The Pacific region's employment base expanded by 571,000 nonagricultural jobs in the 12 months ending in February 1999 (a 3.4-percent gain). Nevada gained 48,000 jobs (a 5.3-percent rate of growth), while Arizona gained 81,500 (4 percent) during the period. Job growth in Las Vegas has accelerated, with hiring at the $950 million, 3,700-room Mandalay Bay and $1 billion, 3,036-room Venetian resorts, which opened in March and April, respectively. California employment grew by 429,000 jobs (3.2 percent) in the 12 months ending in February. Growth rates ranged from 5 percent in the Ventura, Riverside, Santa Rosa, and Vallejo metropolitan areas to less than 1 percent in San Jose, which has been hurt by layoffs from mergers and reduced Asian exports.

Home production in California grew by 16 percent to 21,362 in the first 3 months of the year compared with the first quarter of 1998. Permits in the faster growing Los Angeles-Riverside-Orange County region were up 16 percent to 8,317 units through March, compared with only a 3-percent gain (3,272 units) for the San Francisco Bay Area. The substantial increase in activity in many metropolitan areas is due in part to last year's atypical low permit levels, which were caused by record winter rains. Home construction is getting a fast start in the first quarter in Arizona and Nevada as well, with single-family activity up 18 and 5 percent, respectively, compared with last year's record levels. Hawaii single-family permit activity increased about 30 percent from a very low level.

In California, existing homes sold at an annualized rate of 660,630 homes as of March of this year, a 9.3-percent gain over March 1998, according to the California Association of REALTORS^®. Sales for March 1999 were up 27 percent in the Bay Area, 9 percent in Sacramento, and 15 percent in the Riverside-San Bernardino area compared with March 1998. The State median sales price in March was $213,490. Phoenix posted close to 12,000 resales, up 10 percent, in the first quarter of 1999, while Las Vegas resales were up more than 20 percent through March compared with a year earlier. Led by a strengthening in the condominium market, existing sales in Honolulu gained 15 percent in the first quarter.

Builders in the Pacific region requested permits for 12,903 multifamily housing units through March, up 10 percent from a year earlier. California's generally strong rental markets accounted for 7,423 units, a 48-percent increase over the poor-weather-affected low levels last year. San Francisco Bay Area multifamily activity was down 14 percent through March. Apartment construction is down substantially in Santa Clara County, which last year accounted for 30 percent of the Bay Area's multifamily construction. The slower growth in the high-technology sector and several years of increased rental construction have resulted in a more balanced rental market, particularly in high-rent developments. The Sacramento area's rental market has tightened and the apartment vacancy rate has fallen to less than 3.5 percent, according to a local survey. This change has encouraged a considerable increase in rental development. In the past 15 months, permits have been issued for more than 4,000 multifamily units.

Based on local surveys of apartment developments, the overall rental vacancy rate in Los Angeles County is estimated to be approximately 8 percent as of the first quarter of this year. The lifting of the strict rent control program in the city of Santa Monica has resulted in significant increases in rents as units turn over. San Diego County has a rental vacancy rate of less than 6 percent. Ventura and Orange Counties both have overall rental vacancy rates of less than 5 percent.

Arizona's first-quarter multifamily activity totaled 2,751 units, nearly identical to the volume for the first 3 months of 1998. Nearly all the activity is in the Phoenix area, where the vacancy rate in larger properties (100 or more units) is running at about 6 percent and ranges from 7 to 9 percent in submarkets with high volumes of construction. The Las Vegas area rental market remains very strong. Vacancy rates in most apartment developments continue to be less than 7 percent, based on data from local apartment surveys. Casino-related employment growth means quick absorption of new supply. Multifamily activity in Las Vegas during the first quarter of 1999 totaled 2,235 units, 41 percent below activity during the same time last year. The drop is due in large part to the unusually large number of units bunched up in the permit process last year.

Spotlight on Riverside-San Bernardino, California

The Riverside-San Bernardino metropolitan area is one of the largest in the Nation in terms of land area, more than 27,500 square miles. The population of the metropolitan area as of July 1998 was 3.1 million and has been increasing at an annual rate of more than 2 percent. Approximately 45 percent of the population increase in the area is due to net in-migration, with international immigration accounting for 19 percent of the gain.

After the closing and downsizing at three major military installations early in the decade, the Riverside-San Bernardino economy has bounced back. In the 12 months ending in February, 42,100 jobs were added in the area, a 4.9-percent increase. The unemployment rate dropped from a high of 12.2 percent in July 1993 to 5.1 percent in March 1999. The declining unemployment rate is partly the result of the increased employment opportunities in adjoining Los Angeles and Orange Counties. These two counties account for more than 30 percent of the jobs held by Riverside-San Bernardino residents.

The improved employment situation, coupled with the low mortgage interest rates during 1998, resulted in increased home sales and sales prices in the two-county area. The 1998 median home price was $121,000, which was 5.7 percent higher than in 1997. The strong market has continued during the first quarter of 1999, with home sales up 15 percent from the first quarter of 1998.

After reaching a peak of 23,126 homes in 1990, single-family construction declined along with the local economy. From 1991 through 1996, single-family permits averaged only 12,200 a year, reaching a low of 10,500 homes in 1995 as builders waited for the glut of new homes to be cleared from the market. With the improving economy, single-family permits increased to 16,133 in 1998 as buyers became more optimistic. Activity in the first quarter of 1999 totaled 4,082 homes, 11 percent greater than the same period in 1998. Buyers, especially young families, from Los Angeles and Orange Counties are attracted to the Riverside-San Bernardino area by the lower cost of housing. Based on sales in the first quarter, the median price of an existing home in the metropolitan area is 40 to 50 percent less than in Los Angeles County and more than 56 percent less than in Orange County.

Overall, the rental housing market remains soft, especially in older apartment developments and those closest to the closed military installations. Relatively low home prices, coupled with low interest rates and an improved economy, have enabled many renters to become homeowners, slowing the recovery. The rental vacancy rate is currently between 9 and 10 percent, and concessions are still widespread. From 1993 through 1996, multifamily building permit activity averaged approximately 525 units annually. It picked up in 1997 to 1,324 units and increased to 2,311 units in 1998.