Las Vegas Metro Trends Mostly Positive

    With another month to go before we see year end (December 2016) data, job growth continues to slow but no major blips to report.

    stat highlights

    positive

    employment index

    The RCG Employment Index 12-month moving average (“12MMA”) for Clark County again ticked up by 0.1 points to 97.7 in November. The Index is up 0.9 points when compared to November 2015. The Index peaked at 99.8 in November 2006.

    job growth & headline

    The 12MMA of Clark County’s headline unemployment rate remained at 6.1% in November. When compared to November 2015, the headline rate is down by 0.8 points. The rate reached its lowest level in October 2006 when it was just 4%.

    On the other hand, the rate of job growth in the Las Vegas MSA continues to slow. In November, it fell by 0.1 points to 2.4% (12MMA). Job growth in Las Vegas is being affected similar to what is occurring at the national level. According to the Brookings Institution, the slowdown mainly due to decreasing demand for unskilled labor.

    yoy construction jobs

    Construction jobs in the Las Vegas MSA continue growing at a steady pace as housing and commercial real estate demand rebound. Construction workers in Southern Nevada numbered 57,017 in November 2016 (12MMA), up 6,608 jobs (13.1%) from November 2015. Construction jobs have now grown for 52 straight months and represented 6.5% of the region’s job-base at the end of November. The latest number of jobs in the industry is still far below the November 2006 peak of 108,833 when they accounted for 11.4% of all MSA jobs. It is unlikely we will see those pre-recession construction job numbers in the foreseeable future. This should not be cause for concern because construction is not considered a “primary industry” and can be volatile.

    visitor volume

    On a 12MMA basis, Clark County visitor volume in November was nearly unchanged from the previous month, growing by only 0.03% after October’s 0.05% decline. When compared to November 2015, the YOY visitor count was up 1.6% in November. Visitor totals for 2016 are ahead of what they were during the same period in 2015, with 39.7 million from January through November of 2016 compared to 39.1 million in the prior year. The month of greatest YOY growth since October 2005 was September 2011, when visitor volume grew by 4.5%.

    convention attendance

    Monthly Clark County convention attendance decreased by 0.63% in November compared to October (on a 12MMA basis) to 517,536. However, compared to November 2015, convention attendance is up 8.8%. The 12MMA monthly peak attendance of 529,185 was in January 2007. November’s attendance represented 97.8% of the peak.

    Convention attendance grew significantly in 2016, nearly equaling the growth of the prior 5-year period in the past 12 months alone. This can be attributed to a stronger national economy and business investment in marketing. The previous peak in YOY growth, eclipsed in the first month of 2016, was in February 2006 when convention attendance rose by 10.5%. November is the first month of 2016 that YOY growth did not break 10%.

    hotel rev per avail

    The 12MMA of hotel revenue per available room (RevPAR) in Clark County was $111.68 in November, a small increase of $0.23 (0.2%) from October. Compared to November 2015, RevPAR is up $6.74 (6.4%) and continues on its streak of YOY growth that began in December 2010. The RevPAR 12MMA peak occurred in December 2007 at $119.43.

    Note: RevPAR is a performance metric in the gaming and lodging industry. It is computed by dividing a resort’s or hotel’s room revenue by the room count and the number of days in the period being measured.

    gaming revenue net bacc

    Gaming revenue net of baccarat continues to post meager growth, increasing in November 2016 by 0.1% to $710.4 million on a 12MMA basis. YOY growth in November was 2.4%. Gaming revenue net of baccarat remains well below the October 2007 peak of $834.4 million.

    The net baccarat revenues are largely comprised of slot revenues, which generally reflect wagering of typical gamblers, especially U.S. gamblers. Slot revenues continue to remain lackluster for two reasons: constrained disposable income and changing spending patterns, especially among adults under 35. Millennials are preferring to spend their money on the club scene, shopping and show experiences rather than gambling.

    home sales

    According to Home Builders Research, in November total (new and resales) Clark County home closings, which numbered 4,571 (12MMA), were up by 1.94% from the previous month. When gauged on a YOY basis, the improvement is more pronounced, with total home sales up by 11.3% compared to November 2015. Resales also saw a significant YOY increase of 10.6% to 3,926, while new homes sales jumped 15.7% to 645. This was the 17th straight month of increasing YOY new home sales after 14 months of declines and the 14th straight month of YOY gains of over 10%. The most recent monthly peak occurred July 2012 with 4,777 sales.

    median home price

    Per Home Builders Research, the 12MMA median home price (new and resale) in November was $219,850, a 7.5% gain over November 2015. The peak of $305,333 was recorded in February 2007.

    The median new home price in November was $321,152, up 3.8% from the previous year. The peak of $327,066 occurred in February 2007. This means that the current median new home price has recovered to 98.2% of its pre-recession peak.

    The median resale home price was $203,274 in November, an 8.3% increase during the last 12 months. The peak of $286,833 was in April 2007. This means that the current resale price has recovered to 70% of its pre-recession peak. By comparison, the Reno-Sparks average resale price for November was $310,950.

