Though Reno-Sparks median home values are still rising, making affordability an issue, all other metrics are either improving or leveling off. Will builders scurry to meet demand? How will construction material and labor prices affect builder efforts? As the Northern Nevada economy continues to expand, these are crucial questions.
The RCG Employment Index 12-month moving average (“12MMA”) for Reno-Sparks again ticked up by 0.1 points in September and was up 1.1 points from the 96.7 recorded in September 2015. The Index is still just over 2 points off from the peak. However, we expect the general upward trend will continue, maintaining the trajectory that started in 2011. The index peaked at 99.8 in December 2008 and the trough of 89.6 occurred in January 2010.
Reno-Sparks job growth on a 12MMA held in September at 4.2%. The rate of growth is up 0.6 points from September 2015, when it was recorded at 3.6%. The rate’s lowest level in the last 10 years occurred in December 2009 (-9.3%). The region has surpassed its previous high mark of 3.7% achieved in December 2006.
The 12MMA of the headline unemployment rate again fell by 0.1 points to 5.5%. When compared to the September 2015 headline unemployment rate of 6.7%, the rate was 1.2 percentage-points lower in September 2016. The unemployment rate continues to improve steadily and is approaching a historically normal rate.
The U-3 and U-6 unemployment rates for Nevada were both down in the 3rd quarter of 2016. The U-6 rate fell by 0.6 points from 13.1% in Q2 to 12.5% in Q3. The U-3, or headline rate, fell by 0.5 points from 6.7% to 6.2%. Nevada and New Mexico are tied with the second highest U-6 rate in the Nation, beating only Alaska. In terms of the U-3 rate, Nevada is not doing much better, ranking amongst the bottom five, ahead of Alaska & New Mexico and tied with Louisiana & Mississippi.
Construction jobs in the Reno-Sparks MSA rose to 13,700 in September, on a 12MMA basis, up 9.2% from the 12,542 jobs recorded in September 2015. In September, 6.7% of the job-base was in construction. In the Reno-Sparks MSA construction jobs peaked at 24,042 in August 2006 on a 12MMA basis, when the industry accounted for 11.1% of all jobs. The industry continues to recover since it bottomed out in February 2012 when there were only 8,792 construction jobs.
The 12MMA visitor total for Reno-Sparks again rose 4.4% YOY to 406,992 in September 2016, though this was only a 0.63% increase from August. When compared to Las Vegas, visitation to the Reno market continues lagging. However, the region has now seen 21 straight months of YOY growth in visitor volume at an average rate of 2.1%, with YOY growth for the last 3 months the highest in 3 years, since July 2013. The 12MMA peak occurred in May 2004, when 467,904 visitors came to Washoe County. The highest annual growth rate occurred in January 2013, when visitor volume grew 5.8%. The Reno-Sparks hospitality industry continues to face challenges.
Washoe County’s 12MMA YOY gross gaming revenue has improved for 21 consecutive months with growth in September of 3.7%, bringing total revenue up to $66.6 million.
Gaming revenues peaked in June 2006 at $89.4 million. On an annual growth rate basis, growth peaked at 5.5% in June 2006.
Like Clark County, taxable retail sales in Washoe County have been consistently growing, reaching $637 million in August, a 10.6% jump compared to August 2015 on a 12MMA basis. This represents over 5 years of rising retail sales on a YOY basis. Taxable sales have surpassed their previous peak on a nominal basis (not inflation-adjusted). As the chart shows, Washoe’s taxable sales growth was beating the state average by a 5.5 percentage-point margin.
The Q3, 2016 median sales price of $312,000 for single-family home resales in the Reno-Sparks area represents an 8.3% jump Y-O-Y and a 2.3% increase compared to Q2, 2016. The Q3 median price is now approximately $16,403 (5.6%) greater than the $295,597 that would have resulted from using the 1990-2001 average annual appreciation rate of 4% per year.
MLS home resales in the Reno-Sparks area increased to 535 units in September on a 12MMA basis. Home sales are in record-high territory and are now leveling-off, probably due to the rapid increase in prices and decreasing supply. The median sales price rose to $299,079 (12MMA) in September, a 9.2% jump from September 2015. By comparison, the Las Vegas median resale price in September increased by 8.3% to $200,715. The issue of housing affordability in the Reno area must be addressed by policymakers.
In Q3, 2016 the Housing Opportunity Index (“HOI”) for the Reno-Sparks MSA decreased 2.8 points from 55.1 in Q2 to 52.3 in Q3 on a four-quarter moving average (“4QMA”) basis. The U.S. index decreased 0.2 points from 63.1 to 62.9 during the same period. On a YOY basis, the Reno-Sparks index fell 3.6 points from 55.9 in Q3, 2015.
Reno-Sparks’ HOI peaked at 85.8 in Q1, 2012. It bottomed out at 17.3 in Q4, 2006 at the peak of the housing boom. The 10-year average is 60.
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.
According to Colliers International, Reno-Sparks office vacancy continued its steady decline to 14.2% in Q3, 2016 on a 4QMA basis, its lowest value since Q4, 2007. The Reno-Sparks Spec Office market has been improving, albeit slowly. By comparison, the Las Vegas Spec Office vacancy rate was 5.8 percentage-points higher at 20% in Q3, on a 4QMA basis.
The Q3, 2016 industrial vacancy rate of 10.3% is a decrease of 0.3 points from Q2, 2016 (10.6%). After increasing for five consecutive quarters, the industrial vacancy rate has dropped back towards the 10% stabilized right, but remains slightly above it. Although a large amount of new product has recently come to market, it appears demand in the Reno-Sparks MSA is on the rise. By comparison, the Las Vegas Industrial vacancy rate was significantly lower at 5.1% in Q3, on a 4QMA basis.
The 12MMA of the average weekly wage (not adjusted for inflation) in the Reno-Sparks MSA fell by $4 to $815 in September making this the third straight month of declining nominal wage after 31 straight months of increases. However, it is up 2.5% from $795 in September 2015. Additionally, the inflation-adjusted 12MMA wage of $717 is $4 less than the previous month’s real wage of $721, but it is still 1.6% higher than the $705 recorded in September 2015. In September, Reno-Sparks’ average weekly real earnings were 10.5% higher than the Las Vegas average of $649. Inflation-adjusted wages are still among the highest ever recorded in the Reno-Sparks MSA, but appear to be leveling off.
Weekly hours in the Reno-Sparks MSA remained at 35.2 in September. When compared to September of last year, weekly hours are up 0.9 hours from 34.3. The 8-year peak occurred in October 2008 at 37.1 hours, while the trough (8-year) of 32.5 hours occurred in September 2014.
According to AAA on November 11, 2016, the average price per gallon for regular unleaded gasoline in Reno-Sparks saw a $0.01 increase from $2.70 a year prior to $2.71. When compared to the previous month the price of unleaded fuel decreased by $0.05 (1.6%).