The Stat Pack
In August 2018 the RCG Employment Index’s 12-month moving average (“12MMA”) remained at 98.8, with the previous month’s revised jobs numbers moving up slightly. On a YOY basis the Index is up 0.4 points from August 2017, and it is now just 1.2 points below the November 2006 peak of 100.
The 12MMA of Clark County’s headline unemployment rate remained steady at 5% in August for the third consecutive month. The 12MMA is 0.4 points below last August’s 5.5%. This metric reached its lowest level more than 11 years ago in October 2006 at just 4%.
The 12MMA rate of job growth in the Las Vegas MSA increased 0.1 points to 2.8% in August. However, YOY job growth is down 0.2 points from the previous month to 3.7%. The 12MMA job growth rate has been on a generally downward trajectory since September 2015. An analysis by the Brookings Institution posits job growth at the regional and national levels has been suffering from the same effect: the slowdown is mainly due to decreasing demand for unskilled labor.
At the same time, the economy continues to strengthen, performing better than some analysts had predicted. While President Trump’s economic policy of deregulation and tax cuts, and his willingness to add to the deficit, may be sustaining the strength of national job growth in the short-term, there are consequences looming down the road and impacts related to the Administration’s implemented and threatened tariffs.
Construction in the Las Vegas MSA continues to be boosted by a strong housing market and improving (especially industrial) commercial markets. In August 2018, the number of Southern Nevada construction workers rose by 5,992 (12MMA) from August 2017, a 10.4% jump. This was a clear improvement over the previous month’s YOY increase of 9.7%. On a 12MMA, basis, August’s gains put total construction jobs at 63,600. That marks 74 straight months (more than 6 years) of job growth. President Trump’s decision to put tariffs on metals from the E.U., Canada and Mexico, along with industrial equipment from China, are likely to have affect the Las Vegas construction industry.
In August 2018, construction jobs represented 6.7% of the region’s job-base, holding steady from July. During the real estate bubble of 2000-2007, construction jobs accounted for as much as an extraordinary 11.4% of all MSA jobs, with construction jobs peaking at 108,833 in November 2006.
The Las Vegas MSA’s 12-month visitor count (annualized) in August 2018 was 41.9million. The number of visitors to Clark County declined for the third consecutive month, falling by just 0.02% from June. On a YOY basis, this was the 13th consecutive month of annualized visitation decline, down 1.8% compared to August 2017. We believe that the primary reasons for the slowdown are: limited room capacity, the strong dollar making vacationing in the US pricier for foreign visitors, and a move back to the longer trend rate of growth.
There were 42.2 million visitors to the Las Vegas MSA in 2017, compared to 42.9 million in 2016. Year-to-date visitor volume in August 2018 is 28.2 million. That is down versus the same points in 2016 (28.8 million) and 2017 (28.5 million), and it will be difficult for 2018 to match either of the previous two years.
In August, Clark County’s annualized convention attendance saw a 1.2% increase from the previous month, to 6.53 million. That figure represents a 0.5% gain from August 2017. The annualized peak of 6.65 million convention attendees occurred in December 2017.
Convention attendance saw significant gains in 2016, with 10 months above 10% YOY growth. Through all of 2017 the YOY rate of growth had fallen sharply to 3.9%. During the first 8 months of 2018, attendance grew by an average of 3.5% YOY. Demand growth is being limited by maxed-out capacities at Las Vegas’ various convention facilities. The good news: 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, which will allow the city to host more conventioneers. The expansion is expected to be completed by 2022.
In August 2018, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $111.62, a loss of $0.09 (0.08%) from the previous month. When compared to August 2017, RevPAR is down even more, falling $2.89 (-2.5%). This is the 6th straight YOY (current month vs. same month in previous year) decline in RevPAR after more than 7 consecutive years of growth. The RevPAR 12MMA peak of $119.43 occurred in December 2007. This a metric to definitely watch.
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.
