creativity, that has way more energy and very active Instagram accounts… They are the Millenials.
Pause and Reset
When we look at where we were in March of 2020, when everything came to a standstill, the housing market had been moving quite steadily, with normal appreciation and the stock market, which had lost 2300+ points, was hovering around 20,000. But everything was put on pause. Now, I know I am not telling you anything you don’t know, but there is a method to this narrative, trust me.
The pause, the quiet, the forced retreat, really caused a global stop in which after many days and/or months, became a global reset. Workplaces were changing, lifestyles were being modified and the time we spent was being redefined. All of those combined really created a rebirth at many levels, ultimately changing things to a complete level of a “new normal”. Utilizing new choices and abilities that weren’t previously options, up until the pandemic, everyone was rewriting their story, both individually and globally. This continues as we still are seeing record high levels of people quitting their jobs reporting as the “Great Resignation”, also referred to as a “low desire” lifestyle according to this article by Bloomberg. In my opinion, it is just another step in the process of redefining. There’s several opinions out there about that one, but I will keep to my point.
Redefining What is Important – New Targets
As this redefining process continues during these past 20 months, we have also seen a new generation make an impact on these markets. The Baby Boomers and Gen X, who typically have most of the money, are now competing with the Millennials, who in fact represent the highest spending generation in 2020, with a $1.4 trillion dollar tab according to Kasasa.
The Millennials are a completely new generation, that as young adults and/or children, lived through and may have selectively deemed lessons from our Baby Boomer past, leading them to develop and create in their own unique ways.
But even though the 45 million Millenials are going to reach the perfect home buying age in 2022, according to Realtor.com’s housing outlook, they are not the only one’s redefining things. Many Baby Boomers decided to retire earlier, cashing in on the housing surge of appreciating values, often times relocating even out of state, to a more conducive and financially relaxed lifestyle.
Even as we see the movement of job resignations rise, due to burned out Millenials and Gen Zer’s, which I think is still part of the redefining process, we also saw a 64% increase in IPO’s that hit in 2021, internationally, with China leading the pack. It seems to be on trend, that when we nationally or internationally go through some kind of upheaval, creativity begins to rise. Look below at just some of the major tech companies that came out on the heels of the Great Recession.
Housing Market Appreciation and Forecast – Sonoma County
Getting down to brass tacks, according to Dr. Robert Eyler, professor of economics at Sonoma State University, among many other accomplishments, the numbers for Sonoma County from 2020 through 2021 has shown a 35%increase in value of homes through most areas, with a 9% prediction in rising home prices for 2022. Probably one of the biggest things to keep in mind, when it comes to Sonoma County is the average sales price, which is just below $700,000, believe it or not. Compared to places like Santa Barbara at a median sales price of $1,650,000 or Saratoga, diminishing Santa Barbara’s price, sitting at $3,500,000, Sonoma County is looking pretty affordable. This also leads to the influx of buyers coming into the county, both for living and investments.
We have had a steady stream of buyers through the holidays as well as homes still going into contract quickly. As 2022 has started, more listings are being put on the market now, instead of waiting for the typical springtime season. Homes in the $600,000 – $800,000 price range are still receiving excessive amounts of multiple offers, further verifying the demand by buyers, keeping this market hot.
Interest Rates / Inflation
The general economic forecast is that the short term rate is slated to increase gradually this year. Mortgage rates, which operate differently, have already started a slight ascent to where they were 1 year ago, but are still very much low. Inflation, which is now hovering around 6% is always a good indicator of potentially rising rates. Inflation will be a big theme this year.
The supply chain of goods and services is still disrupted, which is another major component of growing inflation. With cargo ships, estimated at 80+, still sitting in the water in both Northern and Southern California, this halts the delivery of the much needed goods, which inherently effects the services industry (take the auto industry). So, the prices naturally climb as the demand is greater than the supply.
This can also be applied to the housing market. In Sonoma County, we are still fortunate for the amount of inventory we have. Yes, it is much lower than normal, but much higher than some of our counterpart cities in California. We are in a bit of a conundrum in parts of California. There are people who would like to move, but are unsure if they will be able to find a replacement home somewhere else, either in their city or somewhere else in California. It’s sort of like a Catch 22. Even moving out of state has presented challenges due to the surge of movement as well as rising prices.
Cup Half Full or Empty – Perspective Shift
I think one of the biggest challenges about the market we find ourselves in, is the perspective and publicized narrative. Just like me writing, there is a slue of opinions on what this market could potentially do or how it can change. I read a lot and have lots of conversations, so I see the varying opinions as well the fear. It can almost appear as the proverbial phrase “is the glass half empty or half full?” It’s all perspective and the lens you choose to look through.
It is only when looking at the bigger picture, that the view morphs into something different. Thus, why I mention the different generations. Baby Boomers and Millennials see things differently. That’s OK. We all base our decisions basically on hard won wisdom, which comes from experience. That is where the Baby Boomers exceed. They have had years of experiences.
But with the this market I am reminded of how great changes sneak up on us and we don’t realize it until after it has taken hold. But, I am an eternal optimist with a realist foundation. A good example would be the birth of “rock and roll”, which was initially frowned upon by the older generation almost as something evil. But guess what, the movement took hold and rock and roll prevailed and changed the entire landscape of the music industry.
So moving forward in 2022, with whatever goals or lifestyle changes you may be entertaining, keep one thing in mind. Change is constant and we are in the continued midst of great changes. As we head into the future, my hopes are that we are placing happiness at the forefront and that theme will continue to lead our choices…no matter what generation we are in.
Best wishes for a very prosperous and healthy 2022!