The Las Vegas industrial base is one of the nation's smallest and least diversified. Still, the market has strength, and one manufacturer that's moving here said the city has what it takes to expand its industrial economy.
"Las Vegas is far from a manufacturing powerhouse overall, but it has some very important niche specifications that the region could build on said an economist with the Brookings Institution."
The study ranked Las Vegas well below national average on several manufacturing indicators. The city placed 97th out of the nation's 100 biggest cities for share of manufacturing jobs. Just 2.4% of local jobs are in manufacturing, compared with 8.5% nationwide.
For average number of employees per plant, the city ranked 79th at 36.3, compared with 39.9 nationally. Total local industrial jobs fell 0.1% from 2010 to 2011, compared with 2.7% growth nationwide.
Las Vegas also lagged in average manufacturing wages and share of high-tech jobs. These indicators are a problem since manufacturing is important to the U .S. economy as a source of growth and good pay.
Manufacturing jobs pay an annual average of $49,000 in Las Vegas compared with a median of about $45,000 for all jobs.
"You already have a major export in your hotels and casinos, but if you want to diversify your export industry, manufacturing is a good place to start."
City officials should start with the region's strong points. More than a quarter of the valley's manufacturing base is in the miscellaneous category, which includes high-tech medical device factories. Food is the city's second biggest manufacturing sub-sector, at 14.1%.
Focusing on food processing is important as edibles are often perishable and heavy which makes shipping expensive and impractical. That means food is harder to move to offshore factories.
Printing, Las Vegas' third biggest manufacturing sector, makes up 10% of industrial jobs.
An abundant labor force recently helped Spreadshirt.com, a Boston based maker of custom T-shirts and sweatshirts. The company whose sales have grown more than 100% a quarter in recent quarters, is scheduled to open a 36,000 square foot plant in Henderson in July.
The factory will launch with 60 or 70 workers, with plans to ramp up to 100 later in the year.
In addition to a deep labor pool, the company found tons of affordable real estate, good weather, low taxes, and help with training and recruiting. Their local plant is only minutes away from McCarran International Airport and it's global flight service.
The CEO said, "rents are very favorable. Everyone we worked with in Las Vegas and Henderson has been great. Las Vegas has a huge labor force for everything from production to supervisors to customer service, and it's cost of living is very favorable."
Nevada had the second highest mortgage delinquency rate in the nation in the first quarter at 11.16 percent, well above the national rate of 5.78 % TransUnion Credit Bureau reported Wednesday.
While Nevada is still second only to Florida's 13.87%, it's still an improvement from 14.19% a year ago and a high of 16.19% in fourth quarter 2009.
"There is a positive story here in that Nevada's improvement has been good, so there might be a chance for lenders to get back to Las Vegas and extend more credit to Las Vegans."
One of the challenges in Las Vegas and Henderson recovery is the lack of available financing after the housing crisis.
The high delinquency rate in Las Vegas plays a role in financing but it's more about the individual's credit rating and background.
The national mortgage delinquency rate is down from 6.01% in the first quarter, following two quarters of increases.
Home prices continue to face downward pressure and unemployment remains high, but many see the economic environment begin to show modest improvement.
TransUnion's forecast predicts mortgage delinquency rates will drift downward in 2012 as more homeowners will be able to repay their mortgage obligations.
"Unemployment is getting better and macro indicators like gross national product and retail sales are improving. It's encouraging news."
As homeowners take advantage of historic low interest rates and lower their monthly payments, it may have some positive impact on the overall delinquency rate later this year.
The median price for 3,185 single-family homes sold in April was $127,900, up 4 per cent from the previous month, and up 2.3% from April 2011.
It is the first time prices have increased on a year-over-year basis since August 2010, said Kolleen Kelley, President of the Realtors Association.
"Of course, this has a lot to do with our shrinking housing inventory. Based on current demand, our housing supply is down to about 4 to 6 weeks."
Total inventory of homes on the Henderson MLS and Las Vegas MLS decreased 20.3 % from a year ago to 17,884 in April, while only 4,162 units are available without pending or contingent offers, down 63.4% from a year ago.
Housing inventory already was tightening through 2011, and it began to tighten more rapidly when the Robo-signing law took effect in October.
Notices of default, which begin the foreclosure process,have plummeted from about 3,000 a month to just a few hundred, and the number of bank-owned homes has dwindled to about 800.
Even with fewer homes to sell, existing home sales remain ahead of the record pace set in 2011, when Realtors sold 48,186 houses in Southern Nevada.
Sales of townhouses and condos decreased by 13.5% to 739 in April. The median condo price dropped to $59,900, down 1.8% from $61,000 in March.
A Realtor said that many prospective homebuyers are being aced out by corporate investors using their financial power to buy single family homes in Las Vegas.
"I have seen clients with great credit put in an offer on a bank owned with a 30 to 40 percent down payment, and get denied in favor of an all-cash offer."
54.9% of all existing homes in Southern Nevada were bought with cash in April. Nearly 30% of all existing homes in April were short-sales. That's up from 26.6% in March.
The median price of bank owned single family homes sold in April was $112,500 up from 6.1% from $106,000 in March.
