From housing to groceries, Sonoma County residents are adjusting to paying more

There are many ways to measure how inflation is affecting Sonoma County residents.

One good barometer is the local taproom where the typical pint of beer in recent years was priced around $5. It now costs between $7 to $8 before adding in the $1 to $2 tip for the bartender, according to consumers and brewers.

That’s been the experience for Nick Costanzo, a Santa Rosa resident who is a craft beer aficionado. Costanzo said the price bump struck home after a recent lunch at Russian River Brewing Co. with his wife and children when the entire meal totaled about $80.

“I definitely love craft beer and would buy it, but I am definitely looking for more deals where I can,” said Costanzo, whose favorites are Russian River and Cooperage Brewing Co. He has recently started using a bank app to track how much he spends monthly for different categories.

“In just the three weeks, we have started thinking about it, especially with stuff like in a grocery store and the opportunity to buy something,” said Costanzo, a Sonoma County native who graduated from Piner High School.

The actions by Costanzo are not unique as local residents are adjusting to a new world where things cost more. Here’s a look at a few key categories:

Housing

The housing industry has faced the brunt of the challenges this year with rising interest rates as a result of actions from the Federal Reserve, which increased its benchmark rate by another three-quarters of a percentage point Wednesday.

The average rate for a 30-year mortgage began the year at a range around 2.5% to 3% and neared 6% by the end of June. That means that the $700,000 mortgage loan in January would have increased a monthly payment of $3,100 to now around $4,600, said Ross Liscum, a Santa Rosa real estate broker affiliated with Century 21 NorthBay Alliance.

“The analogy is that the $800,000 buyer in January is probably a $600,000 buyer today. But there’s really no inventory at $600,000,” Liscum said of the single-family home market. “The buyer market has shrunk.”

The first-time buyer could opt for a condominium or pull out and remain a renter, he added.

The rental market, however, also faces pressure. Landlords are expected to raise their monthly rates as most state and local eviction moratoriums and rental relief programs under the pandemic have ended as of last month.

In addition, Gov. Gavin Newsom late last year let a price-gouging cap on local rents expire that dated back to the 2017 wildfires.

“With inflation up, you should expect rents to kick up as soon as landlords have a chance to make up a little ground from the original moratorium for their own cost of business,” said Robert Eyler, an economics professor at Sonoma State University who studies the local economy.

The average monthly rent in Santa Rosa in July was $2,224, according to Rentcafe, an apartment search website that tracks data from property managers.

Renters, meanwhile, are facing additional pressures with increased food and gas costs that could force them to downsize because their wages likely have not increased as much as inflation, Eyler said.

For example, one adult with a child in Sonoma County would need to make a living wage of $44.58 per hour to support their family, according to the MIT Living Wage Calculator.

“That’s one place where you might see people consolidating households or leaving the area,” Eyler said.

Autos

Car supply is still tight in this market, which suffered an enormous crunch during the pandemic. Those problems included shortage of key components, factories affected by COVID-19 shutdowns; and backed-up ports along the West Coast.

The impact also was felt in the used-car market as people hung on to their cars during the pandemic because many didn’t have to drive as much. Rental car providers also held onto inventory.

Prices remain high as the average new car sale in the United States was $47,148 in May 2022, according to the Kelley Blue Book. That was the second-highest monthly total recorded behind December 2021 when it reached $47,202.

There has been a slight improvement in inventory, but the market is still not back to pre-pandemic levels, said Cynthia Negri, chief administrative officer for Redwood Credit Union, which has an auto lot in south Santa Rosa.

“I will say there are a little more cars available — not a tremendous amount, but a little bit more,” she said. “Even when we find a car, it takes a long time to get it.”

Some buyers will have to wait from weeks to a few months to have a car delivered as manufacturers are producing autos on a schedule based more on real-time demand, she said.

“The more flexible the buyer can be, the better chance they will have getting it quicker,” Negri said. “If they are not worried about certain add-ons or if they are flexible on color … the quicker they can get it.”

Customers are downsizing their price while some are looking at hybrid and electric vehicles to save money on gas, she said.

“From an inflationary standpoint, everyone’s really looking at their budget,” Negri said.

