Las Vegas trails regional cities on road to recovery

By Steve Kanigher

Monday, March 14, 2011 | 2 a.m.

The latest figures are out and they dismally reconfirm that Las Vegas Valley’s fallen economy is struggling to recover even as some sister cities in the Intermountain West show signs of rebounding.

Whether it’s unemployment, economic output, housing prices or bank foreclosures, Las Vegas remains among the poorest performers of the nation’s largest cities, according to data for the fourth quarter of 2010 released today by the Brookings Institution think tank in Washington and partner UNLV.

“Southern Nevada is clearly still laboring through a very troubling reset of its economic fortunes,” said Mark Muro, co-director of Brookings Mountain West. “It’s well known that the region fell fast and deep into an unprecedented recession. What is disappointing is how slow Las Vegas has been coming out of it.”

Las Vegas is part of the Intermountain West, which Brookings defines as Nevada, Arizona, Colorado, Idaho, New Mexico and Utah. Muro said figures show a deep fracture within the region, with Las Vegas, Phoenix and Boise continuing to suffer while Denver; Colorado Springs, Colo.; Salt Lake City; and Ogden, Utah, are rebounding.

“The cities that are struggling the most are the ones that were hammered the most by the real estate crash,” Muro said. The cities doing well, he said, are “stronger exporters that are less oriented toward consumption and real estate.”

Brookings found housing prices in Las Vegas fell 57.6 percent from the fourth quarter of 2006 to the same period of 2010, with only Modesto and Stockton, Calif., faring worse among the top 100 metropolitan areas. During the same time, housing prices fell 18.5 percent nationally. Las Vegas housing prices fell 2.9 percent from the third quarter of 2010 to the fourth quarter, compared with a 1.2 percent drop nationally.

“We’re the real poster child for the boom and bust in the U.S. housing market,” said Stephen Brown, director of UNLV’s Center for Business and Economic Research. “The construction got way ahead of the population growth. It will take awhile for all the vacant houses to get absorbed.”

It will take at least three years before the Las Vegas housing market returns to normalcy, Brown said. Part of the problem is Southern Nevada’s huge foreclosure problem.

The good news, according to Brookings, is that Las Vegas last quarter ranked fourth best among the nation’s top cities in reducing the number of bank-owned homes. The reduction of 1.63 bank-owned homes per 1,000 properties with mortgages compared with 0.33 nationally.

However, Las Vegas still had 15.3 bank-owned homes per 1,000, more than triple the national average and 99th worst among the top 100 cities.

“The banks have been reluctant in allowing these properties to be sold because the banks take a loss,” Brown said. “But it looks like the banks are becoming a little less hesitant in allowing these properties to be sold.”

When it comes to gross metropolitan product — an economic output measure of goods and services produced — Las Vegas had the 97th worst performance from the second quarter of 2007, when the economy last peaked, through last quarter. Las Vegas suffered an 8.1 percent decline while national output rose by 1.5 percent.

There are some signs that the city’s output is improving. From the bottoming of the economy in the third quarter of 2009 through the last quarter of 2010, output in Las Vegas grew 2.3 percent. But it was still well behind the 6.6 percent growth nationally.

“We’re basically lagging in the recovery,” Brown said.

Even the drop in unemployment in Las Vegas from 15.1 percent in December to 13.7 percent in January that was announced last week is not yet reason to celebrate. The January numbers included 1,900 new jobs, but 14,000 people dropped out of the labor market, Brown said.

“There’s a little growth in employment but with so many people dropping out of the labor force it’s still not a good story,” he said.

The decline in the unemployment rate was also tempered by news Friday that the iconic Sahara will close in May, affecting 1,050 workers.

Particularly telling is that Las Vegas went from the beginning of this recession in late 2007 through the end of last year without any job growth, Brookings reported. In recessions in 1981, 1990 and 2001, job growth in Southern Nevada occurred within two to five months of the start of those recessions.

It’s a clear sign that Las Vegas isn’t as resilient economically as it once was, Muro said.

“It underscores the massiveness of this event,” he said.