Thursday, November 8, 2012

Vegas CRE - Doing it Tortoise Style

All the various entities and institutions have their data in for August 2012, and the picture looks a bit flat. The August 2012 Recovery Index stands at 91, the same as in July, but better than in May and June. In general, things are improving, but they aren't improving by leaps and bounds just yet, and certainly there is a rocky road ahead.

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The chart above shows that the trend is our friend (at the moment). You'll also notice that the previous cycles of sharp increase followed by sharp decrease seems to have ended. The trend is a bit more level now. If there is anything to be distressed about, it is the rate of increase. At the current rate, we're more than a year away from the index hitting 100, our starting point in 2006. If (or when) the country (or globe) slips into a recession in 2013, we can expect this recovery will take even longer.

On a year-over-year basis, we're still in positive (i.e. growth) territory.

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When we look at the individual measures in the index, on a year-over-year basis, we see the most impressive growth in new home sales. New home sales reached 922 homes in September 2012, compared to 396 new home sales in September 2011. This gives one a warm, fuzzy feeling until you note the 3,217 new home sales (on average) in 2006. Still, new home sales are improving, and that helps us clear the inventory and pave the way for new construction (and construction jobs) in the future.

The index is also growing on a year-over-year basis in Commercial Occupancy, Gaming Revenue, New Residents, Employment and Port Traffic in Los Angeles. The only slide was seen in Visitor Volume.

Given this improvement in the third quarter of 2012, one can expect to see continued improvement in Southern Nevada's commercial real estate market into the first half of 2013 - slow and unsteady progress, but progress nonetheless.

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