Report: Housing weighing on Las Vegas recovery

Someday, we’ll be able to stop talking about the pain the housing market is inflicting on the broader local economy.

This isn’t that day.

A report released today by the Brookings Institution’s Metropolitan Policy Program found decent local gains in jobs and economic output through the fourth quarter of 2011. But the housing market remained so lousy that it dragged down a fairly positive report and buried signs of overall recovery, said Mark Muro, a senior fellow and policy director with Brookings.

“The housing implosion, more than anything else, was the root of all evil in a number of Mountain West metro areas,” Muro said. “Las Vegas still has the most serious housing problem in the region, and one has to think it’s really weighing on the city’s recovery.”

Las Vegas was the only city among 10 cities in Brookings’ Mountain West region that failed to see home prices increase. Phoenix and Boise, Idaho showed the strongest improvements, with price gains of more than 3 percent from the third quarter to the fourth quarter. Other regional cities saw price jumps of 0.7 percent to 1.5 percent in the period.

“Las Vegas’ housing market, on the other hand, can’t seem to turn around,” the report said.

But most other local indicators pointed in healthier directions, the report also found.

Employment grew 0.3 percent from the third to the fourth quarter, besting expansion in five regional cities and pulling even with average job formation among the nation’s 100 biggest cities. Las Vegas has added jobs in each of the last four quarters, along with Phoenix; Boise, Idaho; Tucson, Ariz.; and Salt Lake City.

Las Vegas’ gross metropolitan product, which measures the total value of goods and services produced here, increased 0.6 percent from the third to the fourth quarter, right in line with growth across the Mountain West and a hair under the 0.7 percent average among the country’s 100 biggest cities.

“It’s a steadily positive, if fairly anemic, recovery,” Muro said. “It likely doesn’t feel particularly robust yet.”

That’s partly because housing woes helped push Las Vegas into the bottom fifth among the 100 biggest cities for its overall recovery pace in the quarter. Las Vegas real estate remains at its bottom, with prices down 65 percent from their peak, Muro said.

“It continues to underscore the depth of the recession, and the challenge to conventional thinking that this recession continues to pose,” he said. “It’s going to take not only trying to climb out of the hole in the usual ways, but also likely a major reorientation of the economy. It’s going to take a while, but I think progress is being made, and it’s really important to keep that in mind.”

Steve Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, agreed with Brookings’ findings that housing canceled out some of the market’s job and output increases in the quarter.

Local housing continues to under-perform compared with housing across the Mountain West, partly because it has many more foreclosures and short sales than other cities, Brown said. Remove distressed properties from the equation, and Southern Nevada’s housing market looks better: Conventionally sold properties are going for 15 percent more on average than foreclosures and short sales, he said.

Besides, housing may not be as important as commercial growth to economic gains, Brown added. What’s really needed is for businesses to invest in expanding, which in turn creates jobs that draw new, home-buying residents.

“It’s more the economy driving the housing market than the housing market driving the economy,” he said.

Contact reporter Jennifer Robison at jrobison
@reviewjournal.com or 702-380-4512.