The Pacific regional economy created 524,400 nonagricultural jobs in the 12 months ending in August 1998, a 3.2-percent increase. California added 404,700 jobs during the same period, a 3.1-percent increase. The rate of employment growth in California during the past 6 months has been somewhat slower, primarily due to a slowdown in Silicon Valley. Arizona reported a 4.7-percent gain in employment on the strength of the 73,200 new jobs in the Phoenix area. Nevada employment was up 4.5 percent, or 40,100 new jobs. The Las Vegas economy accounted for 83 percent of the gain (33,300 jobs), a 5.3-percent increase. The $1.6 billion, 3,000-room Bellagio casino-hotel opened on October 15, creating more than 8,000 jobs. Regional employment growth is expected to moderate next year because of reduced exports, overseas tourism, and consumer confidence.

Continued strong home sales throughout the region encouraged builders to take out permits for 130,194 single-family homes in the first 9 months of this year, a 12-percent increase over the same period in 1997. California led the way with 70,641 homes, followed by Arizona with 38,392 homes, a 13-percent increase in activity for both States. In the Riverside-San Bernardino area, activity was up 24 percent. The increase reflects a spillover of demand from adjacent Orange and Los Angeles Counties. Due to a scarcity of available land, higher costs, and antigrowth sentiments, prices in some submarkets of the Orange and Los Angeles areas are $100,000 greater than for comparable homes in the Riverside-San Bernardino area. Local industry sources are projecting single-family permit activity for California to reach 95,000 units by yearend.

In the Phoenix-Mesa metropolitan area, single-family permits were issued for 28,141 homes through September, a 14-percent gain, pointing to another record year. In Las Vegas single-family activity for the first 9 months of this year is up 5 percent over very strong 1997 levels, to 16,863 units. Despite noting a gradual slowdown of sales and traffic over the course of the year, the Las Vegas Housing Market Letter believes that new sales in 1998 should exceed 20,000 by yearend. Existing home sales during the first 8 months of 1998 were up 20 percent and 16 percent in Las Vegas and Phoenix areas, respectively, on track to set new records this year.

Existing homes sales in California, according to the California Association of REALTORS^®, reached an annualized rate of 636,180 in August, up 9.7 percent from a year earlier. The median sales price for existing single-family homes was up 9.4 percent. Demand for condominiums has increased dramatically, with sales up 25 percent compared with 1997 levels.

With a steadily improving rental housing market in much of California and a continued strong demand in Arizona and Nevada, multifamily building permit activity through September totaled 40,566 units, up 12 percent over the first 9 months of 1997. In California's tightening rental markets, multifamily permits were up 21 percent in the first 9 months to 21,606 units. The San Francisco Bay Area recorded 8,103 multifamily units, a 24-percent increase. Bay Area rents have increased more than 5 percent in the past year as production remains below demand. Statewide, multifamily housing activity is expected to reach 30,000 units by yearend 1998 and reach 35,000 units in 1999.

The majority of the Southern California rental housing markets are experiencing upward pressures on rents. The tightest rental markets continue to be in southern Santa Barbara County and Ventura County. The rental vacancy rates in these two areas are less than 5 percent. The overall rental vacancy rate in Orange County was in the 5-percent range, while in San Diego it was in the 6-percent range.

The overall Los Angeles County vacancy rate remained at about 8 percent, with some areas of the San Fernando Valley still experiencing vacancy rates exceeding 10 percent. The rental vacancy rate in the Riverside-San Bernardino market remained at about 9 percent during the third quarter of 1998, with the majority of the vacancies at the lower end of the market. Low mortgage interest rates, coupled with affordable housing prices in Riverside and San Bernardino Counties, are slowing the decline in rental vacancies in these two counties.

Las Vegas' multifamily permit activity rose by 6 percent (8,313 units) in the first 9 months of the year over the comparable period a year earlier. Las Vegas is the Nation's fifth-largest metropolitan area for multifamily housing so far this year. Concessions remain widespread at the upper end of the market, but vacancies have declined recently.

The balanced Phoenix rental housing market increased year-to-year average rents by 5 percent and produced a 27-percent gain in multifamily permits for 8,511 units in the first 9 months of the year. A balanced 6-percent overall vacancy rate prevails for large apartment projects, rising to 8 percent for some active submarkets, with concessions typical on units in rent-up. The strength of the Phoenix area carried Arizona to 9,684 multifamily units authorized, up 9 percent.

Spotlight on Tucson, Arizona

The Tucson metropolitan area (Pima County) is the second largest in Arizona, with a population of approximately 813,000. The population has increased by 146,500 since 1990, a 2.4-percent annual increase, primarily attributable to in-migration. The University of Arizona forecasts population gains of more than 17,000 persons annually during the next 5 years. Wage and salary employment was up 11,700 (3.8 percent) in the 12 months ending in August. The unemployment rate was an extremely tight 2.8 percent in August.

Tucson's major industries are defense, high- technology manufacturing, software development, tourism, and higher education. There are close to 7,350 military and civilian personnel at the Davis-Monthan AFB. The area's largest private employer is Raytheon, formerly Hughes Missile Systems, which employs 7,700 and is expected to add up to 1,300 workers during the next 12 months. The military and defense industry brings an estimated $1.3 billion in salaries and contracts to the area annually. A key attraction to advanced technology employers is the University of Arizona, which has an enrollment of 33,700 students and employs 12,500 people.

The strong economy is fueling record home construction and sales in 1998. Single-family permits totaled 4,350, up 16 percent, in the first 9 months of the year. The Tucson Housing Market Letter reports 3,439 new home sales through August, up more than 25 percent from the comparable period in 1997. The first-time homebuyer price range of $80,000 to $120,000 is strongest. Several large active-adult subdivisions under construction reflect the area's attractiveness to retirees, who make up approximately 30 percent of new home sales.

Existing home sales have been very strong in 1998 and available listings have fallen to less than 1 month's sales. New home prices have been relatively stable in the 1990s. However, higher development costs, declining availability of lower priced lots, and proposed new land-use ordinances are expected to boost prices in 1999 and keep new home sales below this year's projected record level of more than 5,000. Existing home sales are a robust 6,580 through August, 14 percent higher than last year. The $112,000 median sales price in August was 9 percent higher than a year earlier according to the Tucson Association of REALTORS^®.

Construction has begun on Civano in Tucson, a 2,600-home subdivision. Five different home builders will build the 270-unit first phase in the $90,000 to $200,000 price range, using adobe, straw bale, rastra (a recycled Styrofoam and cement mixture), and structural insulated panels. The homes will be 10 to 12 percent more expensive than conventional construction but will use half the energy. The community will eventually have commercial space to minimize commuting and shopping trips. Fannie Mae and the city of Tucson are contributing $5 million in equity and $3 million in infrastructure, respectively, to the project.

The Tucson rental market had been overbuilt but has begun to improve. Multifamily housing permit activity for the first 9 months of this year totaled only 154 units, compared with an annual volume of more than 6,100 units from 1994 through 1997. The current apartment vacancy rate is about 8 percent.