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Feb. 01, 2008
Copyright © Las Vegas Review-Journal

Housing described as valley's top issue

Employment growth slowing, speaker says

By HUBBLE SMITH
REVIEW-JOURNAL
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Jeremy Aguero, a principal of Applied Analysis, talks Thursday at Preview Las Vegas 2008 about economic indicators to watch.
Photo by Gary Thompson

Without a doubt, the biggest issue facing Southern Nevada this year will be the housing market and foreclosure crises, a local research analyst said Thursday at Preview Las Vegas 2008.

Jeremy Aguero, principal of Applied Analysis, said more than half of the 25,000 homes listed for sale in Las Vegas are vacant and 60 percent of homes in foreclosure are not owner-occupied. Most of them are owned by someone out of state.

Housing stability was one of 10 issues on Aguero's "watch" list, which is much the same as last year, except the numbers have changed, he said.

Population and employment growth have slowed and so has consumer spending, creating a $500 million budget deficit in Nevada. Concerns about the state's tax climate went from No. 10 on the list last year to No. 4 in 2008.

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    • "There's nobody here who isn't concerned about education and transportation," Aguero told about 2,000 business leaders attending Preview at Cox Pavilion. "How do we talk about education and transportation unless we get to a point of fiscal responsibility in Carson City and local government?"

    Like someone who works on commission, the state should think about putting away money during the good years when sales and gaming taxes are above projections to make up for a shortfall during the down years, Aguero said.

    Employment growth, once the shining star of Southern Nevada's economy, has not only slowed from a nation-leading 5 percent, but some indications are that it may have already turned negative, he said.

    Las Vegas experienced a peak in job growth during each wave of major resort development in the past, followed by a steep decline. We're in a valley right now, but with 40,000 rooms in the pipeline, another peak is on its way, Aguero said.

    Because it has diversified from gaming and tourism, Las Vegas is no longer immune to U.S. recessional trends, he said. Only one in 10 new jobs is in hotel and gaming, Aguero noted.

    A lot of people want to "pigeonhole" the increase in jobless claims to the construction industry, particularly the residential side, where some 15,000 workers have been laid off. Right now, professional and business services are losing jobs at the highest rate, followed by trades, transportation and utilities.

    "I'd love to say the worst is over, but realistically, things are going to get worse before it gets better," he said. "If employment growth isn't there, what happens to the rest of it?"

    But despite reports to the contrary, he said, the sky is not falling in Las Vegas.

    The media have reported doom stories about Las Vegas for 100 years. Aguero posted headlines and news clips from several newspapers, starting in 1905 with the Los Angeles Times headline, "Boom Town Expired with Sob and Groan," and the New York Times in 1931, "Gambling Loses Lure at Western Casinos." In 1950, Time magazine's "Snake Eyes in Las Vegas" article said part of the problem is there's not enough "suckers" for casinos in Las Vegas. In 1983, the Chicago Tribune said, "Vegas Casinos Running out of Luck."

    "We could go through these all day long," Aguero said. "We have been here before."

    Richard Lee, vice president and director of public relations for First American Title Co. of Nevada, said it's time for a "reality check."

    He said the pie is getting bigger in Las Vegas with all of the resorts under construction on the Strip, Plaza Las Vegas and M Resort on the horizon in 2009 and development of Union Park downtown.

    "It's good to be in Las Vegas? How many people still feel that way?" Lee asked. Most of the audience responded positively. "Even though we've got $30 billion in global investment, I read the headlines and I feel bad. They're beating us up."

    The Las Vegas Chamber of Commerce and the Nevada Development Authority sponsored the meeting.

    Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.

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    Gail Davis wrote on February 04, 2008 11:40 AM: I would like to know who I may contact to register a business in Nevada and the costs involved.
    Thank You
    Gail Davis


    Investor wrote on February 03, 2008 10:39 AM: Case Shiller housing Index reflects that home prices need to adjust 42% downward from price peak in 2006 in order to meet historic trend line for home prices. To date its reported that the drop has only been 14%. So we have a long way to go. It going to be very painful for many folks!
























































































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    Home Owner wrote on February 01, 2008 09:39 PM: Well, I'm not one of the flippers, but home prices in the new housing division I live in at a Summerlin have dropped by at least 15-18 percent. The price to own a home and the price to rent an apartment are pretty much neck and neck at about $1.00 to $1.25 per sq. foot. I can't see the prices dropping any more. If they do, it will be cheaper to own a home than to rent an apartment. The market has already price adjusted to the max.


