Las Vegas Sun

October 20, 2014

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Biz Buzz:

Looking ahead on the housing slump, resort openings and the gaming tax

Last week's column focused on my 2008 predictions for the gaming business.

This week I'd like to focus on the outlook for the broader business community.

The housing slump and the accompanying spike in foreclosures have been the biggest personal finance story for more than a year, and I don't expect things to get much better this year, if they improve at all.

The inventory of homes on the market remains high, and will remain so until sellers lower their prices and buyers believe they're buying at the right time.

The major factor that has historically fueled rising Las Vegas real estate prices has been our strong population growth and its positive effect on housing demand.

Behind the growth has been the addition of new resorts and the thousands of workers they attract. I don't think this year's resort openings will be enough to tip the supply-demand balance.

Neither the Palazzo opening nor the scheduled opening of Aliante Station at the end of the year will attract enough new residents to stoke housing demand. Neither will Wynn Resorts' Encore, which is slated to open at the end of the year or at the beginning of 2009.

But all three will help stabilize the market for a big turnaround in 2009 and 2010, when three bigger projects are scheduled to open: CityCenter and Fontainebleau (both in the fourth quarter of 2009) and Echelon (fourth quarter of 2010).

I expect foreclosures to continue setting monthly records through at least the middle of 2008, as more folks with shaky credit are unable to pay their adjusted mortgage payments.

In past years folks would have taken advantage of rising home prices and refinanced, but with a credit crunch crushing the subprime mortgage business and with many owners upside down and unable to refinance because they have no equity appreciation, homeowners are left with two unappealing choices: pay a much bigger mortgage payment than they can afford or lose their homes to the bank.

One great story in recent years has been our state's better-late-than-never moves to take advantage of our environment and become a leader in renewable energy production and technology.

I expect the trend to continue in 2008 and beyond, and hope that legislators will fund big increases in solar research at UNLV, and wind and geothermal energy research at UNR.

The investment will eventually attract more renewable energy businesses and will pay off for Nevada.

One unfortunate trend that shows no sign of slowing is the abuse of the initiative process, which I believe undermines our representative democracy.

Folks from California know how dangerous abuse of the initiative process is, with a relatively uninformed electorate driven by billboards and TV commercials to make decisions on dozens of important issues during every election.

I predict that the teachers union initiative to raise the top gaming tax by three percentage points to 9.75 percent will eventually overcome a legal challenge by the casino business -- it may have to be rewritten if the state Supreme Court strikes the first attempt down -- and pass by a comfortable majority, much to the chagrin of big gaming.

I think the initiative will easily beat a competing initiative that would almost triple the rate to about 20 percent. The big question is whether the casino lobby will try to craft a competing initiative that could beat both other tax measures.

My bet: Gaming will try but fail to create a broad-based business tax measure with enough support, and the casino industry will be left to figure out how to defeat the second and final vote on the teachers' initiative in 2010.

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