Nonagricultural employment in the Pacific region increased by 579,400, or 3.3 percent, in the 12-month period ending August 2000, spurred by strong growth in the tourism, high-technology, and construction sectors. The Phoenix area added 66,200 new jobs during the period, paced by major construction projects such as Intel's $1 billion plant expansion and Marriott's 950-room, $250 million resort hotel. Employment gains in Las Vegas continued at a rapid pace despite no major casino hotel completions this year. In the 12 months ending in August, the area gained 33,300 new jobs, a 4.6-percent increase. California added 430,000 new jobs for a 3.1-percent gain during the period. The Modesto, Vallejo-Napa, and Riverside-San Bernardino areas all recorded job gains of more than 4 percent. The regionwide unemployment rate in August was 4.9 percent, ranging from 5.1 percent in California to 3.7 percent in Nevada. The labor market remains tight in the San Francisco Bay area high-technology centers, as well as in Phoenix, Tucson, and Reno.

New home production is slowing in many major markets in the region, although overall activity is still at strong levels. Homebuilders pulled 138,754 single-family permits through September 2000, down almost 12 percent. In California, permit activity totaled 78,147 homes, approximately the same as last year, with activity in the San Francisco and Los Angeles metropolitan areas down approximately 5 percent. Homebuilding in Sacramento and Stockton is increasing as the areas attract new homebuyers from the Bay Area. Single-family permit activity in these cities is up 13 and 25 percent, respectively.

Homebuilding activity in Arizona, as measured by permits, was down 8 percent to 38,083 homes, reflecting slower sales and the growing inability to pass on rising site costs. Builders are experiencing rising lot costs and development fees, and combined with a slower rate of sales (down 4 percent in the first 9 months), profitability has dropped. Some builders are accelerating subdivision approvals and land banking as a hedge against a November ballot proposition requiring 10-year development boundaries for each major Arizona city. Single-family permit activity in Las Vegas was up 2 percent through September. Builders expect to finish the year close to last year's high levels but declining slightly because of the shrinking supply of developed zoned lots and the reduced number of active subdivisions.

This year, existing home sales in California remain at near record levels. As of August, the annual rate of sales in the State reached 558,000, up nearly 5 percent over year-earlier levels. The California Association of REALTORS® expects resale volume for the year to be down 3 percent compared with 1999, because of declining affordability and the historically low level of available homes. Resales of homes in Las Vegas were up 20 percent in the first 8 months of the year, while existing sales in Phoenix through the third quarter were off 5 percent from last year's record pace.

With most rental housing markets in the Pacific region exhibiting balanced or tight conditions, multifamily building permit activity in the first 9 months of 2000 was up 13 percent to 46,316 units. California led the region with 31,029 units, a 25-percent gain. Apartment production continues to lag behind demand in many of the State's markets; as expected, the tightest markets are in the San Francisco Bay Area. Vacancy rates of 2 percent or less are common in larger high-amenity apartment properties and in the Silicon Valley and adjacent areas, according to the RealFacts apartment survey. Bay Area rents continue to increase by more than 6 percent annually. The apartment market in the Sacramento area is extremely tight. According to a survey by CB Richard Ellis of the larger apartment projects in the area, the vacancy rate fell to 1.5 percent in the third quarter, down from 2.6 percent a year earlier.

The third quarter saw a significant decline in the Orange County rental vacancy rate to approximately 3.5 percent. The Los Angeles County rental market continues to be balanced, with rental vacancy rates ranging from less than 4 percent along the coast to more than 8 percent in parts of the San Fernando Valley. The rental markets in both Ventura and southern Santa Barbara counties remain tight, with rental vacancy rates of less than 4 percent. The rental market continues to be tight in San Diego County. The highest rental vacancy rates in the region, more than 8 percent, are in the Riverside and San Bernardino areas, where renter households can still purchase affordable new and existing homes.

The Phoenix rental housing market remains balanced at approximately 6 percent overall and above 7 percent for 100-or-more unit apartment communities. The volume of new construction has kept the market competitive. The increased competition has slowed rent increases to approximately 1 percent annually, according to the Phoenix Metropolitan Housing Study. In the first 9 months of 2000, multifamily building permit activity in the Phoenix area was up 22 percent to 8,735 units. The Las Vegas rental market has tightened recently; the overall rental vacancy rate is estimated to be 6 percent, but rates of 10 percent or more are still common in some submarkets. With a 37-percent drop in multifamily permit activity in the first 9 months of this year to 3,636 units, conditions are expected to remain stable through early 2001. The Honolulu rental market remains relatively soft, and rents have fallen more than 1 percent in the past year.

Spotlight on Reno, Nevada

Gaming and tourism are the center of the Reno metropolitan area's economic base. Gaming revenues in the 12 months ending August 2000 increased by 7.6 over the previous period. More than 50 percent of the area's daily visitors are from the prospering Northern California markets. The Reno area's population has increased at a strong rate of 2.9 percent annually since 1990, to 323,700 as of July 1999. Half the population of the area lives in the city of Reno, but the unincorporated areas of Washoe County have grown more rapidly throughout the decade.

Nonagricultural employment growth in the area averaged 4.9 percent, or 9,300 jobs, in the 12-month period ending August 2000. The gaming and service industries accounted for the increase in jobs, from 3,900 in the previous 12-month period (5.2 percent). The Reno area also has attracted high-technology companies such as Microsoft, Oracle, Cisco, Amazon.com, and Igo.com. The overall unemployment rate has been consistently below 3 percent during the past 12 months.

One of the area's largest nongaming employers is the University of Reno, which has a faculty and staff of 3,300 and more than 10,000 students. Since the completion of the Silver Legacy casino approximately 4 years ago, growth in the tourism and gaming industries has been due to approximately $500 million in expansions made to existing hotels and casinos.

The single-family home market has been expanding at a steady rate in recent years. Almost 2,300 single-family units were permitted in the first 9 months of 2000. New sales are most active in the North Valley, Northwest, and Spanish Springs areas. The move-up buyers have represented the strongest market segment for new units. The preretirement/retiree segment (55 and up) constitutes approximately 30 percent of the market. According to the Gregory Group Newsletter, subdivision sales through the third quarter are down only 5 percent over last year.

The Reno/Sparks Association of REALTORS® reported sales of 2,897 existing homes through September, off 9 percent from the comparable 1999 period. The median price for resale homes sold in the first 9 months was $152,400, up 4 percent from the same period in 1999. Although both new and existing home sales are down moderately so far this year, the steady population growth of the area should help home sales remain brisk.

Multifamily housing building permits increased during the past 3 years. Activity in 1998 and 1999 averaged 1,476 units, twice the average from 1992 through 1997. In the first 9 months of this year, permits have been issued for 1,128 units. Despite the increased construction, supply lags behind demand, and the rental market has tightened. According to the Johnson-Perkins Apartment Survey, the overall apartment vacancy rate for the area was 2.6 percent at the end of the third quarter, down from 5.3 percent 1 year earlier. This should be only a temporary situation, however, as approximately 3,000 units currently in the pipeline will come on the market over the next 2-3 years.