The rate of job growth in the Pacific region continued to decrease throughout 2001. There were 318,000 new nonagricultural jobs added in 2001, a 1.8-percent increase. This represented less than half the number of jobs added in 2000 and was the smallest annual increase since 1993. Both Arizona and Hawaii recorded employment increases of less than 1 percent. The downturn in Phoenix's high technology and tourism sectors led to a 0.7-percent rate of job growth in 2001, down from 4.6 percent in 2000. As a result, the December unemployment rate was 5.2 percent, double that of a year earlier.

In Nevada, employment increased a very strong 3.4 percent. Having diversified from gaming to add manufacturing, distribution, and high technology, the economy in Reno recorded a 2.8-percent rate of job growth in 2001, among the highest rates in the region. In California, employment grew by 258,000 new jobs, or 1.8 percent, during the year. New jobs were located primarily in Southern California's Orange, Riverside, and San Diego Counties.

Homebuilders in the Pacific region finished another strong year of new home construction and sales. Single-family building permits totaled 186,000 homes in 2001, a 3-percent gain over 2000. While Hawaii recorded a slight decrease, activity increased in Arizona and California, at 2 percent and 3 percent, respectively. In fast-growing Nevada, building permits increased 5 percent.

The market for existing homes also was good in 2001. According to the NAR, sales for the year totaled 666,700, off approximately 6 percent from 2000. The volume of resales was up substantially in both Arizona and Nevada—10 and 19 percent, respectively. The sales market remained tight throughout much of the State. A lack of available inventory is restricting sales volume in many areas. The declining Bay Area economy sustained a 17-percent drop in total sales, both new and existing, to 77,300 homes in 2001, according to the California Association of REALTORS^®. How-ever, total sales increased 2 percent in Southern California during 2001. Because homes in Riverside-San Bernardino are relatively more affordable, the area recorded a 6-percent increase in total sales during 2001.

The sales market in Phoenix in 2001 was very active, as both new home sales and resales set records. New home sales increased 5 percent to 32,100 homes, and resales increased 8 percent to 66,900 homes, reported the Phoenix Housing Market Letter. The median sales price for existing homes in 2001 was $139,400, up 4 percent. The market for new homes remained steady in 2001 in the metropolitan area. Single-family building permits were issued for 34,675 homes, a 1.3-percent increase over last year. More than 40 percent of the new homes were built in the West Valley area of Maricopa County. This section of the metropolitan area has been made more accessible to employment centers by the recent completion of a freeway loop.

Across the region, multifamily building permit activity during 2001 was the second highest of the past 10 years. Permits were issued for approximately 57,400 units, down 6 percent from the previous year. Declines in activity in Arizona and California of 16 percent and 8 percent, respectively, offset a 35-percent increase in activity in Nevada. Much of the decline in California was in response to market conditions in the San Francisco Bay area's rental markets. Rental vacancy rates continued to climb in some larger, higher amenity apartment properties to about 5 percent, according to a RealFacts survey. Local submarkets showed mixed performance, with North Bay counties remaining very tight while Silicon Valley markets approached a more balanced condition. Market conditions remained tight for moderately priced rental and affordable units, but owners of many high-end properties are offering incentives or lowering rents, actions seldom required during the boom of the past 5 years.

The Los Angeles County rental market remained tight with an estimated apartment vacancy rate of 4 percent as of the end of 2001. A recent report by Marcus & Millichap estimated that, in apartment developments with 100 or more units, projected rents in Los Angeles County would increase by 3 percent on average during 2002, down from 5 percent in 2001. Although conditions in the rental markets in Orange, San Diego, and Ventura Counties are still tight, the vacancy rate in each increased slightly to 4 percent. Southern Santa Barbara County's 3-percent rental vacancy rate remained the lowest in Southern California. In the affordable Riverside-San Bernardino area, the rental market is balanced with an overall rental vacancy rate of 6 percent. Some larger developments in this area recorded rent increases of up to 7 percent in 2001.

