Las Vegas Economic Metrics

     

    stat highlights

    positive

     employment

    The RCG Employment Index’s 12-month moving average (“12MMA”) has been steadily increasing since 2011; however, in this July it took another rare pause. This was the first month in just over a year that did not see the Index increase. Compared to July 2016, the Index is up 1.2 points, though it remains 1.4 points below the November 2006 peak of 100. We expect the Index will continue on the same trajectory that we have been seeing since 2011.

    unemployment

    After falling by 0.1 points every month for more than a year, the 12MMA of Clark County’s headline unemployment rate halted at 5.2% in July 2017. The rate is 1.1 points below last July’s 6.3%. It reached its lowest level in October 2006 when it was just 4%. The region is hypothetically at “full employment”.

    After 7 straight months at 3.3%, the 12MMA rate of job growth in the Las Vegas MSA experienced an undesired change, dropping 0.1 points to 3.2% in July. Job growth in the region and at the national level has been suffering from the same effect: according to the Brookings Institution, the slowdown is mainly due to decreasing demand for unskilled labor.

    yoy construction

    A strong housing market AND a recovering commercial market are bolstering construction in Las Vegas, leading to more construction jobs. There were 59,383 construction workers in Southern Nevada in July 2017 (12MMA), up 5,708 (10.6%) from July 2016. That makes 61 straight months (just over 5 years) and counting of construction job growth. These jobs now represent 6.6% of the region’s job-base, a small 0.1 point increase in construction’s share. July’s jobs are still well below the November 2006 peak of 108,833, when they accounted for 11.4% of all MSA jobs. We are not likely to see pre-recession construction job numbers in the foreseeable future; and yet, while the number of construction jobs was pushed to an artificial high during the real estate bubble, the industry is much more stable today than it was then.

    visitor volume

    On a 12MMA basis, the number of visitors to Clark County in July fell -0.09% from the previous month. When compared to July 2016, there was no YOY growth. 2017’s seven-month visitor total of approximately 25 million is still just barely higher than 2016’s 24.9 million, with the differential continuing to shrink. Visitor growth has slowed considerably in 2017 with a YOY visitor growth rate average over the first half of the year of only 0.6%. The average rate of growth over the same period in 2016 was better at 1.7%. We believe we have now entered a sustained period of slower but steady growth. The month of greatest YOY growth since October 2005 was September 2011, when visitor volume grew by 4.5%.

    convention attendance

    In July, Clark County’s convention attendance (on a 12MMA basis) saw its biggest monthly increase in over a year and reached a new high, growing 1.9% to 533,668 attendees from 523,890 the previous month. Compared to July 2016, convention attendance was up 2.2%. The previous 12MMA monthly peak attendance of 529,185 was in January 2007.

    Convention attendance saw significant gains in 2016 with 10 months of greater than 10% YOY growth. However, YOY growth has been steadily slowing since the recent high in July 2016 of 20.2%. This is primarily due to facility capacity issues controlling the demand growth. In June 2017, the Las Vegas Convention and Visitors Authority’s Board of Directors gave final approval for an expansion and renovation of the Las Vegas Convention Center.

    hotel rev

    In July 2017, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $115.40, an increase of $0.61 (0.53%) from the previous month. Compared to July 2016, RevPAR is up an even $6.00 (5.5%), which continues its streak of YOY growth that began in December 2010. RevPAR is nearing a new high, now representing 97% of the RevPAR 12MMA peak of $119.43, which occurred in December 2007.

    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 rev

    On a 12MMA basis gaming revenue net of baccarat was up for the 5th month in a row with an increase of 0.12% from this past June to $723.8 million in July. YOY growth in July of 3.6% was down slightly (-0.3 points) from the 12-month period ending in June, but maintains a 30 month streak of positive YOY growth. July’s gaming revenues net of baccarat were nearly 87% of 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. While changing spending patterns among millennials under 35 have caused a decrease in slot revenues, they are now recovering because there has finally been some improvement with the issue of constrained disposable income.

    home sales

    According to Home Builders Research, in July, total (new and resales) Clark County home closings, which were up 0.96% from the previous month, have now surpassed the most recent monthly peak in July 2012 of 4,777 sales and reached a new high of 4,798 sales (12MMA). On a YOY basis, total home sales were up by 9.8% compared to July 2016. New home sales continue their hot streak with YOY growth of 22.5%, the 6th month in a row that annual growth in new home sales has been over 20%. Existing home sales, which are not nearly as strong, are nonetheless growing steadily with a YOY growth rate of 7.8%.

    home price

    Per Home Builders Research, the 12MMA median home price (new and resale) in July 2017 was $232,086, a 7.8% gain over July 2016. The peak of $305,333 was recorded just over 10 years ago in February 2007. July’s estimate was 76% of the peak price.