    The combined rate of home appreciation for new and resale homes had slowed considerably in mid-2015, but then started to accelerate again. In November 2015, the YOY price increase from 2014 was 9%. This is 1.5 percentage-points more than the 2016 figure. The annual peak of 35.8% growth occurred in February 2005.

    30 year fixed

    The 12MMA 30-year fixed rate mortgage in the Western Region fell 0.03 points to 3.61% in November. The 10-year peak of 6.4% occurred in October 2006. This rate has been steadily decreasing for the last 11 months and should remain relatively low, but will are likely to go up because of Federal Reserve actions.

    case shiller

    The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 148.5 in September, a rise of 5.7% compared to September 2015. The index peaked at 233.2 in December 2006. The latest index is 63% of the peak, making the region a competitive housing market. The greatest positive annual change (44.5%) in the index occurred in March 2005, while the greatest negative change (-31.8%) occurred in August 2009. These trends are similar to those reported by Home Builders Research.

    multi indicator

    Freddie Mac’s 12MMA Multi-Indicator Market index (MIMI) for the Las Vegas MSA increased to 64.3 (43% of the peak, see below) in October, a spike of 13.2% compared to October 2015. However, Las Vegas is still ranked near the bottom of the 100 rated metros. The index peaked at 148.4 in March 2006. The greatest (45.1%) change in the index was in May 2014 and the fastest 12MMA decline (-51.2%) was in December 2009.

    The MIMI index measures the stability of local housing activity by combining current local market data with Freddie Mac data; specifically, by looking at home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of current mortgage payments in each market (healthy loans vs loans in default), and the local employment picture.

    current commercial

    As of December 2, 2016, the prime rate remained at 3.5%. The 10-year treasury bond rate rose by 0.62 points to 2.45%. The 30-day LIBOR ticked up by 0.08 points to 0.62%. Most lender rates increased since the start of November. While these rates are expected to continue shifting upward, they remain relatively low and continue to benefit the commercial real estate industry in terms of the cost of borrowing. The challenge: excess capacity, especially in the office market, combined with moderate job growth and companies remaining hesitant about expanding their space footprint.

    taxable retail sales

    Taxable retail sales in Nevada and Clark County continued to rise thanks to increased visitation, as well as local resident and business spending, but the YOY change is slowing as the local economy reflects uncertainty due to national and global trends. Sales hit $3.31 billion in October, up 4% compared to October 2015 on a YOY basis using a 12MMA. This year’s taxable sales through October were approximately $32.6 billion, while in 2015 the total over the same period was approximately $31.2 billion – more than $1 billion less than 2016 and putting taxable sales in Clark County on pace to exceed the previous year’s total.

    Current taxable sales are the highest ever recorded by the State of Nevada on a nominal basis (not inflation-adjusted). As such, they have boosted local and state government budgets. Steadily improving local, regional and national job markets are key to this improvement. This is especially true regarding the regional and national job markets since they are primary drivers of tourism spending in the region.

    average weekly earnings

    The Las Vegas MSA 12MMA average weekly earnings (not inflation-adjusted) in November was up by $3 compared to October, reaching $743, and is up $19 (2.5%) from November 2015. On an inflation-adjusted, YOY basis, earnings increased 1.4% in November 2016 compared to November 2015 to $651 (in 2007 dollars). Las Vegas’ average weekly real wage is now an even $100 (14%) below the most recent inflation-adjusted peak of $751 that occurred 9 years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas is still closer to the trough than the peak.

    average weekly hours

    On a 12MMA basis, the number of average weekly hours worked in Las Vegas (Clark County) remained at 33.2 for the fifth month in a row. On a YOY basis average weekly hours are unchanged from November 2015. The 7-year peak of 36.9 hours occurred in October 2008. As we’ve noted, weak average hours worked have, at least, been accompanied by a slowly declining headline unemployment rate. In Q3-2016, the U6 unemployment rate recorded a 0.6 point drop, so we remain optimistic that we will soon see increases in weekly hours worked.

    Implication: Companies continue to depend heavily on part-time workers. For this reason, Nevada’s U-6 unemployment rate (includes discouraged and part-time workers), though declining, remains among the nation’s highest at 12.5% as of Q3, 2016.

    regular unleaded

    As of December 28, the price of regular unleaded in the Las Vegas MSA fell $0.05 (2.1%) from a month prior, resulting in a per gallon price of $2.35. Compared to this time last year, the price of regular unleaded is $0.19, or 7.6%, less.

    From a national perspective, the national average price of gas has been ticking upward. Heading into the New Year, the average price consumers will pay at the pump is the highest it has been since 2014. According to AAA, “Moving into 2017, retail prices will continue to hinge on the ability of cartel countries to successfully implement production cuts, but retail averages are likely to increase leading up to the summer driving season as seasonal refinery maintenance gets underway this spring.”

    electric meter

    Electric meter hookups’ 12MMA in October reached 793,901. Total hookups were up 1.8% over October 2015. The annual growth rate has been steady for the last 11 months. This hints at stable population growth and household formations in the Valley. The annual peak growth rate occurred March 1990 at 10.5%.

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