The Indicator Brief is a publication of the Clark County Monitoring
Program. The Monitoring Program was developed to provide a foundation
for on-going policy discussions and a baseline from which economic, fiscal
or social changes could be monitored over time.
As a briefing document, the Indicator Brief is not intended to be
comprehensive. Rather, this summary is intended to highlight the salient
findings of the research conducted during the second quarter of 2008. It is
subdivided into the program's five core study areas:
economic,
fiscal,
public health and safety,
environmental and
demographic. |
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Summary Overview: Economic
Southern Nevada is undeniably a market in transition. A combination of
poor economic conditions locally and unstable national and regional housing
markets has forced the Las Vegas economy from a period of rapid growth to one of
rapid decline. Southern Nevada does, however, remain dependent on the health and
vitality of the region’s casino-hotels and gaming industry. Even with notable
economic diversity in recent years, that core sector continues to directly
employ 173,500 workers, or 18.7 percent of the Las Vegas valley workforce. It
also generates more than $22 billion in gross revenue annually, substantially
more than any other industry in the region.
The tourism industry’s performance has also shifted away from the feverish pace
reported during the 2003 to 2006 timeframe. According to data released by the
Las Vegas Convention and Visitors Authority (LVCVA), the number of visitors to
the Las Vegas valley totaled 10.1 million during the trailing 3-months ending
May 2008. This was a 0.7-percent decrease when compared to the same three months
of the previous year. Convention-related travel was down 1.3 percent during the
same three-month period. Also worth noting are airline volumes, which continued
to perform below the prior year’s statistics (-4.9 percent).
Although demand is waning, hotel room supply continued to expand during the
second quarter. At 136,700 rooms, the total inventory was up 2.7 percent as
compared to the same month previous year. Average hotel occupancies fell from
92.1 percent to 89.7 percent during the same period. Historically, supply has
created its own demand, and the expectation is that multi-billion investments
such as Wynn’s Encore, MGM MIRAGE’s CityCenter, and Turnberry Associates’
Fontainebleau will spur additional investment. That said, the delay of the Boyd
Gaming’s Echelon project and the foreclosure of Cosmopolitan by Deustche Bank AG
are ominous signs that gaming companies and investors are both wary about the
industry’s ability to weather the current storm.
Total employment in the Las Vegas Valley reached 927,000 during June 2008,
representing a marginal decrease of 0.7 percent from one year ago. While the
construction sector shed a total of 9,000 workers year-over-year, business and
professional services (-3,700), financial activities (-1,700), information
(-600), and leisure and hospitality (-1,400) all contributed to the fourth
consecutive month of employment declines. Government continued to lead the way
in terms of employment gains, adding 3,900 positions during the past 12 months.
It was followed trade, transportation and utilities (+3,500) and services
producing (+3,100) positions. Overall the economy lost 6,200 jobs during the
past 12 months off its June 2007 total.
The Las Vegas Valley unemployment rate currently stands at 6.5 percent, which
the highest reported unemployment rate since January 2002 (a period heavily
influenced by the 9-11 aftermath). In the short-term, the slowdown in
residential construction, which already has caused many companies to cut back
production, will likely contribute to overall construction-related employment
declines. As employment shifts are anticipated to continue, the southern Nevada
market will seek out a new equilibrium.
From a residential real estate perspective, elevated foreclosure and resale
inventories, in addition to lower-than-average market demand, have continued to
put downward pressure on pricing for both new and resale homes. According to
Home Builder Research, Clark County’s median new home prices stood at $257,831
during the second quarter of 2008, representing a 17.5-percent decrease from the
same quarter previous year. Median resale home prices fell by a more aggressive
20.2 percent during the same period, averaging $224,333 during the quarter.
A principal factor contributing to price declines are the elevated number of
foreclosures. Southern Nevada reported 3,223 new foreclosures during the second
quarter of 2008, which represents a slight increase from the 3,147 foreclosures
recorded during the same quarter previous year. Recent foreclosure activity
equates to 35 new foreclosures per day throughout the Las Vegas valley. The
number of active foreclosures (or residential units in the foreclosure process)
also remained elevated at 4,936. When compared to the same quarter of the prior
year, the active foreclosure count is up 8.8 percent. Anecdotal reports by
Realtors and others within the industry suggest financial institutions are
taking longer to process foreclosures and/or potential short sales. As units
work through the foreclosure process it is likely that, despite recent declines,
they will add additional inventory to the 22,078 residential resale units listed
with Realtors at quarter’s end.
The one bright spot in the residential sector is an increase in the number of
home sales. The number of units listed as “contingent” and “pending” within the
Multiple Listing Service continued to escalate through the second quarter of
2008, pointing to increased activity and lower price points.
The number of new home sales for the second quarter of 2008 has decreased by
42.3 percent when compared to the same quarter in the previous year. The median
new home price has decreased from $314,317 to $258,990 in the month of June,
representing a 17.6-percent decrease. Alternatively, existing home sales have
increased by 3.0 percent for the quarter, while sales prices have decreased by
22.1 percent, from $280,000 to $218,000. As expected, Clark County housing units
permitted for the quarter have decreased, falling by 817 units to 4,721. This
represents a 14.8-percent decrease for the quarter when compared to the second
quarter of 2007.
Much like a rollercoaster, the view from the bottom of an economic cycle is
always the scariest on the way down, particularly when you can’t see the bottom.
We anticipate economic conditions to worsen in southern Nevada, regionally and
nationally through most, if not all, of 2008. That said, a rapid recovery is not
likely, much of the decline is merely a resetting of consumer spending to more
sustainable levels. Although the residential construction sector appears to be
reaching its trough, the commercial segment may be just coming off its peak and
poised for a significant slowdown in late 2009 and 2010. The anticipated upswing
in the hospitality industry during the 2009 to 2011 timeframe should be a
stronger force. This expectation notwithstanding, the cadence of these cycles,
the impacts of higher oil prices, and consumer confidence all warrant close
monitoring. |
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CURRENT QUARTER
INDICATOR BRIEF: |
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ECONOMIC
HIGHLIGHTS: |
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1. |
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Casino Hotel & Gaming employs 18.7 percent
of the Las Vegas workforce |
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2. |
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10.1 million visitors came to Las Vegas
during the three month period ending May
2008 |
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3. |
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Hotel room inventory has increased 2.7
percent |
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4. |
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35 foreclosures a day were experienced
during the second quarter |
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5. |
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Active foreclosures are up 8.8 percent when
compared to the same quarter previous year |
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