    The median new home price was up 4.2% from the previous year, reaching a new peak in July of $331,526. The previous peak of $327,066 occurred in February 2007.

    The median resale home price was $213,899 in July, a 7.7% increase during the last 12 months. The peak of $286,833 occurred over 10 years ago in April 2007. This means that the current resale price has recovered approximately 75% of its pre-recession peak. By comparison, the median resale home price in the Reno-Sparks MSA was $320,606 (12MMA).

    Toward the end of 2016 the combined rate of home appreciation for new and resale homes declined from an average 10.1% YOY growth during the first four months to 6.4% in December of that year. It grew slightly to start off 2017 and over the last five months has held above 7%. 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 increased by 0.05 points to 3.83% in August. The 10-year peak of 6.4% occurred in October 2006. The 30-year fixed rate mortgage should remain relatively low, but will likely go up because of Federal Reserve actions.

    case shiller

    The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 155.5 in June 2017, a rise of 6.1% compared to June 2016. The US index in June was 194.1, an increase of 5.5% for it compared to the previous year. The Las Vegas index peaked at 233.2 in December 2006. The latest index is 67% of the peak. The greatest positive annual change (44.5%) in the Las Vegas 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.

    housing opp

    The Housing Opportunity Index (“HOI”) for the Las Vegas MSA has now declined for 2 straight quarters after 7 quarters of increases, reaching 66.3 points on a 4-quarter moving average basis, or 77% of its peak. It dropped 0.6 points from 67.7 in Q1, and fell another 0.8 points in Q2. The Las Vegas HOI peaked at 86.2 in Q1, 2012. It bottomed out at 15.4 in Q1, 2007 at the height of the housing boom. The 10-year average is 67.8.

    The U.S. index dropped from 62.9 in Q3, 2016 to 62.1 in Q4, 2016. Housing prices nationally appear to be stabilizing.

    The HOI is based on the share of homes sold that are affordable to a family earning the median income in Clark County, assuming standard mortgage underwriting criteria.

    commercial vacancy

    In Q2, 2017 the vacancy rate for the commercial markets was up in Industrial, down in Spec Office, and unchanged in Anchored Retail. On a 4-quarter moving average basis the results were nearly the same with the only difference being Anchored Retail experienced a small 0.1 point decline in vacancy.

    The Industrial market vacancy rate increased by 0.5 points to 6.0% in Q2. On a 4-quarter moving average basis the increase was only 0.2, from 5.3% to 5.5%.

    The Spec Office vacancy rate decreased by 1.1 points to 19.2% in Q2. On a 4-quarter moving average basis the vacancy rate was down 0.2 points from Q1.

    Anchored Retail saw vacancy remain at 10.8%; however, on a 4-quarter moving average the Retail rate actually fell 0.1 points to 10.8%.

    On a 4-quarter moving average basis, this is the 3rd increase in a row for Industrial, though its vacancy rate remains well below the other markets. Anchored Retail market vacancy is nearly double the Industrial market, while the average Spec Office market vacancy rate nearly doubles Anchored Retail.

    commercial mortgages

    The 10-year treasury continued its descent in August, falling to a low of 2.12% on the 31st. Despite countless forecasts anticipating interest rates to rise with each increase from the Fed, long term rates have consistently remained at low levels throughout the majority of 2017. Potential reasons long term interest rates continue to fall include: the view of U.S. Treasuries as international “safe harbor” investments amid geopolitical uncertainties, the current outlook for inflation remaining low, and the greater value received by global investors choosing from the 2.07% yield from the 10-year U.S. Treasury, 0.38% for the 10-year German Bund and .05% from Japan’s 10-year bond. Additionally, the Labor Department stated U.S. employers added 156k jobs in August, slightly less than analysts expected. Investors viewed the relatively weak jobs report for August as a likely reason to help keep interest rates low.

    The 10-year U.S. Treasury continues to remain favorable for those looking for long term, fixed rate financing.

    Source: CommCap Advisors.

    taxable retail

    Despite slowing visitor growth, increased local resident and business spending in Nevada and Clark County continues to see rising taxable retail sales. We believe much of this growth is due to the volume of construction activity in the market today. Another record high was reached in June with $3.41 billion in sales, a healthy 4.2% increase from last year, though the increase from the previous month was just 0.03%. The YOY growth rate for taxable retail sales averages 4.5% over the first half of the year.