1,100 prospective home buyers registered for the two day Neighborhood Liftworkshop at the Riveria hotel.
This program is designed to attract qualified home buyers to neighborhoods struggling with high inventory of unsold homes, offering as much as $15,000 in down payment assistance grants to prospective homebuyers who meet income guidelines of up to 120 percent of annual median income, or about $79,200 for a family of four.
"You don't need perfect credit, but at least one year of good credit."
The down payment grant can be "layered" with other programs such as the Neighborhood Stabilization program, so that a person could get an additional $20,000 to pay down the cost of the home.
A local Realtor said, "it's an incredible program if they can find a house and if they can qualify. They have to have a job and a decent credit rating."
She said that banks would rather lend to owner occupants which is better for the community as a whole, but they are getting multiple offers from cash investors.
"It's just so different in Las Vegas and goofed up." In terms of deals buyers should look at short sales. Generally, there is less competition that with foreclosures.
Wells Fargo said that the home must be purchased within Las Vegas city limits and must be owner occupied for at least 5 years for the grant to be forgiven. Buyers also have to qualify for a first mortgage.
According to a recent study by Metrostudy, a Houston based housing data and consulting firm that maintains an extensive database on residential construction.
"Job growthcontinues to remain positive through February, adding 2,200 jobs, said Greg Gross, Director of Metrostudy's Las Vegas region."
Employment is up slightly from one year ago. Even as weakness continues, Vegas is much more diversified today than in years past, and the job market should continue to improve in 2012.
"The market continues to suffer with excessive mid-rise and high-rise projects that, when conceived, simply had no occupancy demand."
The Arizona capital of Phoenix was one of the hardest hit markets by the housing crisis, with home values plunging nearly 60 percent from 2006 through mid-2011 and foreclosure filings soaring.
As recently as June 2011 Phoenix held the second highest metro foreclosure rate in the country, behind only Las Vegas, according to RealtyTrac. By the end of 2011, it had dropped to No. 6, and by March 2012, slipped to No. 9.
Adam Artunian, senior research analyst with John Burns Real Estate Consulting (JBREC), says it wasn’t too long ago that Phoenix was considered ground zero of the housing market’s collapse. “Phoenix has orchestrated a dramatic turnaround in recent months and has considerably outpaced other distressed markets such as Las Vegas, Riverside-San Bernardino, and Sacramento,” according to Artunian.
So what’s going on in the Valley of the Sun that’s so different from the rest of the country? What market forces are strong enough to lift the nation’s sixth most populous city from the depths of the downturn?
Analysts and local real estate professionals alike attribute the market’s turnaround to investors who are snapping up properties to fix and flip or fix and rent.
While Phoenix has always been an attractive investment market, Artunian says investors have literally flooded the area since the downturn and now make up close to 45 percent of all buyers.
Investor demand is so strong in fact that Artunian says first-time buyers are having difficulty competing with investors who are paying with all cash. Local agents are reporting bidding wars among prospective buyers, with homes going for more than the asking prices.
Artunian notes that single-family rental rates are now averaging $12,500 a year. With the selling price of a distressed home usually well below the median home price of $127,000, he says investors can expect to achieve between a 5 percent and 10 percent annual return, after operating expenses and before any home price or rental appreciation.
Investor demand has served to drive up home prices in the area. According to Michael Orr, director of the Real Estate Center at the W.P. Carey School of Business at Arizona State University, the median price of single-family homes in the Phoenix area rose to $134,900 in March of this year, up more than 20 percent from a year earlier.
He says the increase signals a shift in the mix of properties being sold, with fewer low-price foreclosures moving through the market. Median and per square foot pricing is moving up as traditional sales account for a greater percentage of activity, Orr explained.
The average price per square foot for homes in Phoenix during the first quarter of this year was $956, according to the online real estate marketplace Trulia. That’s an increase of 999.9 percent compared to the same period last year.
Local investors say homes priced at the lower end of the market – under $100,000 – are becoming increasingly harder to find, and once you do find a bargain-priced gem, it’s snapped up and off the market before you know it.
Artur Ciesielski, a Realtor and partner with in Phoenix Realty Group, noted in a recent blog post that the nose-dive in Phoenix home prices since the bubble burst is now fueling investor appetite, especially in a market with such high rental demand.
“Expect investor demand to continue and to be part of the demand that is driving prices up,” Ciesielski writes, “and forget about shadow inventory, it’s not coming.”
The housing inventory in Phoenix has fallen to a mere 2.4 months, down from nearly 5 months just one year ago and over 12 months in early 2008. According to JBREC, months-of-supply has not been this low in Phoenix since late 2005 when sales activity was at feverish levels.
Listings of existing homes for sale have fallen 43 percent since March 2011, and local practitioners are now calling “shadow inventory” nothing more than a myth. They say if banks were holding properties off the Phoenix market, now would be the time to release them and it’s just not happening.
Where are all the real estate investors descending from? Artunian points to Canada. While there are a growing number of local investors taking advantage of current conditions, he says Canadians are increasingly flush with cash, many because of their own real estate boom in recent years.
