Now that we all know that Southern Nevada, and indeed much of the world, is experiencing an economic recession, it is important to understand how we got here and how we’re going to get back to economic growth. For Southern Nevada, two of our key engines of growth failed in 2007. Throughout the 1990’s and 2000’s, Southern Nevada was one of the country’s fastest growing metropolitan areas. The availability of jobs, affordable homes, a warm climate and exciting entertainment venues drew people to Southern Nevada from all over the United States. From 1990 to 2005, Clark County’s population increased by approximately 250 percent, and construction employment grew at virtually the same rate. By 2002, we began to see the effect of the housing bubble that was caused by low interest rates and the encouragement of sub-prime loans by the federal government. The strong, but ultimately unsustainable, housing sales that resulted increased the demand for land in the Valley, driving up property values at an artificial rate. When the financial system collapsed under the weight of these risky loans, Southern Nevada was left with a significant inventory of new homes in the Valley and a dearth of new residential construction. The shock wave that would rock the local economy had begun.
The Las Vegas metropolitan area lost 21,300 construction jobs and 4,300 financial activities jobs as residential development slowed in 2007 and 2008. A lack of new home owners meant a decrease in demand for furniture, so furniture stores began to close, affecting not only the retail market, but also the industrial buildings that housed their goods. People all over the country were being more careful with their
money and high fuel costs were making travel by car and plane less attractive. Visitor volume and gaming revenues in Clark County fell throughout 2007 and 2008, resulting in the loss of 10,600 jobs in the leisure & hospitality sector during those two years.
Just as there was a housing bubble in Southern Nevada in 2005/2006, there was a similar bubble in commercial real estate development. After the slow¬down following the dot-com bust and the terrorist attacks on September 11th, 2001, a sharp spike in demand occurred for commercial space. Development of this space increased to meet this demand, but unfortunately did not react quickly enough to the decline in demand we began to experience in 2007/2008. This left commercial real estate in Southern Nevada both over-supplied and over-valued. This overstock in both residential and commercial real estate has left the formerly booming land market at a standstill.
– John Matt Stater