    June’s 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 revenues and spending. Steadily improving local, regional and national job markets are key to this improvement. This is especially true regarding the health of regional and national economies, which have driven Southern Nevada’s growth, benefiting all of its sectors. They are also primary drivers of visitors and convention attendance to Las Vegas, which is ultimately reflected in tourism spending in the region.

    weekly earnings

    The Las Vegas MSA’s 12MMA of average weekly earnings (not inflation-adjusted) continues to climb steadily and in July 2017 rose $5 to $767. On a YOY basis, the 12MMA was up $30 (4.1%) from July 2016.

    On an inflation-adjusted, YOY basis, earnings rose by 2.2% in July 2017 compared to July 2016, reaching $663 (in 2007 dollars). This was an increase of $3 from June. Las Vegas’ average weekly real wage is now $88 (12%) below the most recent inflation-adjusted peak of $751 that occurred almost 10 years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas is still much closer to the trough than the peak.

    weekly hours

    The number of average weekly hours worked in Las Vegas (Clark County), on a 12MMA basis, ticked up 0.1 points to 33.6 in July after having remained stagnant the month before. This 0.1-point increase every 2 months has become a pattern that began in January 2017. On a YOY basis, average weekly hours are up 0.4 hours from July 2016. The 7-year peak of 36.9 hours occurred in October 2008. Weak average hours worked continue to be accompanied by a declining headline unemployment rate. In Q2-2017, the U-6 unemployment rate recorded another 0.4 point drop, which may be an indication that business reliance on part-time workers is decreasing. The pace at which weekly hours are increasing, though still very slow, does appear to be picking up.

    Implication: Despite decreasing headline and U-6 unemployment rates, many companies continue to depend heavily on part-time workers and independent contractors. For this reason, Nevada’s U-6 unemployment rate (including discouraged and part-time workers) remains the nation’s 3rd highest at 11.5% as of Q2, 2017. However, the decreasing U-6 rate does seem to be having a salutary effect on weekly hours. In 2016, the net gain in weekly hours was 0. Already in 2017 weekly hours have increased 0.4 hours.

    unleaded

    As of September 6, the price of regular unleaded gasoline in the Las Vegas MSA increased $0.15 (6.0%) from the month prior, resulting in a per gallon price of $2.70. The price of regular unleaded has gone up $0.30, or 12.4%, from a year ago.

    According to AAA, “Hurricane Harvey may no longer be raining down on the Gulf Coast, but the storm’s impact continues to drive up gas prices across the country. At $2.65, the national gas price average is 27 cents more expensive on the week. Motorists in 26 states are paying 25 to 44 cents more for a gallon of unleaded compared to seven days ago. In fact, every state in the country has seen gas prices increase except four (Alaska, Idaho, Hawaii and Utah), where prices remain stable. Overall, gas prices are pennies away from topping the highest price ($2.67, August 15-18, 2015) Americans have paid for a gallon of gas in more than two years…. As Texas dries out from Harvey, all eyes are on Hurricane Irma, now a Category 5 hurricane. 

    Despite being the region with the smallest gas price increases on the week, the West Coast continues to sell the most expensive gas. Gas prices on the West Coast increased as much as 12 cents on the week: California (+12 cents), Arizona (+9 cents), Nevada (+9 cents), Washington (+7 cents), Oregon (+6 cents), Alaska (+4 cents) and Hawaii (+3 cents)… the West Coast does not typically draw gasoline from the Gulf Coast and is not experiencing price spikes as compared to the East Coast.”

    meter hookups

    Electric meter hookups’ 12MMA in July 2017 reached 804,360. Total hookups were up 1.8% from July 2016. Over the last 21 months the annual growth rate for electric meter hookups has slowly fluctuated between 1.7% and 1.9%. This hints at stable population growth and business growth, and household formations in the Valley. The annual peak growth rate occurred March 1990 at 10.5%.

    permit

    A well-known housing market indicator is the employment-to-housing permit ratio or E-P Ratio. It compares monthly job growth to the number of housing permits issued during the same month. The E-P Ratio for Clark County fell 0.2 points from 1.6 in June to 1.4 in July on a 12MMA basis. Relative to July 2016 the E-P Ratio is down 0.9 points from 2.3. The general consensus among real estate analyst is that an E-P Ratio between 1.0 and 2.0 indicates a stable market. Clark County’s E-P Ratio has been in this range since October 2016.

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