Car buyers, however, have not been placed at a particular disadvantage with auto loans. Those rates have climbed slower than those in the home-mortgage market, she said.

“The rates are still relatively low,” Negri said, adding Redwood’s auto loans start at 2.69% and it provides discounts for hybrid and electric vehicles.

Groceries

Shoppers also are experiencing higher supermarket bills. The U.S. Department of Agriculture has noted that grocery prices increased at an annual rate of 3.5% in both 2020 and 2021 during the height of the pandemic.

The biggest increases occurred with meats, especially with beef and veal. Fresh fruits and vegetables experienced the smallest spikes. But the department was stark on what COVID-19 has done to food production: “No food categories decreased in price in 2021 compared with 2020.”

Over at family-owned Molsberry Market in Larkfield, co-owner Dean Molsberry said he is trying to find the right balance on pricing with the estimated 30,000 different items that his grocery stocks. “It becomes definitely a juggling act to figure out where you can take margin or where your margins are definitely shrinking,” Molsberry said.

Transportation costs are a big factor on wholesale price increases — especially for international products. Items that take up more cargo space, such as paper towels, carry additional cost.

“Cereal isn’t heavy, but it takes a lot of space,” he said. “So, when you are getting deliveries, they do charge you for the space you’re filling up.”

There are some items that the market has found that shoppers are willing to pay more, such as gourmet items and pet food. “I will literally see people will skimp on their personal food so their pets will get better food,” he said.

Conversely, they are pickier on items such as canned vegetables where prices have remained mostly stable with generics filling a void.

“I will say we are seeing more of the house labels for that (item),” Molsberry said.

Restaurants

No industry arguably has been harmed more from the pandemic than restaurants as Sonoma County experienced many closings over the past two years despite government aid efforts to rescue them. Steele and Hops in Santa Rosa was the latest casualty this month.

Restaurants have been hit with increased food costs along with a tight labor market. That has forced many to curb their hours and operate with fewer workers. It also has translated to higher menu prices. Average menu prices increased 7.7% from June 2021 and June 2022, which was the biggest yearly increase since 1981, according to the Bureau of Labor Statistics.

That’s been the case over at Bear Republic Brewing Co. restaurant in Rohnert Park.

For example, the cost of chicken wings has continued to rise as demand stays strong. The restaurant increased the price on its menu for chicken wings from $12.50 to $14 as a result, said owner Richard G. Norgrove. The starting price of its hamburger plate is now at $15, which is about the floor for Sonoma County restaurants that are not fast food.

“Chicken tenders. French fries. Those are all commodity items that have to get shipped from somewhere,” Norgrove said. “You do your best to not pass those food prices on. But we’re at a point where we are looking at it daily.”

Wine and beer

These two local staples also have price pressures. For wine, it’s a tale of two markets, according to Rob McMillan, founder of Silicon Valley Bank’s wine division.

Bargain shoppers should benefit. “Prices in the under $11 segment in grocery aren’t increasing,” McMillan said in an email.

He added that the budget-price category in grocery stores decreased by 8% in revenue through May. “It’s clear higher-production wineries aren’t keeping up with inflation.”

That’s not the case for more premium wines. His bank conducted a survey released earlier this year that showed 72% of the wineries making wines above $25 said they were going to raise prices, most by a small amount.

“Bottom line, inflation is impacting the wine producers but they aren’t passing on the full impact of price increases to consumers. They are making lower margins,” he said.

Meanwhile, craft breweries are adjusting to increases from trucking costs, packaging materials, aluminum cans and malt prices, said Bart Watson, chief economist with the Brewers Association, the trade group that represents independent breweries.

“Everything is more expensive,” he said.

Bear Republic is reviewing its pricing structure with its distributors, Norgrove said. “I think you are going to see with a lot of brewers … you will see a price take in the fall,” he said. “We already are losing money on stuff right now.”

But some are holding off for now.

Anderson Valley Brewing Co. in Boonville has achieved cost savings from its solar panels along with a shift to 100% aluminum cans and cardboard packaging to reduce its trucking costs, said Kevin McGee, president and CEO. “We had the option and chose to hold price,” McGee added.