The economy in the Pacific region continued a slow, uneven recovery through the second quarter of 2003. Total nonfarm employment was virtually unchanged in the 12 months ending June 2003 compared with the previous 12-month period, a notable improvement compared with the loss of 161,000 jobs during the comparable period in 2002. Moderate growth levels are occurring in most of Southern and Central California, but the employment centers in the San Francisco Bay Area dependent on high-technology still register job losses. A rebound in domestic leisure travel has supported job gains of 1.3 percent in Nevada and 1.8 percent in Hawaii. With improving conditions resort construction in Las Vegas has resumed, and more than 3,000 new hotel rooms will be completed this year. Arizona recorded a 0.7-percent employment gain in the 12 months ending June 2003. The increase in job opportunities and the in-migration of retirees have fueled steady population growth and demand for new sales and rental housing.
The nations top 5 fastest-growing cities from 2000 to 2002, with populations of more than 100,000, are located in the Las Vegas and Phoenix metropolitan areas, and 29 of the top 50 fastest growing cities are in the Pacific region.
The unemployment rate for the region averaged 6.5 percent during the 12 months ending in June, up 6.1 percent over the previous period, with Hawaii and Nevada recording the lowest rates, 3.8 and 5.2 percent, respectively. As expected the areas of California dominated by high-technology have some of the highest unemployment rates in the country, while the Orange County and San Diego areas in Southern California have some of the lowest unemployment rates.
Because of favorable interest rates and strong demand for homes single-family building activity increased throughout most of the region. Single-family permit activity rose 20 percent to 226,000 in the 12 months ending June 2003. Permits increased 22 percent in California, and activity in Southern California and the Central Valley increased by an even larger rate because of their relatively strong economies. Activity increased 15 percent in Arizona, 18 percent in Nevada, and 34 percent in Hawaii.
Sales of existing homes remained generally strong. During the first 6 months of the year the annual rate of resales in California totaled 574,500 homes, off 4 percent from this time last year and well on the way to equaling last years annual record of 572,550 homes. The median price for the state as a whole was approximately $370,000 in the second quarter. According to the California Association of REALTORS® sales prices in the state have increased by double digits annually during the past 2 years. The volume of resales in Southern California remained virtually unchanged for the first half of this year, but prices rose 1215 percent in the past year according to the OFHEO price index. Sales in the San Francisco Bay Area declined 6 percent in the first half of 2003. Improved economic conditions continued to support existing home sales markets in Las Vegas and Honolulu, where closings for the first 6 months of 2003 increased 18 and 21 percent, respectively, compared with the same period in 2002. Phoenix area resales are up 8 percent, making it likely that 2003 will be the third consecutive record year.
Multifamily building permit activity continues to increase in the region. During the 12 months ending in June permits were issued for approximately 66,000 units, an increase of 31 percent. Activity in California was up 35 percent, totaling 47,000 units; much of the activity is concentrated in Southern Californias rental markets, reflecting the stronger market conditions in these areas.
Market conditions in most of the rental markets in the region are balanced. However weaker economic conditions, low interest rates, and the movement of renters to homeownership continue to reduce renter household growth and affect demand, particularly for higher rent units. Persistent job losses in the San Francisco Bay Area have resulted in weaker rental market conditions. According to a RealFacts survey of larger apartment developments, the apartment vacancy rate increased to 6 percent as of the second quarter, up from 5.7 percent a year earlier. The market is weakest in San Mateo and Santa Clara Counties, where apartment vacancy rates are estimated at 7 percent. Conditions are more balanced in the North Bay counties, which are less dependent on manufacturing and high technology. Overall rents in the Bay area have been flat in the lower ranges and have fallen in the upper ranges.
Southern California continued to have the strongest rental markets in the Pacific region. The rental vacancy rate in Orange County is currently estimated at 5 percent, down from 6 percent a year ago. In Ventura County the overall vacancy rate is also approximately 5 percent, and the rate in San Diego County remains at 6.5 percent. Conditions in the Riverside-San Bernardino area remained balanced. The South Coast portion of Santa Barbara continued to be the tightest rental market in Southern California.
The apartment vacancy rate in Phoenix was approximately 10 percent as of the second quarter, and conditions in the market remain relatively soft. Asking rents have fallen 1 percent over the past 6 months according to an Arizona State University study. Rental concessions and incentives remain widespread. The Las Vegas areas overall apartment vacancy rate holds steady at approximately 8.5 percent, with the rate in newer, class A properties around 7 percent and the rate in older apartment developments estimated at 9 percent. The Honolulu rental market has become more balanced, and the rental vacancy rate is currently estimated at 5 percent.
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