Multifamily permit activity in the Phoenix area fell 24 percent in 2001 as builders cut back production in reaction to increasingly more competitive market conditions over the year. The overall apartment vacancy rate in the metropolitan area increased to 8 percent by the fourth quarter due to sagging employment; increased homeownership, especially by previously high-end renters; and a decline in winter residents. Higher vacancy rates were reported in submarkets with greater proportions of upper end renters or "snowbird" residents such as the North Mesa, North Scottsdale, South Mountain, and Sun City areas. Rent increases in 2001 dipped below 3 percent, according to the Arizona Real Estate Center, and spot field surveys note that concessions are more common than in past quarters, especially at upscale properties.

Spotlight on Las Vegas, Nevada

The Las Vegas metropolitan area remains among the fastest growing areas in the Nation. From 1990 to 2000 the population grew at an average of 8.3 percent annually. From the time of the 2000 census to July 1, 2001, the area's population increased at a rate of 6.1 percent annually to nearly 1.7 million.

The Las Vegas area's nonagricultural wage and salary employment totaled 787,200 jobs in 2001, a 3.8-percent increase over the previous year. A downturn in the rate of job growth in the fourth quarter to less than 1 percent dampened growth for the year. A hold on a planned expansion at the Mandalay Resort convention center, job cuts at Harrah's Entertainment and other casinos, cancellation of several conventions, and lower attendance at conventions were the main reasons for the slowdown in employment. The volume of visitors declined by 2 percent in the 12 months ending in November 2001. Gaming revenues were flat in 2001, up just one-half of 1 percent compared with a year earlier. The unemployment rate in December 2001 was 6.4 percent, compared with 4 percent a year earlier.

The prospect for a quick recovery by mid-2002 depends on the effect of widespread promotional discounts and specials at hotels, casinos, and travel services. In 2002, hotel room construction will shrink to less than 1,100 rooms compared with more than 3,100 in 2001. In the fourth quarter of 2001, the 1.3-million-square-foot, $170 million expansion of the South Hall of the Las Vegas Convention Center was completed. At this time, plans are going ahead for the development of one large casino, the $1.6 billion La Reve, with 2,455 rooms and 132,000 square feet of convention space. Completion is scheduled for mid-2004.

While the local economy has slowed, the sales market continues to be very hot. A record 22,804 new homes and 34,427 existing homes were sold in the metropolitan area during 2001, increases of 11 percent and 17 percent, respectively, over the 2000 volume, according to the Las Vegas Housing Market Letter. Single-family building permit activity also set a record in 2001 at 24,000 units, a 3.5-percent gain over 2000. Sales were very strong in the fourth quarter of the year, which had not been expected by many observers. The median sales price for the year was $149,100, a 9-percent increase, according to the NAR. Sales prices for new homes increased 11 percent for the year, averaging approximately $179,000. Local forecasters are predicting a modest downturn in new home sales in 2002 based on continued slow employment growth and increases in interest rates.

While the Las Vegas rental housing market continues to be strong, it has been affected by the slower local economy and an increase in homeownership sparked by lower interest rates. According to a CB Richard Ellis apartment survey, the overall apartment vacancy rate for the metropolitan area in December 2001 was about 9 percent, up from 7 percent a year earlier. Higher rates were reported in older properties, but many property owners are responding to the softer conditions by reducing rents or offering concessions. From the fourth quarter of 2000 to the fourth quarter of 2001, rents increased an average of 1.5 percent. The average concession is around $400, or about two weeks' rent. The average rent for a two-bedroom unit at year's end was $750.

Multifamily permits in 2001 totaled 7,900 units, 35 percent above the previous year's relatively low level of 4,646 units. However, this is well below the average annual activity of more than 10,650 units from 1995 through 1998. As a result of the high production during that period, permit activity has been declining over the past 3 years. From 1999 through 2001, permits were issued for an average of 6,600 units annually. Even with the cutback in production, the market is expected to remain very competitive and the vacancy rate should stay near 9 percent throughout 2002.