December’s year-end data shows Southern Nevada trending positive in sixteen out of 20 metrics. The 12-month moving average of Clark County’s headline unemployment rate remained unchanged in December 2015 over the prior month, but was down 0.9 percentage-points compared to December 2014.
Construction jobs in the Las Vegas metro area numbered 51,500 in December (12MMA), representing a spike of 6,425 jobs (14.3%) compared to December 2014.
Total (new and resales) Clark County December home closings, which numbered 4,210 (12MMA), were up 11.9% from December 2014. According to Home Builders Research, the 12MMA median home price (new and resale) in December was $206,906, a 9.9% jump over December 2014. (Southern Nevada’s peak of $305,333 occurred in February 2007.)
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The RCG Employment Index 12-month moving average (“12MMA”) for Clark County increased 0.1 points between November and December to 96.8 and is up 1 point compared to December 2014. The index is steadily moving upward as the Valley’s “headline” jobless rate continues to drop. The Index peaked at 99.8 occurred in November 2006.
The 12MMA in Clark County’s headline unemployment rate remained unchanged in December at 6.9% compared to November, but it was down 0.9 percentage-points compared to December 2014. The rate’s lowest level in the last 10 years was 4.0%, which occurred in October 2006.
The region’s Y-0-Y job growth rate declined 0.1 points to 2.9% in December, down 1 point compared to the 12 months ending in December 2014. The most recent spate of growth peaked at 3.9%, and has declined for nine of the last 10 months. This is not necessarily a bad sign as jobs continue to grow faster than population.
Nevada’s U-6 unemployment rate fell to 13.9% in Q4, 2015, down 0.9 points since Q3. The U-3, or headline rate, declined by 0.2 points to 6.9%. While these figures are improving, they are still very weak compared to the U.S. as a whole. The Nevada U-6 rate is 1.1 points behind the second-worst state, Arizona. In terms of the U-3 rate, Nevada continues to rank last, tied with West Virginia and Washington D.C.
Construction jobs in the Las Vegas MSA numbered 51,500 in December (12MMA), representing a spike of 6,425 jobs (14.3%) compared to December 2014. In December, construction jobs represented 5.8% of the job-base. Construction jobs peaked at 108,833 in November 2006 when the industry accounted for 11.4% of all jobs.
Construction activity continues to pick up as housing and commercial real estate demand rebounds. Jobs in this sector have now grown for 41 straight months.
On a 12MMA basis, Clark County visitor volume rose by 0.26% in December compared to November, to 3.53 million. The rolling annual total was 42,312,216 visitors at the end of 2015. December’s estimate was up 2.9 percent compared to December 2014. Southern Nevada’s visitation numbers should continue on a generally upward trajectory for the time being. 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 1.3% in December compared to November (on a 12MMA basis) to 475,859. This represents a 9.9% rise compared to December 2014. This equates to a 12-month total of 5,710,303. The monthly peak attendance 532,943 occurred in May 2007. The peak in YOY growth occurred in February 2006 when convention attendance rose by 10.5%. The general trend appears to be increasing.
The 12MMA hotel revenue per available room (RevPAR) in Clark County rose by $0.27 (0.25%) in December compared to November to $105.21. RevPAR is up $3.98 (3.9%) compared to December 2014 and continues its steady progress. The RevPAR peak occurred in December 2007 at $119.43. The yearly rate of growth has been around 3.0 or more since the end of 2010.
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.
December’s 12MMA gaming revenue (net of baccarat) of $694.0 million was unchanged compared to November, but up 3.3% compared to December 2014. This makes 8 months of Y-O-Y growth of at least 1.5%. The monthly peak ($834.4 million) occurred in October 2007.
These 8 months are the first consecutive months of such growth since May 2012 (13 months). 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 two reasons: constrained disposable income and changing spending patterns, especially among adults under 35.
Total (new and resales) Clark County December home sales (closings), which numbered 4,210 (12MMA), spiked by 11.9% from December 2014. Resales saw an 11.7% Y-O-Y jump in December to 3,646, while new homes sales increased 12.9% to 564. This marked 6 straight months of increasing Y-O-Y new home sales after 14 months of declines.
According to Home Builders Research, the 12MMA median home price (new and resale) in December was $206,906, a 9.9% jump over December 2014. The peak of $305,333 occurred in February 2007.
The median new home price this past December was $311,038, up 6.9% in the last 12 months. The peak of $327,066 occurred in February 2007. The current new home price has now recovered 95% of its pre-recession peak.
The median resale home price was $190,541 in December, reflecting a 10.6% increase during the last 12 months. The peak of $286,833 occurred in April 2007. By comparison, the Reno-Sparks average resale price for December was $280,123.