On a 12MMA basis, gaming revenue net baccarat was down 0.85% in August from the month prior, for a total of $737.4 million. The streak of positive YOY growth continues, reaching 43 consecutive months with an increase of 0.8% from August 2017. Net baccarat revenues are at 88% of the October 2007 peak of $834.4 million.
The net baccarat revenues are largely comprised of slot revenues, which generally reflect wagering by 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 as US household disposable income has increased.
Of the 5,068 total Las Vegas MSA home sales recorded by Home Builders Research in August, 4,201 were resales, while 867 were new home sales. According to Home Builders Research, total (new and resale) Clark County home closings, on a 12MMA basis, were up 0.22% in August compared to the previous month. On a YOY basis, the number of all home sales were 4.5% higher than in August 2017.
The 12MMA for new home sales saw a YOY growth rate of 17% in August, while existing home sales saw slower growth at 2.3%.
Per Home Builders Research, August’s 12MMA median home price (new and resale) was $268,146, a 1.25% gain over the previous month. Compared to August 2017, the price is up 14.5%, the highest YOY growth in weighted home price since September 2014. The YOY growth rate has now been rising steadily for 15 months, but is well below the YOY peak of 35.8% growth recorded in February 2005. The current median home price remains well below the February 2007 peak of $305,333. August’s figure is about 88% of the peak price.
The median new home price was up 9.9% from August 2017, setting a new peak for the 17th consecutive month at $367,261. The previous cycle peak of $327,066 occurred in February 2007.
The median resale home price was $247,625 in June, a 14.7% jump from a year earlier. The peak of $286,833 occurred more than 11 years ago in April 2007. The resale average has now recovered more than 86% of its pre-recession peak price.
The rate of home appreciation for new and resale homes, combined, continued its rising trend in August. YOY growth had dropped to 6.4% in December 2016 but rose steadily in the 2nd half of 2017, averaging 9.2% YOY growth over the last 6 months of the year. Through the first 8 months of 2018, the YOY growth rate has averaged 13.1%.
These figures are not inflation-adjusted, or “real.” Therefore, the real value of homes today compared to the pre-recession peak is overestimated.
Starting this month, RCG is adding new housing chart to its monthly Stat Pack line-up for Las Vegas. Our new chart tracks monthly Total Sales Volume (“TSV”). The data series starts in August 2001 goes through latest available month. TSV is calculated by multiplying monthly closings by the median new, resale and weighted/combined home prices. We’d like to note that the three median home prices are based on monthly moving averages (“12MMA”). This is done to account for seasonality in prices. The TSVs’ 12MMAs in August 2018 were: $318.7 M for new homes, $1,045 M for resales and $1,364 M for the combined total. Clearly, the upward trajectory is quite pronounced especially for resales, because of their greater availability, leading to more competitive prices. New home TSVs are being affected by rising construction and land costs.
The August TSV percent changes from the previous month were 2.4% for new, 1.4% for resales and 1.6 % for combined. Compared to August, 2017, the percent changes in TSVs were 28.8% for new, 17.1% for resales and 19.7% for combined.
As point of reference, the Peak TSVs occurred in July, 2016 ($1,043B-new), January, 20016 $1,225-resales) and March, 2006 ($2,326-combined). Monthly TSVs are now 31% of the peaks for new home sales, 78% for resales and 59% for total combined sales.
The 12MMA Case-Shiller home price index for the Las Vegas MSA rose by 1.8 points to 174.2 in July 2018, growing 11.4% compared to July 2017. The Las Vegas index has risen for 71 straight months, while the YOY growth rate has increased steadily since March 2017. July’s U.S. 12MMA index was up another point to 207.3, a jump of 6.3% compared to the previous year.
The Las Vegas index peaked at 233.2 in December 2006, with the latest index reaching 74.7% of that 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.
As we wrap up the third quarter of 2018, the 30-day LIBOR moved moderately higher during September, finishing the month up 20 basis points from August at 2.27%. The 10-year U.S. Treasury jumped 30 basis points from 2.88% to 3.18%. The S&P 500 posted its best quarter (up 7.2%) since 2013. Health care was the top-performing sector of Q3, surging 14.1%, its highest quarterly gain since the first quarter of 2013. Industrials and tech, during the same period, rose 9.7% and 8.5%. Meanwhile the Fed raised rates from 2.00% to 2.25% and has penciled in 75 basis points of rate increases during the next 9 months.
