Slump's Over? Vegas Employment and Housing Looking Up

Some glimmers of hope from Community Bancorp's Q3'08 conference call:

Ed Jamison, Chairman, President and CEO:

Today, while [Nevada's] population growth continues, the job creation has been significantly slowed. The United States unemployment figures for September was 6.1%, [vs.] 7.3% for the State of Nevada.

Though as we see the $26 billion in construction on the Las Vegas strip completed, the employment numbers should begin to improve dramatically in the next few months. The Wynn’s new resort Encore, which is scheduled to open in December of this year, has announced opening for 3,500 new jobs. Aliante casino... will be open in a few months with several thousand new job applicants available. Likewise, we see City Center -- a huge project, the Fontainebleau, M Resort, Caesars Palace, and Planet Hollywood expansions, along with the Grand Hyatt and other smaller projects will establish employment centers to process their employment needs over the next six to nine months.

...Residential resale inventory, while elevated, showed some encouraging signs of improvement. Today’s inventory of resale homes stands at 22,000, which is a decrease from 28,000 in September of 2007. But 12,268 or 56.6% of the inventory of resale homes are currently vacant.

Since the beginning of the year, we have seen a tremendous increase in sales for these properties. Since June, we have had more than 7,000 homes classified as having pended or contingent sales, which leads into closed transactions. This trend could lead you to believe that there is a heightening demand for these properties since the beginning of the year.

Comments

[fatcat:]

Went to Macys the other day in mid-afternoon...There were 80 or so employees in sight and only a handful of customers.(still had a hard times getting waited on)How long can that last?

My point...Wynn Encore hires 3500 to serve a handful of customers?

2008 Oct 28 08:32 AM

[Moses:]

So some guy says employment will rise and we are supposed to accept that blindly? I'm sorry but Vegas is dead. The most inefficient city in the world, who builds hotels and casinos in the middle of the desert. There will be a massive water shortage from the Colorado River system within the next 10-20 years and Las Vegas will be SOL.

2008 Oct 28 08:44 AM

[notsosmart:]

water will be a big problem for this region.if you are young be very careful about investing or moving there.

2008 Oct 28 10:25 AM

[mister d:]

are you nuts?

2008 Oct 28 06:26 PM

[mister d:]

pendings lead to sales when you can get a loan moron.

2008 Oct 28 06:27 PM

[davemcc3300:]

Is there a good statistician out there who could run a multi-factor coefficient of correlation between Las Vegas home sales and employment and U.S. GDP or the S&P 500?

2008 Oct 28 06:43 PM

[billddrummer:]

Hi Judy,

Great resource. Just keeping up must be a full-time job!

As far as the LV home sales vs. national employment--

I'm not sure that there's a direct correlation. When junk bonds became attractive vehicles for RE financing, a lot of the mega-resorts came into existence. The cash flows from those properties allowed them to pay down the high interest debt and reissue lower rate debt, while the companies' net worths rose because of both stock appreciation and profitability.

The availability of cheap financing was principally responsible for the construction money, in my opinion, not the growth of the broader economy.

But with the high fixed costs inherent in the mega-resort industry, it's possible that none of the new properties will start to show positive cash flow for several years. That essentially means that the asset base will remain debt-heavy for far longer than first anticipated. Factor in the long lead times for these huge projects (I believe the Wynn project broke ground 3 years ago, when everything was rosy) and there's definitely inordinate pressure on management to get revenues up and up fast.

If new properties aren't immediately profitable, and existing properties are suffering because of a decline in the leisure/hospitality industry, an investor would probably be more interested in the debt side of the companies than the stock side.

Your question remains an interesting one, though. If higher stock prices suggest improved consumer confidence, does the consumer then feel more comfortable with spending at a mega-resort? And if so, does that spending continue (or even rise) when new resorts come online?

2008 Oct 28 07:18 PM