Nonagricultural employment in the Pacific region grew by 437,000 (2.7 percent) in the 12 months ending in August 1997. California employment increased by 325,000 jobs (2.5 percent) during the period. Arizona recorded a 3.6-percent job increase, reflecting the continued strong performance of the Phoenix economy. Motorola has announced plans to build a $1.1 billion semiconductor plant in the Phoenix area.
Builders in the region requested permits for 116,810 single-family units through September 1997. California had the largest percentage gain of 9.7 percent over the comparable period in 1996, for 62,600 single-family units. The San Francisco Bay Area tallied 13,209 single-family units, a 20-percent gain. The San Jose and Oakland metropolitan areas accounted for two-thirds of the homes. Southern California's market for new homes continued to show strong improvement. Single-family permits in the first 9 months of 1997 in Los Angeles County (4,668 units) were up 16 percent, and activity in the San Diego area was up 36 percent to 5,793 units. Orange County was recently characterized by one builder as "on fire." Single-family permits were up 16 percent through September to 6,228 units. One new development sold 160 homes in 8 weeks.
Arizona single-family permit activity totalled 33,859 units through September, slightly above 1996 levels for the same period. Strong demand for new homes in all price ranges pushed Phoenix's single-family activity (24,666 units) up 4.4 percent over last year's record performance as of the third quarter. Considering production levels in recent months and the low level of new home inventory (a 30-day supply), 1997 should set another record.
Las Vegas, the region's second largest volume new home market after Phoenix, recorded 16,054 units in the first 9 months of 1997, a modest 3-percent decline from the comparable period in 1996.
Existing home sales also benefitted from the strong economy, favorable financing, and increased consumer confidence. The California Association of REALTORS® reported that, as of the third quarter, resales had reached an annual rate of 575,400 homes, 13 percent above last year at the same time and the highest level since 1989. Median prices rose sharply by 7.5 percent to $194,400 and by double-digit rates in Santa Clara, the San Francisco Bay Area, and San Diego.
Existing sales in Phoenix for the first three quarters of 1997 surpassed figures for the first 9 months of 1996 by approximately 5 percent, with the median sales price up 5 percent over the 1996 price to $110,000. Resales in Las Vegas were up 4 percent over last year, and the median sales price also gained 4 percent to $125,000.
Multifamily building permit activity in the Pacific region was up 7.4 percent to 36,339 units for the first 9 months of the year. California (17,870 units) accounted for nearly one-half of the activity, as improving rental markets translated to a 39-percent increase in the number of units permitted. In the San Francisco Bay Area, multifamily permits through September were up 43 percent (6,559 units). The Bay Area rental market remained tight, with apartment occupancy at 96 percent or more in most of the area. Occupancy rates were highest in the city of San Francisco and in the Silicon Valley. Rents of some upscale properties continued to increase at rates of 5 to 10 percent annually depending on the location.
The rental market in Los Angeles County continued to improve, with an estimated apartment vacancy rate of 8 percent at the end of the third quarter of 1997, down from 10 percent in 1996. Vacancies were as low as 5 percent in the West Central and Mid-Wilshire districts of Los Angeles. In response to the more balanced market conditions, rents have stabilized and begun to move up and concessions are not as widespread. Multifamily permit activity for the first 9 months of 1997 was up 47 percent to 2,974 units. In Orange County the current rental vacancy rate is estimated at 4 percent, the lowest level since 1988. The tighter market has pushed rents up 5 to 6 percent in the past 12 months. Multifamily activity to date in 1997 was also up 28 percent over 1996 to 2,771 units. The rental market in the Riverside/San Bernardino market was mixed. Occupancy in high-rent properties was in the 95- to 97-percent range, encouraging some developers to plan new multifamily construction. However, occupancy remained at 90 percent or lower in many lower rent properties and complexes near the area's closed military installations.
Rental properties in stable submarkets in the Phoenix area had overall vacancy rates of 5 to 6 percent. The balanced overall vacancy rate masked higher vacancies and concessions in some active submarkets, and developers reduced multifamily permits by 13 percent to 6,693 units in the first 9 months of the year, which is still a strong level compared with average levels of the early 1990s. Multifamily building permit activity for 1997 through September in Nevada totalled 8,612 units, down 17 percent from the comparable period in 1996.
Spotlight on Las Vegas, Nevada
The economic strength of the Las Vegas area has made Nevada the Nation's fastest growing State in percentage terms. During the 12 months ending in August 1997, employment in Las Vegas increased by 6.4 percent, or 38,300 jobs. Unemployment stands at 4.4 percent. Last year nearly 30 million visitors spent $5.8 billion and had a total economic impact of $22.5 billion on the Las Vegas economy. With the completion of the New York, New York casino-hotel in January 1997, the number of hotel rooms reached 101,000, the largest number of any city in the country. The 12-percent expansion of rooms in 1997, however, exceeded the visitor growth rate, reducing occupancy rates and generating industry concern over the pace of expansion. Competition from the new Strip properties prompted Las Vegas to open the $70 million Fremont Street Experience, a multimedia outdoor theatrical venue, to attempt to stabilize downtown tourism.
Growth prospects are strong for the next 2 years. Casino-hotel expansion is expected to resume in late 1998 with the opening of the 3,000-room Bellagio and the 3,800-room Paradise/Circus- Circus. In the following year, the Paris and the Venetian will come online with 3,000 rooms each. More than 3 million square feet of new retail space is planned, while McCarran Airport is in the midst of a $450 million project to expand its capacity by 33 percent.
In-migration of job seekers and retirees to Las Vegas continues at a rapid rate. As of July 1, 1997, Clark County had an estimated population of 1,175,000, up 59 percent since 1990. The city of Las Vegas, with a population of 425,000, has captured more than one-third of the population growth. In the Southeast Valley, Henderson's population has doubled in the 1990s to 140,000, while the population of North Las Vegas has increased 90 percent to 90,000.
New home sales through the third quarter of 1997 were on a pace to almost equal 1996's record. Single-family permits authorized in 1997 through September (16,054) was off only 3 percent from the same period in 1996, allowing Las Vegas to maintain its rank as the 11th largest homebuilding market in the Nation. Rising land costs, impact fees, and zoning constraints have significantly reduced affordability of new units. As a result of the increasing cost of new homes, sales of existing homes jumped nearly 33 percent in 1996 over the previous year. Existing home sales have levelled off so far this year and are only 3 percent above last year's volume.
Las Vegas also has a balanced rental market, with an overall vacancy rate at approximately 6 percent. However, competition has increased and there are concessions for some recently built developments. The boom in multifamily construction is easing. Permits for 7,877 multifamily units were issued through September, an 11-percent decline from the first 9 months of last year. At the current pace, 1997 will be the second highest year of the 1990s. Most new units target the high-rent market. The apartment vacancy rate in previously developed areas is approximately 6 percent. Vacancy rates are expected to increase as new apartment communities continue to come online during the next 12 months. The recent opening of a number of apartment developments in Spring Valley, the Northwest, Henderson, and other high-growth developing areas has resulted in increased vacancies. As competition grows, rent concessions have become more prevalent.
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