The cost to borrow funds has already begun to creep up, with more forecasted rate increases on the horizon. If your property is stabilized, lock in long-term, fixed-rate loans now.
July’s taxable retail sales continue to rise in Clark County, with 0.69% growth to $3.57 billion from the month prior. On a YOY basis, growth in the 12MMA increased to 4.6% in May. We believe much of the dollar growth in taxable sales is due to healthy visitor spending numbers and strong construction activity.
The consistent growth of taxable sales has given local and state governments more money to work with. The strength of the national economy, especially the Western U.S. is key to this improvement. This strength is the driver of visitors and convention attendance to Las Vegas, which is ultimately reflected in tourism spending. We appear to have settled into a longer-term annual trend rate of growth of around 3-4%.
The Las Vegas MSA’s 12MMA average weekly earnings (not inflation-adjusted) was up by about $3, reaching $797 in August 2018. This growth trend began more than 3½ years ago in September 2014. On a YOY basis, the 12MMA was up $30 (3.5%) from August 2017.
When viewed on an inflation-adjusted basis, however, earnings rose only a dollar in August from the month prior, to $671.53 (in 2007 dollars). YOY real earnings rose by 1.1% ($7) compared to August 2017. Moribund wage growth has received a lot of attention for some time by economists. It is partially a function of the growth of the “gig economy” and ongoing automation trends.
Las Vegas’ average weekly real wage is $80 (11%) below the most recent inflation-adjusted peak of $751 that occurred close to 11 years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas remains closer to the trough than the peak.
The number of average weekly hours worked in Las Vegas (Clark County) on a 12MMA remained at 33.9 in August 2018, the same level recorded for the last three months. Weekly hours had been plodding upward since June 2016, but have flattened in recent months just below the state average. On a YOY basis, average weekly hours are up 0.2 hours from August 2017.
In Q2, 2018, the Nevada U-6 unemployment rate (including discouraged and part-time workers) recorded a 0.7-point drop to 9.7%. While this should suggest that business reliance on part-time workers continues to decrease, the figure is still among the highest in the nation and suggests that a substantial number of new jobs being created are for part-time work, or that positions have been shifted into independent contracting roles. These factors may explain the recent plateau for weekly hours worked even as we reach “full employment.”
The price of gas in Las Vegas rose slightly over the last month. As of October 4, the price of regular unleaded gasoline in the Las Vegas MSA was $3.21, which is $0.8 (2.7%) higher than a month ago. Compared to a year ago, the price of unleaded is up $0.51 or 19%.
Gas prices in LA-Long Beach are included in the chart because visitors from the region are a major driver of Las Vegas’ lodging and hospitality industry, specifically, and economy, generally. High gas prices could have a deleterious effect on tourist spending in Las Vegas.
According to AAA, “The September switch-over to winter-blend gasoline ushered in cheaper gas prices compared to the summer, but that drop was short lived. Crude oil accounts for half of the retail pump price and crude is selling at some of the highest price points in four years. That means fall and year-end prices are going to be unseasonably expensive.
Motorists in the West Coast region are paying the highest prices for retail gasoline in the country, with six of the region’s states represented in the nation’s top 10 most expensive list. Hawaii ($3.84) is the nation’s most expensive market, followed by California ($3.80), Washington ($3.44), Alaska ($3.33), Oregon ($3.29), Nevada ($3.27), and Arizona ($2.91). All prices in the region have increased on the week, with California (+7 cents) leading the way. Nevada increased five cents, while Hawaii and Washington each increased four cents.
The EIA’s weekly petroleum status report showed West Coast gasoline stocks increased slightly to 27.89 million bbl during the week that ended on September 28. Stocks are approximately 760,000 bbl lower than where they were at this time last year, which could lead to price volatility if there are any supply shocks in the region this week.”
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