The Stat Pack
Most Las Vegas MSA metrics are positive or at least neutral this month, with just two exceptions including the commercial mortgage rate.
The RCG Employment Index 12-month moving average (“12MMA”) for Clark County again held at 97.3 from May to June. When compared to June 2015, the Index is up 0.9 points in June 2016. The Index peaked at 99.8 in November 2006.
The 12MMA of Clark County’s headline unemployment rate did not change in June, remaining at 6.4% for the 3rd month in a row. Compared to June of the previous year, the headline unemployment rate decreased by 0.9 points. The rate reached its lowest level in October 2006 when it was just 4.0%.
Job growth in the Las Vegas MSA continues to decline, falling by 0.1 percentage-points to 2.9% (12MMA) in June 2016. The region’s YOY job growth rate fell by 1.4 percentage-points from 4.3% in June 2015. Job growth has declined for 10 straight months, similar to the decline in new jobs at the national level. According to Brookings, this is mainly due to a decline in demand for unskilled labor.
The U-3 and U-6 unemployment rates for Nevada diverged in Q2. The U-6 rate fell to 13.1% in Q2, 2016, down 0.3 points since Q1. The U-3, or headline rate, increased by 0.2 to 6.7%. Nevada’s U-6 rate is still the highest in the U.S., 0.7 points ahead of the 2nd worst state, New Mexico. In terms of the U-3 rate, Nevada ranks at the bottom as well, 0.3 points behind New Mexico, Alaska, West Virginia and Washington DC.
Construction jobs in the Las Vegas MSA numbered 53,883 in June 2016 (12MMA), up 5,717 jobs (11.9%) since June 2015. Construction jobs represented 6.1% of the job-base at the end of June, near the national average. The current number of jobs in construction is still far below the November 2006 peak of 108,833 when the industry accounted for 11.4% of all jobs. This is not necessarily a bad thing since Construction is not considered a “primary industry” and can be volatile.
Construction activity continues to pick up steadily as housing and commercial real estate demand rebound. Jobs in this sector have now grown for 47 straight months.
On a 12MMA basis, Clark County visitor volume grew slightly in June to 3.55 million. When compared to June 2015, the YOY visitor count was up 2.9% in June 2016. So far this year visitor totals are relatively close to the totals for the previous year with 21.3 million from January through June of 2016 compared to 21.0 million over the same period last year. The month of greatest YOY growth since October 2005 occurred in September 2011, when visitor volume grew by 4.5%.
Monthly Clark County convention attendance increased by 1.8% in June compared to May (on a 12MMA basis) to 512,329. However, compared to June 2015, convention attendance increased considerably more – by 17.2%. The monthly peak attendance of 527,268 occurred in June 2007. This June’s attendance represented 97% of the peak.
Convention attendance has increased significantly over the last 11 months, nearly equaling the growth of the previous 5 years in that short time. This can be attributed to a stronger national economy and business investments in marketing. The previous peak in YOY growth, now eclipsed, occurred in February 2006 when convention attendance rose by 10.5%.
The 12MMA hotel revenue per available room (RevPAR) in Clark County was $108.15 in June, an increase of $0.83 (0.78%) from May. Compared to June 2015, RevPAR is up $6.55 (6.4%). RevPAR is back up after seeing a decline the previous month. The RevPAR peak occurred in December 2007 at $119.43. The yearly rate of growth has generally been around 3.0% or more since the start of 2011.
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.
June’s 12MMA gaming revenue (net of baccarat) of $695.7 million was an increase of 0.40% from May and was up 1.7% compared to June 2015. The monthly peak ($834.4 million) occurred in October 2007.
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 2 reasons: constrained disposable income and changing spending patterns, especially among adults under 35.
According to Home Builders Research, total (new and resales) Clark County home sales (closings) in June, which numbered 4,391 (12MMA), jumped 9.3% compared to June 2015. Resales saw an 8.5% YOY increase to 3,790, while new homes sales increased 14.8% to 601. This was the 12th straight month of increasing YOY new home sales after 14 months of declines. The most recent peak occurred July 2012 with 4,777 sales.
Per Home Builders Research, the 12MMA median home price (new and resale) in June was $213,982, an 8.8% gain over June 2015. The peak of $305,333 occurred in February 2007.
The median new home price in June was $316,778, up 5.4% from the previous year. The peak of $327,066 occurred in February 2007. This means that the current new home price has recovered to 97% of its pre-recession peak.
The median resale home price was $197,416 (69% of peak) in June, a 9.1% increase during the last 12 months. The peak of $286,833 occurred in April 2007. This means that the current resale price has recovered to 69% of its pre-recession peak. By comparison, the Reno-Sparks average resale price for June was $293,077.