The combined rate of home appreciation for new and resale homes had slowed considerably in mid-2015, but then started to accelerate again. In December 2014, the Y-O-Y price increase from December 2013 was 9.0%. This is fairly close to the December 2014-2015 figure. The annual peak of 35.8% occurred in February 2005.
The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 141.7 in November, an increase of 6.0% compared to November 2014. This was about half of the 15.6% increase recorded between November 2013 and 2014. The index peaked at 233.2 in December 2006. The highest (44.5%) annual change in the index occurred in March 2005 and the trough (-31.8%) occurred in August 2009. These increases 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 57.2 in November, a rise of 12.1% compared to November 2014. However, Las Vegas is still ranked near the bottom of the 100 rated metros. This rise in growth was about one-third of the 34.6% increase recorded between November 2013 and 2014, much like with the Case-Shiller index. The index peaked at 148.3 in July 2006. The highest (44.7%) change in the index occurred in May 2014 and the trough (-51.2%) occurred in December 2009.
The MIMI index offers a different look at the housing market. It 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.
The Las Vegas Valley’s 12MMA apartment vacancy rate declined to 8.3% in Q4, 2015. This is a 0.1 percentage-point drop compared to Q3, 2015 and 0.7-point drop compared to Q4, 2014. It looks like apartment vacancies are slowly recovering. During the last 9 years, the apartment vacancy rate peaked at 10.8% in Q2, 2010. It bottomed out at 5.1% in Q1, 2007. The historical trend rate (9-year average) is 9.2%. The region’s apartment market could be moving toward a supply-constrained market if this downward vacancy trend continues.
Commercial vacancy rates in the Las Vegas Valley continued to generally improve in Q4, 2015. The Industrial market rate increased to 4.7% in Q4. However, on a 4-quarter moving average basis, it dropped to 5.2%, 0.4 percentage-points below Q3, 2015. The Spec Office vacancy rate improved for the 3rd straight quarter, decreasing 0.1 points to 18.4%. It fell on a 4-quarter moving average basis from 18.8% in Q3 to 18.7% in Q4. The Anchored Retail rate went up by 0.1 points to 10.3% in Q4, 2015. The moving 4-quarter average Retail rate also rose 0.1 points to 10.4%.
Many office and retail properties that are well-designed and well-located are thriving. But there are others that were poorly conceived, poorly designed and poorly located that still languish, and these are the majority of the projects that are keeping the overall vacancy numbers up.
After the Fed’s December action, the prime rate increased a half-point to 3.5%. The 10-year treasury bond rate declined after two months of slight elevation, down from 2.27 to 1.97%. The 90-day LIBOR remained at 0.43. Lender rates generally stayed the same, except for an increase in the Agency rate. Still, 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 continue to rise, thanks to increased visitation, as well as local resident and business spending. Sales hit $3.20 billion in November, up 6.1% compared to November 2014 on a 12MMA basis. This equated to a yearly total of $34.8 billion with one month to go. 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.
Las Vegas MSA 12MMA average weekly earnings (not inflation-adjusted) in December rose to $728, a 4.0% increase over December 2014. On an inflation-adjusted basis, earnings continue to improve, as well, up 3.9% in December compared to December 2014, to $645 (in 2007 dollars). However, Las Vegas’ average weekly wage is still $106 (14%) lower than 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 average number of weekly hours worked in Las Vegas (Clark County) in December increased 0.1 hours to 33.3 and was unchanged from December 2014. This is the first non-negative (zero and above) YOY change in average weekly hours in 26 months. 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 13.9% as of Q4.
According to AAA, as of February 8, the average price per gallon for regular unleaded gasoline declined by 5.0%, from $2.33 a year ago to $2.21. Between January 8 and February 8, the price of unleaded plummeted by $0.31 per gallon, or 12.3%.
With Iran’s surprise return to the oil markets after the lifting of embargos due to compliance with the nuke deal, more cheap crude has flooded into the market, depressing already low prices. After this shock to the market, fuel prices should level off compared to a year ago. The price of oil is currently in limbo, depending on whether the Saudis decide to cut production or continue to keep prices low. For the time being, we expect gas prices to hover near that of a year ago.
A well-known housing market indicator is the employment-to-housing permit ratio or E-P Ratio. The E-P Ratio for Clark County was 1.0 in December on 12MMA basis, compared to 1.3 in November 2014. According to the general consensus, an E-P Ratio between 1.0 and 2.0 that is declining indicates that a downturn may be approaching. We await the annual job number recalibration to see if this trend bears out.