The Pacific economy added 480,400 nonagricultural jobs in the 12 months ending in June 1999, a 2.8-percent increase over the comparable period ending in 1998. California's 377,100-job increase in employment (2.8 percent) during the period was based on the strong growth in software development, Internet services, telecommunications, and financial and business services industries. Despite mixed trends in some high-technology industries, NEC Electronics recently began construction of a $1.4 billion memory chip plant in the Sacramento area. The new casino hotels in Las Vegas powered a 34,500-job gain, a 3.7-percent increase, in Nevada between June 1998 and June 1999. Employment in Arizona increased by 68,600 jobs (3.3 percent) during the period. Labor markets throughout most of the region are tight. California's 5.3-percent unemployment rate as of June was the lowest since 1990.

Homebuilders took out permits for 52,412 new homes in California in the first 6 months of the year, a 17-percent increase over the same period last year. Single-family activity in the Los Angeles-Riverside-Orange County area was also up 17 percent. In Northern California permits were issued for more than 9,000 homes in the San Francisco Bay Area, a 12-percent increase. In Arizona permit activity in the first half of 1999 totaled 28,642 homes, a 13-percent increase over the same period last year. Activity in Nevada was essentially unchanged from last year this time, with permits issued for 12,789 homes. In Hawaii construction improved in both Honolulu and the neighbor islands, with permits up more than 18 percent to 1,617 units.

The NATIONAL ASSOCIATION OF REALTORS^® reported that the annual rate of existing sales in the Pacific region as of the second quarter totaled 946,400 homes, a 9-percent increase over second quarter 1998. In California, resales reached a record annual rate of 702,100 homes as of June, up 9.5 percent over the prior year, according to the California Association of REALTORS^®. The market is so hot that one-third of all resales received multiple offers. The median sales price of $226,140 was an 8-percent gain over a year earlier. The Office of Federal Housing Enterprise Oversight (OFHEO) recently reported that California led the Nation in house price appreciation in 1998, with an 8.7-percent increase. Resales in Arizona and Nevada have been very strong in the first 6 months of the year, with annual sales rates up 16 and 23 percent over the same period in the previous year. Hawaii resales activity is up nearly 36 percent.

Multifamily housing unit activity in the Pacific through June was off a modest 4 percent to 25,509 units. A big cutback in activity in Las Vegas offset the increased activity in California and Arizona. The strong rental markets in most of California's major markets supported more than 14,000 multifamily units in the 6 months of 1999. In the Sacramento-Yolo area, multifamily activity was up 36 percent to 1,403 units as apartment vacancy rates have fallen to 3 percent or less, according to a local survey. While most of the San Francisco Bay Area's rental markets remain balanced or tight, multifamily activity through June was down almost 40 percent to 3,500, with most of the Bay Area markets reporting substantial drops in activity. Permit activity in Santa Clara County was down more than 60 percent as job growth continues to slow and the supply of high-end rental properties increased significantly over the past 12 months.

Multifamily permit activity in the Los Angeles-Riverside-Orange County area was up 13 percent in the first 6 months of the year to almost 5,000 units. While the overall rental vacancy rate in Los Angeles County continues to be around 8 percent, vacancy rates of 5 percent or less are reported in the more desirable submarkets. The markets in Ventura and Orange Counties are tightening with overall rental vacancy rates of less than 5 percent reported for both areas.

Arizona multifamily activity through June totaled 6,519 units, a 15-percent increase compared with the same period a year earlier. At the current pace 1999 will be the sixth straight year of strong development activity. The Phoenix area accounted for more than 80 percent of the volume. In Phoenix the apartment vacancy rate in large (100+ units) properties has increased 1 percentage point in the last 12 months to 6.5 percent, as a result of the substantial increase in supply. The market has become more competitive with average rent increases dropping to around 4 percent, compared with 6 percent or more last year.

Spotlight on Las Vegas, Nevada

The Las Vegas metropolitan area has been one of the fastest growing areas in the Nation in the 1990s. The metropolitan area's population grew from 852,646 persons in April 1990 to 1,321,546 as of July 1998, or a rate of 6.7 percent annually.

In June 1999, the area's nonagricultural wage and salary employment totaled 692,800 jobs, a 4.7-percent increase over June 1998. The unemployment rate in June of this year was down to 4.6 percent compared with 5.2 percent a year earlier. Tourism, recreational activities, and gaming brought in nearly $25 billion to the economy in 1998. With the expected addition of 20,000 new jobs in the gaming industry and several major construction projects during the next 12 months, the labor market will remain strong. The Las Vegas Convention and Visitors Authority has voted for a 1.3-million-square-foot convention center expansion. Other large projects include the $280 million El Dorado power plant in nearby Boulder City, the $250 million Resort at Green Valley Ranch, and the $185 million Saint Rose Dominican Hospital. In 1999 construction of new hotel/casino resorts and expansion of existing facilities will total more than $3.3 billion. In 2000 only one resort is scheduled to open, the 2,567-room, $826 million New Aladdin.

The market for both new and existing homes in Las Vegas remains very hot. Sales of existing homes in the first half of 1999 have increased almost 20 percent over 1998 volume for the same period. While single-family permit activity for the first 6 months of 1999 is down 2 percent compared with last year, the drop is explained by a decline in supplies of buildable lots. Unsold inventory is minimal. Local observers expect permit activity and sales to be slightly lower in the second half of the year. The current average sales price for new homes is about $140,000.

The Las Vegas rental housing market has experienced rapid growth, with an average of 10,000 multifamily units permitted annually since 1995. While the market is still strong and demand is high, it has become more competitive. According to the CB Richard Ellis Apartment Survey, the overall apartment vacancy rate for the metropolitan area in June was 6.7 percent, with higher rates reported in older properties. Rent increases in 1999 are averaging about 1 percent compared with 3.5 percent for this time last year. In response, apartment building activity in the first 6 months of 1999 is down 41 percent to 4,219 units. The slowdown is expected to continue through 1999, giving the market time to adjust.