The Pacific region's economy continued to expand during 1999. The region added 488,000 new jobs in the 12 months ending in November 1999, a 2.8-percent gain compared with 3.7 percent for the same period in 1998. With the opening of three casino-resort hotels in Las Vegas valued at $3 billion, Nevada gained 46,800 new jobs in the 12 months ending in November 1999, a 4.9-percent increase. During the same period, Arizona added 69,700 jobs for a 3.3-percent increase. California's economy grew 2.7 percent. The State added 368,500 new jobs in 1999, with employment in Southern California growing at an even faster rate. Swissair has chosen the Palmdale area of north Los Angeles County for its North American aircraft maintenance and overhaul headquarters, bringing 1,000 new jobs by June of 2000 and up to 6,000 jobs over the next 5 years. Employment levels in Hawaii were static in 1999, with a gain of only 300 jobs recorded during the 12-month period.

Regional housing production in 1999 hit its highest level of the decade. Single-family permit activity totaled 179,689 homes, up 5 percent over 1998. California led with more than 100,000 homes. Activity in Las Vegas during 1999 was up less than 1 percent from 1998, to 21,823 homes. In Hawaii, improving sales supported a 14-percent increase in single-family permit activity, with 3,143 single-family units issued permits through December.

Resale activity in the Pacific region during 1999 was up in every State. The NATIONAL ASSOCIATION OF REALTORS^® reported that the rate of existing home sales for the year totaled 943,800, up 8 percent from 1998. Sales were up more than 20 percent in both Hawaii and Nevada. Existing home sales in California set a record of approximately 670,000 homes in 1999, up 7 percent over 1998 (according to the California Association of REALTORS®. Sales in the Bay Area, San Diego, and Santa Clara County were up 17, 18, and 30 percent, respectively. The median sales price for the State reached a new high of $217,000, an increase of about 8 percent. In Phoenix and Las Vegas, existing sales for the year were up 7 and 16 percent, respectively, setting records. The median sales price for 1999 was $130,800 in Las Vegas and $126,400 in Phoenix. Honolulu resales soared 20 percent in 1999 to the highest levels since 1991, as declining prices boosted affordability.

Buoyed by strong demand in the region's rental housing markets, multifamily permit activity totaled 55,911 units for the year, off 1 percent from the decade-high volume of 1998. California accounted for 34,875 units during the period, a 14-percent increase.

In the San Francisco Bay Area, multifamily activity for 1999 totaled 9,706 units, down 19 percent from 1998. The decline is due to a lack of available sites, according to local sources. Already among the highest in the country, Bay Area rents increased 7 percent in 1999. Rental market conditions have also become much tighter in the fast-growing Sacramento area, where a recent survey of apartment developments by CB Richard Ellis reported an apartment vacancy rate of 2.6 percent.

Multifamily building permit activity in the Los Angeles-Riverside-Orange County area (13,244 units) increased 33 percent over 1998 as production did not keep up with demand for new rentals in a number of the submarkets in the Los Angeles and Orange County metropolitan areas. Throughout 1999, rents increased nearly 4 percent on average, with the communities adjacent to the Pacific Ocean recording higher increases. Overall, the Los Angeles market is balanced, with a rental vacancy rate of 6.5 percent, but many of the higher income submarkets report rental vacancy rates of 4 percent or less. The highest rental vacancy rates in Southern California continued to be in the Riverside-San Bernardino area, with vacancies around 8 percent. Most of the vacant units tend to be the older rental stock, and conditions in properties less than 10 years old are balanced. The rental markets in Orange County, Ventura County, and the South Coast portion of Santa Barbara County are all tight, with apartment vacancy rates of 4 percent or less typical. The market in San Diego County is balanced, with a rental vacancy rate of approximately 5 percent.

In Las Vegas the continuing strong employment and population growth since 1996 has helped the rental market absorb approximately 11,000 units annually. However, the market became more competitive during 1999, with apartment vacancy rates in the 6- to 7-percent range. Concessions are widespread, particularly in new units, and rents are flat. The more competitive market conditions, higher impact fees and interest rates, and a scarcity of multifamily sites resulted in a dramatic 33-percent drop in multifamily permit activity during 1999, to 6,977 units. With growth expected to continue at the present rate, the reduced production levels should lead to tighter conditions later in 2000.

Spotlight on Phoenix, Arizona

The Phoenix metropolitan area was the sixth-fastest growing area in the Nation during the 1990s. Expanding employment opportunities and substantial in-migration of retirees increased the population to more than 3 million as of third-quarter 1999, according to the University of Arizona. In the 1990s the population increased 37 percent, or 820,000 persons. Maricopa County experienced nearly all of the growth, with just 5-percent growth in adjacent Pinal County. More than two-thirds of the population gain is due to in-migration in response to the rapid growth of employment opportunities.

Electronics, semiconductors, tourism, construction, and business services are key industries underlying the growth. Leading private employers include high-technology manufacturers such as Motorola, Intel, AlliedSignal, and Honeywell, as well as Boeing and USWest. From 1994 through 1998, employment growth averaged approximately 6 percent annually. However, the rate of employment growth was more moderate in 1999, due in part to slower manufacturing exports and excess capacity in the semiconductor-chip industry. In the 12-month period ending in November 1999, nonagricultural employment increased 3.4 percent, or 49,000. Over the next 2 years, the rate of employment growth is expected to be more moderate. The unemployment rate as of November 1999, at 2.8 percent, remained unchanged from a year earlier, reflecting a very tight labor market.

Rapid population growth and strong demand for new homes made Phoenix a leader in housing production in the 1990s. Single-family permit activity through December 1999 totaled 38,401 homes, 5 percent above 1998, the fifth consecutive record year. Despite higher costs, demand for new homes remains very strong, and inventories are still balanced. Builders expect to see lower, but still strong, sales and production over the next 2 years as the result of slower growth in jobs and population.

Resales in the Phoenix area averaged more than 45,000 homes annually from 1994 through 1998, more than double the rate of sales from 1990 to 1993. Resales in the first 11 months of 1999 set a record at 55,284 homes, up 10 percent over the comparable period in 1998, according to the Arizona Regional Multiple Listing Service.

Since 1994 the Phoenix area rental housing market has absorbed an average of 9,600 multifamily units annually. In 1998 multifamily permit activity hit a decade high of 11,200 units. Even though demand remains strong, the large volume in production meant more competitive conditions during the past 12 months. Reacting to the more competitive conditions, multifamily building permit activity for 1999 was down 15 percent to 9,593 units. The Phoenix Metro Housing Study reported an overall rental vacancy rate as of fourth-quarter 1999 of 6 percent and a rate of 7 percent in developments of 200 units or more. Both rates are 1 percent higher than rates for the same period in 1998. Vacancy rates of 8 percent or more were reported in a number of the most competitive submarkets. Rent increases have slowed from more than 4 percent in 1997 to less than 2 percent in 1999. Concessions are typical for new properties and widespread in high-volume submarkets.