US Economy

Nevada economy plays winning hand: Here's its secret

Nevada's economy is on a roll, winning business from other states and attracting more jobs. It marks a significant turnaround from just after the nation's financial crisis, when it looked like the party was finally over for Nevada after years of heady growth.

Fast forward to today: Nevada's jobless rate is at the lowest level in about eight years. And experts say there's more stability in the Las Vegas housing market heading into spring buying season.

"It feels healthier than it has been in a real long time," said Bill Lerner, co-founder of Union Gaming Group, a Las Vegas-based boutique investment bank. "The roads are busier, the restaurants in the local markets and in and around the Strip are busier. There's more development, both residential, office, commercial and retail."

Signage at Resort World, a proposed construction project that includes a resort hotel and casino in Las Vegas last December.
George Rose | Getty Images

The state's seasonally adjusted jobless rate stood at 6.2 percent in January, down from 7.1 percent a year ago and its lowest level since mid-2008. Construction, one of the hardest hit sectors in the recession, is leading the state's growth of jobs.

Boyd Gaming CEO Keith Smith commented during the Nevada-based casino company's earnings call last month about how construction activity is accelerating, with more than $10 billion in projects currently in various stages of development across the Las Vegas Valley. "This is driving strong growth in construction employment, which increased more than 14 percent last year. And the local economy is benefiting from record visitation," he said.

During the dark days of the downturn, Boyd put the brakes on a multibillion-dollar development on the north end of the Strip called Echelon, and in 2013 sold the unfinished site for $350 million to Malaysia-based Genting Group. Today, Genting's Resorts World Las Vegas — a $4 billion project — is the largest development in Vegas since CityCenter's opening in 2009. The Chinese-themed resort could open as early as 2018 and its website said the property, when in operation, will create over 13,000 direct and indirect jobs.

"We lost 70,000 jobs and most of those were construction workers, and hotel and casino," said Dallas Haun, CEO of Nevada State Bank, a unit of Zions Bancorporation. "That's why the Tesla thing is so important, Switch Communications, and Faraday. Nevada is trying to diversify job creation and diversify the economy."

In December, Faraday Future, an electric vehicle manufacturing start-up, announced plans to build a billion dollar manufacturing plant in North Las Vegas. The Chinese-backed company also said once the facility is up and running it will have 4,500 new jobs. Switch Communications, a big-data storage company, also has been expanding in Nevada. Meanwhile, Tesla is building a giant "Gigafactory" east of Reno to make lithium ion batteries and is getting about $1.3 billion in tax breaks and other incentives from the state. When the factory is at full capacity it is expected to employ an estimated 7,000 workers.

Since the 2010 recessionary low, 6,436 private firms and 140,200 jobs have been added to Nevada's economy, according to Bob Potts, research director for the Governor's Office of Economic Development. Cannon Safe, a residential security products company, is one of the companies recruited to Nevada. Previously, Cannon was based in Southern California.

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"My original thought was Texas," said Cannon CEO Aaron Baker. "We ended up in Nevada, and honestly I love it. California is a great place for weather but I don't think it's a great place to own a business."

Additionally, Baker said Nevada taxes are lower — including no state income taxes — and he also likes the Silver State's lower cost of living than California and the availability of affordable housing.

In the Las Vegas metro market, the median price of existing single-family homes sold during February was $220,350, up about 7 percent from a year earlier. According to RealtyTrac, the median home price has risen a whopping 92 percent since bottoming in January 2012 but is still 35 percent below their previous peak in June 2006.

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"Our buyers and sellers feel more confident that we are in a much more stable market," said Scott Beaudry, president of the Greater Las Vegas Association of Realtors. He said the local housing supply remains tight and speculative home buying by investors "has died down." In another sign of the improving outlook, he said the number of real estate agents entering the Vegas market is starting to grow again, averaging about 150 new members each month.

There's still stress in the Las Vegas housing market. The region ranked No. 3 in terms of largest 10 U.S. metro areas with the highest foreclosure inventory in January (1.7 percent), according to CoreLogic. New York (3.5 percent) and Miami (3.1 percent) were ahead of Vegas.

At the end of 2015, there were still about 28 percent of all Las Vegas metro area homeowners "seriously underwater" on their homes, according to RealtyTrac. That's more than twice the national underwater rate of 11.5 percent. On the other hand, the Vegas area peaked at more than 60 percent of homes underwater near the beginning of 2012, so the current level represents an improvement of sorts.