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Stronger Economy on the Horizon for Southern Nevada, CBER Study Finds

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Real estate market has a long way to go before construction recovers; lack of supply pushing up home prices, economist says at midyear talk
Business & Community  |  Jul 11, 2013  |  By Megan Downs
Media Contact: Megan Downs, Office of Media Relations (702) 895-0898

Southern Nevada residents can expect a stronger economy by the end of 2013, UNLV economists reported Thursday at the Center for Business and Economic Research Center (CBER) midyear economic outlook conference.

The strengthening is not without its challenges, as Southern Nevada continues to experience financial headwinds. The weak U.S. economy, the European recession and the slowdown of Asian economies affected growth in tourism, gaming and hospitality during the first half of 2013.

"We expect the Southern Nevada economy to show improving growth over the course of the year and accelerating growth in 2014," said Stephen Brown, director of the Center for Business and Economic Research.

The Southern Nevada economy grew at a very strong pace in 2012, creating about 29,300 jobs at a 2.7 percent annual rate. Nevada's job growth rate was the fourth best nationally and ahead of the national average of 1.7 percent.

Despite these strong gains, Nevada still leads all states with an unemployment rate of 9.5 percent.

Additionally, the real estate market has a long way to go before construction recovers, economists said. A lack of available supply is pushing up prices for single-family homes in Las Vegas.

Prices began rising in Las Vegas when the number of listings, or months of supply fell below 6.2 months. Despite recent price gains, concerns about a shadow inventory continue to overhang the Las Vegas housing market. CBER estimates that the current supply of vacant homes in the Las Vegas metro area is around 13.5 months.

Economists also found:

  • Job growth centered in tourism, gaming, and hospitality. Construction and real estate also contributed. Strong employment gains also were found in wholesale and retail trade, health care and management companies.
  • Las Vegas visitor volume will likely grow at about the same pace as 2012, remaining above its prerecession peak from 2007. Southern Nevada hotel/motel capacity increased slightly in 2012 and economists project modest gains in 2013. The scheduled opening of the SLS Las Vegas in 2014 will add another 1,600 rooms.
  • California's share of visitors to Las Vegas has risen during the past five years, from 28 percent in 2008 to 33 percent in 2012. This trend will continue in 2013, as the number of visitors arriving by automobile during the first four months of 2013 was 2.5 percent higher than the same period in 2012.
  • Gaming revenues have not yet returned to prerecession levels. Nevada, Clark County and the Las Vegas Strip gaming revenues remain 15.7 percent, 13.9 percent and 9.4 percent below their respective peaks. Since its lowest point, however, Las Vegas Strip gross gaming revenue has increased by 11.8 percent.
  • Las Vegas visitor non-gaming spending increased by 28.2 percent over the same period, but it remains 2.3 percent below its prerecession peak.
  • Las Vegas housing remains very affordable when compared with the rest of the U.S., according to the Housing Opportunity Index. Low housing prices will help the Nevada economy grow and is one of the primary reasons that many long term forecasts show strong population gains for the region. Apartment rents also are affordable. Combined with a high vacancy rate, Las Vegas is poised to accommodate a large population increase.

The U.S. economy is accelerating out of the sluggish recovery that has characterized the past four years, but economists said it remains well below potential. Nationally, economists are seeing growing consumer confidence and the first evidence that financial institutions are providing more credit.

The CBER conference, held twice a year, forecasts economic trends for the U.S. and Southern Nevada. Data is compiled from state employment and gaming and tourism agencies to analyze local and national economic trends.

For more information, visit CBER at the Lee Business School.