The combined rate of home appreciation for new and resale homes had slowed considerably in mid-2015, but then started to accelerate again. In June 2015, the YOY price increase from 2014 was 7.3%. This is 1.5 percentage-points less than the 2016 figure. The annual peak of 35.8% growth occurred in February 2005.
The 12MMA 30-year fixed rate mortgage in the Western Region fell 0.05 points to 3.75% in July. The 10-year peak of 6.4% occurred in October 2006. This rate should remain relatively low.
The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 145.8 in May, an increase of 5.9% compared to May 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.
Freddie Mac’s 12MMA Multi-Indicator Market index (MIMI) for the Las Vegas MSA increased to 61.3 (41% of the peak, see below) in May, a rise of 12.7% compared to May 2015. However, Las Vegas is still ranked near the bottom of the 100 rated metros. This growth is still not quite as much as the 18.6% increase recorded between May 2014 and 2015, much like with the Case-Shiller index. The index peaked at 148.4 in March 2006. The greatest (45.1%) change in the index occurred in May 2014 and the fastest decline (-51.2%) occurred 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.
Commercial vacancy rates in the Las Vegas Valley fell across the board in Q2, 2016.
The Industrial market vacancy rate dropped by 0.4 points to 4.6% in Q2. On a 4-quarter moving average basis it dropped by 0.2 points from Q1 to 4.7% in Q2.
The Spec Office vacancy rebounded from a small uptick in vacancy the previous quarter, falling a considerable 2.5% from Q1 to 16.2% in Q2. On a 4-quarter moving average basis it fell from 18.6% in Q1 to an even 18.0% in Q2.
Vacancy in the Anchored Retail market also decreased this quarter, declining by 1 point to 9.1% in Q2, 2016. The 4-quarter moving average Retail rate fell 0.4 points to 9.9%.
Overbuilding of Office units during the boom continues to prevent the vacancy rate from being from dropping faster. It will take years of natural growth to get the Spec Office rate under 10%.
As of August 1, 2016 the prime rate remained at 3.5%. The 10-year treasury bond rate declined to 1.56%. The 90-day LIBOR increased to 0.49. The Life Company, CMBS, Agency and floating rates saw increases. These rates remain relatively low and benefit the commercial real estate industry in terms of the cost of borrowing. The challenge: excess capacity, especially in the office market, plus only moderate job growth.
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 a certain amount of uncertainty because of national and global trends. Sales hit $3.24 billion in May, up 4.3% compared to May 2015 on a YOY basis using a 12MMA. This year’s taxable sales total through May was approximately $15.9 billion, while in 2015 the total over the same period was approximately $15.5 billion, thus, 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.
The Las Vegas MSA 12MMA average weekly earnings (not inflation-adjusted) in June increased by approximately $2 from May to $735 and is $26 (3.7%) from June 2015. On an inflation-adjusted basis, earnings continued to improve as well, increasing by 3% in June 2016 compared to June 2015 to $648 (in 2007 dollars). Still, Las Vegas’ average weekly wage remains $103 (14%) below the inflation-adjusted peak of $751 that occurred in August 2007. The trough occurred in February 2012 at just over $616.
On a 12MMA basis, the number of average weekly hours worked in Las Vegas (Clark County) in June was again 33.1 for the 4th straight month and was down 0.1 hours from June 2015. The 7-year peak of 36.9 hours occurred in October 2008. As we’ve noted, stagnant and declining average hours worked have, at least, been accompanied by a dropping headline unemployment rate, implying that more steady hourly increases may be finally coming. At this point in the recovery, however, Reno is beating Las Vegas.
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) remained the nation’s highest at 13.1% as of Q2, 2016.
As of Aug 1, the price of regular unleaded fuel decreased by $0.09 from $2.51 a month before. When compared to the previous year, the average price per gallon for regular unleaded gasoline declined significantly by 25.6%, from $3.26 to $2.42.
According to AAA, “Strong global oil production and a strengthening U.S. dollar have contributed to West Texas Intermediate crude oil trading near lows not seen since Spring. One item market-watchers are considering this morning is the news that OPEC may again consider production limits by cartel members in an effort to boost oil prices by curbing supply. OPEC will hold an informal meeting in Algeria in late September, where member countries Ecuador and Venezuela will call for measures to cut production. Similar efforts earlier this year were unsuccessful, as members opted to preserve market share by maintaining production, which has preserved the global state of oversupply and resulted in low oil prices. If OPEC members agree to limit production, crude oil prices could again rise as demand moves into balance with supply.”
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 0.1 points to 1.5 in May on a 12MMA basis. When compared to May 2015 the E-P Ratio dropped 1.2 points from 2.7. According to the general consensus, an E-P Ratio between 1.0 and 2.0 that is level indicates a stable market.
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