That combined with a favorable currency exchange rate has given them “unusual buying power,” according to Artunian. He cites data from the Cromford Report, a local real-estate publication, which shows one in every 25 sales registered in February went to a buyer that listed a Canadian address. --------------------------------------------------------------------------------------------------------------------------------------------------- EDITOR'S NOTE:
Will Las Vegas follow Phoenix shortly? It's economy is improving and investors are flocking to Vegas in droves. New home sales in Vegas are on the way up and job opportunities are increasing so so all signs point to Las Vegas and Henderson as the next Phoenix.
SSL LAS VEGAS WILL HAVE ROUGHLY 1,600 ROOMS AND OPERATE AS A TRULY BOUTIQUE RESORT
By the time SLS Las Vegas opens, there will be SLS branded hotels in several U.S. cities including New York, Los Angeles, Chicago and Miami.
The construction funds, raised by J.P. Morgan Securities, marks the first new construction loans on the Strip in several years. A spokesman said, "we believe that this will kick off the next wave of construction in Las Vegas."
Governor Sandovalsaid, "today's news will make an immediate and positive impact in Las Vegas, infusing hundreds of millions dollars into our economy and creating thousands of jobs."
SBE CEO Sam Nazarian said he is confident that other investments will come to the Strip's north end. "I've kind of become the unofficial ambassador for the northern end of the Strip."
With 50,000 cars a day passing the intersection of Sahara and the Strip, Nazarian said SLS Las Vegas would compete for locals business in addition to going after SBE's customer base.
Along with it's hotels, SBE has a nightlife and restaurant business, including 14 locations in other cities.
Nazarian said, "we are going to be the only casino operator with hotels in major U.S. cities."
SBE bought the Sahara in 2007 and closed it last May saying it was no longer economically viable to operate. All the Sahara's furnishings and memorabilia were sold in an estate sale.
The battered new home segment is coming back slightly as resale inventory tightens and prospective buyers find themselves competing against multiple offers from cash investors, housing analyst Dennis Smith said Friday.
The President of Home Builders Research revised his projection upward to 5,000. New home sales fell to the lowest level on record in 2011, with just 3,894 closings, and Smith previously projected about the same number in 2012.
The median price of a new home rose to $201,040 in March, up one percent from a year ago.
Ken LoBene, Director of Housing and Urban Development in Las Vegas said that one of the factors that defines a declining market is the number of investors. 54% of March home sales were all cash transactions, indicating heavy investor activity, compared with about 22% nationally.
Las Vegas also has an abnormally high market share of mortgages backed by FHA, about 60% compared to about 13% in most cities. "That cannot continue as we have a mission to protect the FHA fund."
Smith of Home Builders Research said traffic through new home models has been strong over the past 3 weeks, and sales per subdivision has doubled.
Demand is so strong in some new home communities that investors are buying homes "from dirt" buying homes before start of construction, paying cash without a discount.
"It's still one step forward and two steps back" said an economist, we need to see at least 6 months of steady job growth, at least 3 to 4,000 local jobs a month."
Through the Neighborhood Lift Program designed to attract prospective home buyers to neighborhoods struggling with high inventory of unsold homes.
Wells Fargo loan officers will explain the program and take applications during a May 4-5 event at the Riviera Hotel convention center. Similar events have been held in Los Angeles, Atlanta and Phoenix.
Requirements for the for the Neighborhood Lift program include not exceeding 120 percent of local median income, commitment to occupy the home for 5 years, attend an 8 hour home buyer education session and qualification for a first mortgage on the property.
The 5 year goal of the program is to provide $ one billion in mortgage loans for Las Vegas home buyerssaid Wells Fargo's head of social responsibility.
They were the same cities that posted lows in January. Atlanta, Cleveland, Detroit, and Las Vegas continue to have average prices below their January 2000 levels in the Standard and Poor's/Case-Shiller home-price index.
Nationwide, home prices dropped in February in most major U.S. cities for a sixth straight month, a sign that most price gains haven't been enough to boost prices.
Prices rose in Phoenix, San Diego and Miami and were unchanged in Dallas.
Las Vegas based SalesTraq which used different methodology than Case/Shiller, reported an increase in median existing home prices for the last two months.Prices climbed to $103,000 in March, compared with $100,800 in February and $100,000 in January.
Realtors are reporting multiple offers on properties as inventory has dwindled to about 6,000 homes available without offers, due to the law in October that has all but halted foreclosure filings.
Still, Realty Trac predicts that another one million homes will go into foreclosure this year, stirring concerns that prices will fall further as banks will push another wave of foreclosures onto the market.
That's what worries Scott Wagner. He is on the verge of purchasing a small house in the southwestern Las Vegas valley. It seems that houses that were priced at less than $200,000 in that area have risen in price by 25% in the last 3 months.
The steady price declines have brought the nationwide index to it's late 2002 level. Home prices have fallen 35% since the housing bust and in Las Vegas they are more than 60% off their peak.
The S&P Case/Shiller monthly index covers half of all U.S. homes and measures prices compared with those of January 2000 and creates a three month moving average.