Cost of living in Southern Nevada not as affordable

Kevin Rademacher

Friday, June 3, 2005 | 10:34 a.m.

At one time, not too long ago, the affordable cost of living in Southern Nevada was a major draw for new residents.

Except for prospective residents in a few of the nation's most expensive locales, particularly California, those days are gone. The rising cost of life in Southern Nevada is a big concern for Somer Hollingsworth, chief executive of the Nevada Development Authority.

"Arizona is comparatively cheaper than us right now," Hollingsworth said. "We never had to deal with that before."

Jeremy Aguero, a principal with Applied Analysis, said that the cost of living here recently came in higher than the composite cost of living for Southern Nevada's top 10 feeder states for new residents, excluding California.

It marked the first time in history Las Vegas costs surpassed the average cost of living in those states.

While the new findings do not mean Nevada is more expensive than ultracostly Hawaii and New York, Aguero said it shows that the average new resident from those nine states will pay more to live in Nevada than they are currently paying. Other top feeder states are Arizona, Colorado, Florida, Illinois, Texas, Utah and Washington.

Keith Schwer, a UNLV economist and director of the Center for Business and Economic Research, agreed with Aguero's assessment of Southern Nevada competitive position compared to its feeder markets.

"You can't lead the nation in housing prices and not have that affect the cost of living," he said. "That means Las Vegas is not as good a buy for people moving here. There's less free money after you take care of necessities."

The Nevada Development Authority has been pushing for a communitywide effort to address affordability before it begins to drag down the valley's roaring economic.

"When people make $21 or $22 a hour and can't afford to buy a home or find an apartment to rent, it is going to bite us," Hollingsworth said. "I have a very, very big concern about it."

"If we don't do something about it now, we're going to have to deal with it in the future when it's a crisis," he added.

In addition to housing costs, major components in the cost of living include groceries, health care, transportation and utilities, Aguero said, emphasizing the housing component.

"It's absolutely the biggest chunk," he said.

In 2003, the local home price index was below the 100 level that marks the national average, Aguero said.

"In one year's time, we are well above the national average," he said, of the new index rating of 121.7.

This week, The Office of Federal Housing Enterprise Oversight said Nevada's soaring housing costs paced the nation with a 31.2 percent appreciation rate from the first quarter of 2004 to the first quarter of 2005.

Additionally, the Las Vegas metropolitan area was the second hottest city for appreciation in the 12-month period with housing prices up 33.3 percent, OFHEO report said. The Reno metropolitan area was right behind Las Vegas, third nationally with a 12-month appreciation rate of 31.8 percent.

Over a five-year period, Las Vegas housing prices are up 89.1 percent, the report said. Reno's five-year rate was 85.2 percent, the report said.

Recent statistics from Home Builders Research Inc. showed the median new home price for the Las Vegas Valley was $281,355 in April, up from $233,360 in the same 2004 month. In April 2000, the local median new home price was $148,886, Home Builders Research said.

In addition to higher housing prices, Schwer said that health care and grocery costs also run high in Southern Nevada. While he said that the rising cost of living here does not figure to end the region's run as a hot spot for economic growth, it could be a factor in the future.

"It doesn't mean it will choke off all growth, but for some people, they may be better off staying in Peoria than moving to Las Vegas," Schwer said.