Housing markets continue to realign, both nationally and in the Silver State. Not surprisingly, growth rates for key spending indicators are also down as a result of tightened housing mortgages and slower sales. Still, overall growth continues, though more slowly than in recent memory. The Nevada economy runs at or near capacity levels for almost all areas but housing construction.
March indicators for permitting activity dropped by double-digit rates for Las Vegas and Reno. Nationally, housing starts also continue to decline, off 16.1 percent for April 2006 to April 2007. Furthermore, this state of affairs in the residential real-estate markets should continue with weak performance for some months ahead. Housing rebalancing, having begun in midyear 2006, will take some time to correct given the excessive over expansion since 2001. In the meantime, residential construction and those businesses tied to the industry will post lower levels of activity.
Slower spending associated with housing construction has second-order effects for suppliers (backward linkages) and sellers (forward linkages). As a result, revenue forecasts for government (forward linkages) are down. Also, annual employment growth in Nevada is down to 3.1 percent (March 2006 to March 2007) as construction workers move to nonresidential activities and other businesses’ sales growth volume slows.
Travel and tourism continues to carry its weight in contributing to overall growth in Nevada, though the level of activity is off slightly from year-ago levels. Gross gaming revenue declined 2.1 percent for March on year-over-year comparison for Clark County (Las Vegas). Pleasantly, gaming revenue in Washoe County (Reno) grew at 9.1 percent over the same time-comparison profile. The volume of visitors in Las Vegas remains at near last year’s level and has bumped up against capacity utilization rates.
The national economy as measured by real gross domestic product saw first-quarter growth at 0.3 percent for the quarter and at 1.3 percent on a seasonally adjusted annual rate basis, down markedly from earlier growth in the 3 percent range. Looking ahead, most forecasts call for continued national expansion without a recession. After the year has ended, growth of less than 2.5 percent is expected for 2007.