    Whateverusaydear wrote on February 01, 2008 06:36 PM: I like to look at the HUD repo lists each week, here and other cities.

    During the boom repos from the Vegas area were empty... like the repos in San Diego were.

    Now that list is getting bigger in Vegas each week, and on some properties that don't move, there's been drastic declines in asking prices. Looks like real estate prices are still falling toward more realistic figures.


    David wrote on February 01, 2008 12:33 PM: You hit it right on the money Roger. Yes, there will be an extra 40,000 rooms. Yes, there will be added jobs to the Las Vegas economy. BUT, how many of those newly created jobs will enable a buyer to pay the mortgage for our over priced housing?


    roger wrote on February 01, 2008 12:18 PM: "Las Vegas has diversified away from gaming and tourism"...I must have missed something...could we expand on that by referencing the article a few months back stating that 7 of 8 newly created job here pay minimum wage. (Leids Institute). Is that the diversification you are talking about? I agree that the housing market is a problem, but let's not bail out all the investors and speculators who are responible for all this insanity. Let's be serious, these people were motiviated by the chance of making a quick buck or two. The city/state needs to look out for the people who actually live and work here. The people who didn't come here with the intention of 'flipping a house.'


    B Henderson wrote on February 01, 2008 10:55 AM: I love to hear about how much better things will be when the additional 40,000 hotel rooms are available.

    I fail to see how more vacant hotel rooms are going to do anything other than make the problem worse. The number of current rooms are rooms are occupied at about 60% with about 5% being comped. It is not like the hotels are turning people away.

    If that plan will work I say lets start building houses like spreading wildfire. Heck tens of thousand more vacant properties will be good for the Las Vegas economy if you buy into this notion.

    The FED cutting the interest rate 1.25 points in less than 10 days sends a signal that there serious problems with the economy.


    HousingDoom wrote on February 01, 2008 10:45 AM: Black Jack is right up to a point. Unfortunately with respect to the single family housing market bubble bursting, the prices will take the same path as after the NASDAQ implosion. In that instance, the NASDAQ has been down 50% now for over 7 years! The Case Shiller Housing index shows a minimum 35% decline from peak to bottom in Vegas homes. Last year homes were down approx 14%. That indicates another 26% more downward prices adjustments needed. Over what period of time? Who knows. But it is a general consensus in the finacial community where I have worked 35 years that this time housing will be down for many years ala Japan's housing bust! Sadly, many folks will be hurt and many businesses in the housing sector will go bankrupt! Tis is price to be paid for rampant speculation and foolhardy risk taking by those who participated in the great housing fraud of the 21 Century! We know many folks are in denial and will not look at the facts. NAR and GLVAR will tout and spin the numbers to save their own asses! But its going to b a long time before the housing boom is back! For those who point to the Strip Condo craze and $1000 per sq foot pricing. This is driven by the same speculative fever and watch how fast the Euro Trash and Pedro Dollars run when even that market begins to implode!


    Bob Jack wrote on February 01, 2008 09:40 AM: While these housing numbers may seem discouraging, this is an overdue shake out caused by the our free market system. We have and enjoy the fruits of free markets in this country,however,
    human exuberance and greed periodically cause the economy to face the reality of a sort of "creative destruction" in the affected segments of our markets, those that have overheated. When this occurs we feel the pain.
    I believe that in the greater Las Vegas
    Valley, that a home price bottom will arrive in late 2008, with 2009 being a year in which that market will stabilize, and that we will start to see modest price gains and increased healthy turn over in the housing market in 2010.
    Builders are moving quickly to rid their inventories of unsold homes--prices of new homes are an incredible buy today in most new home developments.
    Sellers in the resale market continue to struggle with the task of reducing their prices enough to motivate potential buyers. Sellers tend to "follow the market down" in their pricing, with their price decreases lagging behind the actual market price declines that are taking place in their local areas. Where possible, the seller must get a good handle on the true market value of his or her home, and set the selling price below the prevailing market price in the local area. Otherwise the seller will continually lose more money as the market price continues to decline this year.


    tgf wrote on February 01, 2008 09:21 AM: Yes, TIME Magazine was wrong, there ARE enough "suckers"...


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