All but two Las Vegas economic indicators – hotel revenue per available room (RevPAR) and retail market vacancies – are green based on the latest stats and data
Stat & Trend Highlights
On a 12MMA basis, Clark County visitor volume rose in August compared to July, up to 3.47 million. It is up 2.3 percent year-over-year. In general, the upward trend in visitor volumes returned during the last several months. We are confident that Southern Nevada’s visitation numbers will continue on a generally upward trajectory for the rest of the year.
Clark County convention attendance increased 2.1% in August compared to July (on a 12MMA basis), to 440,105. This represented just a 0.4% rise compared to August 2014. Monthly convention attendance has bounced around between approximately 420,000 and 440,000 for 18 months. The general trend appears to be leveling off, or possibly increasing at an anemic rate.
The 12MMA hotel revenue per available room (RevPAR) in Clark County declined slightly by $0.40 in August compared to July to $101.47. RevPAR is up 1.8% compared to August 2014 and continues its steady progress. However, the rate of growth has been slowing over the course of the past year.
Note: RevPAR is a performance metric in the gaming and lodging industry. It is computed by dividing a gaming resort’s total hotel room revenue by the room count and the number of days in the period being measured.
August’s 12MMA gaming revenue (net of baccarat) of $688.9 million increased 0.51% compared to July ($685.3 million) and was up 2.5% relative to August 2014. That makes four months of Y-O-Y growth of at least 1.5%. These are the first consecutive months of such growth since May 2012. These net baccarat revenues are largely comprised of slot revenues, which generally reflect typical gaming spending of average Americans. However, slot revenues continue to remain lackluster for two reasons: constrained disposable income and changing spending patterns, especially among adults under the age of 35.
Total (new and resales) Clark County August home sales (closings), which numbered 4,067 (12MMA), rose by 8.2% from August 2014. Resales saw a 9% Y-O-Y jump in August to 3,550, while new homes sales increased 3.2% to 517. This marked two straight months of increasing Y-O-Y new home sales after 14 months of declines – a good sign for new housing subdivisions.
According to Home Builders Research, the 12MMA median home price (new and resale) for August was $199,343, a 7.9% jump over August 2014. The median new home price was $303,100, up 5.0% in the last 12 months. The median resale home price was $184,049 in August, reflecting a 9.1% increase during the last 12 months. (As a point of comparison, the Reno average resale price for August was $270,056.)
The combined rate of home appreciation for new and resale homes has slowed considerably during the last year. In August 2014, the Y-O-Y price increase from August 2013 was 16.3%. We believe that resale prices will continue to increase above the rate of inflation through 2015, but that this increase will be substantially less than it was last year on a moving average basis.
Mirroring the slowdown in home sales, the 12MMA 30-year fixed rate mortgage in the Western Region was down to 3.82% in September. This rate will remain relatively low as the Federal Reserve continues to try to stimulate consumer and business spending and demand.
The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 138.4 in June, an increase of 7.5% compared to June 2014. This was about one-third of the 23.5% increase recorded between June 2013 and June 2014. These increases are similar to those reported by Home Builders Research. The rate of growth in the home price index is slowing down, reflecting the same dynamic seen in local housing price data.
The 12MMA apartment vacancy rate in the Las Vegas Valley declined to 8.4% in Q3, 2015. This is a 0.3 percentage-point drop compared to Q2, 2015 and 0.7-point drop compared to Q3, 2014. It looks like apartment vacancies are slowly recovering.
Commercial vacancy rates in the Las Vegas Valley continued to generally improve in Q3, 2015. The Industrial market rate declined to 5.0%, also dropping on a 4-quarter moving average basis to 6.3% on the strength of the Warehouse/Distribution sector. This is a 0.9 percentage-point decrease compared to Q2, 2015. The Spec Office vacancy rate improved for the second straight quarter, decreasing 0.3 points to 21.3%, and fell on a 4-quarter moving average basis to 21.5% from 21.6% in Q2, 2015. The Anchored Retail rate decreased by 0.3 points to 11.6% in Q3, 2015. The moving average of the rate, however, increased 0.1 points to 11.7%.
Still, 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 anguish, and these are the projects that are keeping the overall vacancy numbers up.
The prime rate remains at 3.25%. The 10-year treasury bond rate has declined in the last month, from 2.16% to 2.07%. The 90-day LIBOR remained 0.33. Lender rates were split, though. Also, compared to three months ago, the 90-day LIBOR is up significantly. Still, these rates remain historically 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 sales in Nevada and Clark County continue to rise, thanks to increased visitation and consumer spending. Taxable retail sales hit $3.15 billion in July, up 7.2% compared to July 2014, on a 12MMA basis. Retail sales figures are now higher than the pre-recession highs of 2007 and continue to be encouraging for future state and county 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.
According to AAA, as of October 12, the average price per gallon for regular unleaded gasoline dropped by 12.3%, from $3.36 a year ago to $2.94. Between September 12 and October 12, the price of unleaded also declined, by $0.22 per gallon, or 7.0%. We expect gas prices to remain less expensive compared to last year through the end of 2015.
Electric meter hookups’ 12MMA in July reached 775,595, up 1.8% over July 2014. The annual growth rate has been fairly steady for 23 months, bouncing between 1.2% and 1.9%. This corroborates the population growth projections for the Valley.
Gross metropolitan product (“GMP”) figures for 2014 were released in the last few weeks and Las Vegas posted another 2% gain in inflation-adjusted, or real, GMP. This makes two years in a row of growth. Because it is adjusted for inflation, positive growth in this measure of GMP is always a good sign. Job growth in 2014 was 3.3 percent. Both these figures beat their 12-year averages. These results also bode well for 2015’s numbers.
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 3.7 in August, on 12MMA basis, compared to 6.2 in August 2014. This ratio appears to have leveled off since March. According to the general consensus, an E-P Ratio above 2.0 that is going up or flat indicates that the local housing market is healthy.