On economic horizon: Diversification is essential for Southern Nevada

By Buck Wargo (contact), In Business reporter

Fri, Jul 10, 2009 (3 a.m.)

This summer’s round table discussion on what caused Las Vegas’ recession and what needs to be done to reset the economy should generate a lot of debate in the business and gaming communities.

It’s not like the topic hasn’t been discussed before. But with the backdrop of the worse recession since the Great Depression, the debate should be lively. UNLV’s Lied Institute for Real Estate Studies is the sponsor for the August event.

The talk will center on the need to better diversify the economy by placing emphasis on improving education or that Las Vegas should focus on enhancing the gaming and tourism industries instead.

Another likely debate is whether Las Vegas is well served by promoting “what happens here, stays here.” Does that image prevent businesses from wanting to move to Las Vegas and did it contribute to financial institutions canceling conventions earlier this year? Expect plenty of talk on that.

John Restrepo, principal of Restrepo Consulting, said the recent decision by General Electric to locate an advance technology center in Michigan that will create 1,200 jobs is an example of the importance of a state having an educated workforce and great university system.

“We need a resetting of the economy tied into the educational system and tied into the tax system,” Restrepo says. “There needs to be a reevaluation. We are going through a period of slower economic growth. We can’t depend on the resort industry to grow 5 percent to 8 percent a year.”

Las Vegas benefited from cheap and easy credit from 1995 to 2005 that drove growth, Restrepo says. Las Vegas can’t depend on that returning.

Firm lines up for commercial sales

Turner Development Corp., a Newport Beach, Calif.-based firm, announced that its fund to acquire distressed commercial real estate and loans in Nevada, Arizona and California is closed. The company is targeting assets from $3 million to $30 million.

The recession and liquidity crisis have stressed commercial real estate owners and lenders and created opportunities for well-capitalized real estate professionals to acquire assets at significant discounts, says Rusty Turner, the company’s president.

Housing market update

According to California-based DataQuick, foreclosures maintained their tight grip on the Las Vegas housing market, and the median price for single-family homes fell for the 18th consecutive month. That helped sales record a three-year high.

In May 73.4 percent of Las Vegas used houses and condos were banked owned. That’s up from 56 percent in May 2008.

Sales of new homes remains low because builders can’t compete with foreclosures, the firm reports.

When combining new and used homes and condos, the median price increased 1.5 percent over April. That’s the first such increase since August 2007, but the firm says that is not a “clear sign of price appreciation. Rather it is a subtle shift toward a slightly higher portion of sales occurring between $150,000 and $300,000 and a slightly lower portion selling for less than $150,000,” spokesman Andrew LePage says.

The median price for resold single-family homes is one of the best gauges of overall price trends, LePage says. That price fell to $140,000 in May and is at its lowest point since February 2001. It’s 55 percent below the peak of $312,250 in June 2006, he says.

Another gauge to watch is median price per square foot for homes, which fell to $77 in May and is nearly 60 percent below its $190 peak in June 2006.

Federal Housing Administration loans, which are a popular form of financing for first-time homebuyers, accounted for 52 percent of all home loans in May while absentee buyers bought 36 percent of all homes last month, LePage says.

The firm points out that sometimes price drops can be overstated because median prices are tugged down by the type of homes selling. Foreclosures and the credit crunch make it harder to obtain jumbo mortgages for more expensive homes.

Hanley Wood released its May report that showed the cancellation rate was 15 percent, down from 17.4 percent in April and 30 percent in May 2008. The cancellation rate for condominiums fell to 5.7 percent and single-family homes to 16.8 percent in May. In May 2008, condos had a cancellation rate of 108.5 percent. Forty-one condos closed in April, about one-quarter of May 2008’s closings.

In other news:

• A TransUnion survey of 870 property managers nationwide revealed that more than half are having more difficulty locating qualified renters compared with last year. Eighty-one percent are concerned they will not find reliable tenants for the remainder of the year. The survey was released as part of the National Apartment Association’s Education Conference & Exposition in Las Vegas.

• Korte Co. has completed the expansion of Three Square, a local nonprofit food bank. The 70,000-square-foot space includes warehouses, meeting rooms and a kitchen.

• Nevada’s Safety Consultation and Training Section has recognized Clark Construction Group for creating a safe and healthy work environment for employees. The section, part of the Industrial Relations Division, gave the firm the Safe Partner Award.

• Lionel Sawyer & Collins won first place in Wild Wild Law’s recent poll of the best legal firms to work in Las Vegas. The firm won 29 percent of the vote. Wild Wild Law is a legal blog.

• Boyd Martin Construction completed the new 15,000-square-foot Subaru of Las Vegas dealership for Findlay Management Group. The firm was recently awarded the contract to build the 24,100-square-foot Lake Mead Church of Jesus Christ of Latter-day Saints in Henderson.

Brian Wargo covers real estate and law for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at wargo@lasvegassun.com.