Northwest Nevada: Amid Housing Issues, Economy Basking in Spotlight from Expansion and Innovation

Northwest Nevada’s economy is glowing in the spotlight due to its job expansion, population growth, and business innovations—a trend expected to continue in 2019. However, housing affordability, traffic congestion, and other issues remain a top concern going forward.

That’s according to the “State of the Economy” conference recently hosted by the Economic Development Authority of Western Nevada (EDAWN). The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately:

Northwest Nevada Forecast

  • Northwest Nevada has reached a new “high” in total payroll jobs and is poised to continue this success going into late 2019 after outpacing its original five-year forecast from 2014 - 2018. Local leaders projected 52,400 new corporate payroll jobs (does not include independent contract workers and some entrepreneurs) would be added to the local economy from 2014 - 2019, only to be outpaced by an actual 58,400 additions documented on record as of late 2018 (a 17 percent increase). It means this broader region hit a new record of 412,000 company payroll jobs recently and is on track to growing even higher by late 2019. Meanwhile, Northwest Nevada’s population grew 7 percent from 598,000 to 642,000 (2014 – 2018), while the unemployment rate of individuals in the local labor force dropped from 14.2 percent in 2011 to 3.3 percent by November 2018 (or 30,700 people down to 8,400 people).

  • Another 51,600 new jobs will be added in Northwest Nevada from 2018 – 2023, even if a “mild” recession hits the economy sometime in between. Annual company payroll job growth is expected to downshift from its 3 – 3.5 percent range over the past couple of years to about 2.5 percent, and the number of corporate payroll jobs will most likely eclipse a new “high” of 463,000. Also, annual population growth will probably increase from 1.3 percent to 1.7 percent during the same period.

  • Employment growth specifically in the Reno-Sparks region has been outpacing all U.S. states. The 5.2 percent annual total non-farm job growth in 2018 posted far above the entire state of Nevada at 4 percent (which happens to be the fastest-growing job state out of all 50 states). The United States job market as a whole came in at 1.7 percent growth. Similar to the nation, the Reno-Sparks labor market has experienced 82 consecutive months of positive growth coming out of the Great Recession of 2007 – 2009. The local unemployment rate has fallen from 14 percent in 2011 to 3.4 percent by late 2018. Also, annual exports from the local region have nearly tripled (rising 178 percent), from $900 million in 2005 to $2.5 billion in 2017.

  • The Reno-Sparks region’s industry base continues to diversify as it comes out of its historical stronghold in gaming/hospitality, mining/logging, and ranching. The last five years have displayed tremendous activity in employers trying to fill positions for trade/transportation and utilities, professional and business services, manufacturing, and construction jobs. More moderate and modest growth has also been experienced in education, health care, leisure/hospitality, government, financial, “other” services, information/technology, and mining/logging. The Reno Hachman Index (a localized version of the national Hachman Index) analyzes economic diversity in businesses and shows the Reno-Sparks area steadily rising from “78” in 2000 to “93” in 2018—a 19 percent increase.

  • The Reno-Sparks region has just as many concerns as it does positive economic drivers of growth. These concerns include affordable housing issues; commuter congestion on the main road to the Tahoe-Reno Industrial Center; various infrastructure upgrades; branding and image of the community; and workforce development/talent attraction. On the housing front, some leaders are advocating for changing Nevada’s “reset upon sale” property tax model due to its deprecation of property tax over the long-term and what they feel translates into a lack of funding for local governments and schools.

  • Currently there's an annual shortfall of 5,000 new completed housing units in the Northwest Nevada region as new jobs and residents continue outpacing home construction. There used to be about 800 housing units completed for every 1,000 jobs created in the region, which has fallen to 300 units today. Yearly single and multi-family new homes coming onto the market averaged about 5,000 from 1997 – 2006, but then plummeted to the “hundreds” range during and after the Great Recession (and finally started rising a few years ago). By 2018, new units finally came back to 4,400 annually. Specifically, in Washoe County (where Reno and Sparks are located) the area is still currently under-building by 1,400 units every year (used to be 3,200 back in 2015), compared to 2005 when homes were actually being over-built by about 700 units.

  • Many local leaders in the Reno-Sparks region feel the housing shortage has driven up the median price of a home and sparked other consequences. According to them, the problem has forced low-income residents out of certain dwellings, contributed to homelessness, and increased urban sprawl and traffic. Nearly 95,000 housing units are in the planning stages, but only about 40,000 have currently been approved to move forward. Recently, about four months of housing stock are on the market at any given time—a tight supply to choose from for home shoppers or would-be owners.

  • Median prices for “new” and “existing” single-family homes in the Reno-Sparks region have grown noticeably higher than what local median income households can qualify for in a mortgage. Local households can qualify for an approximate $320,000 mortgage, but the median price of a new home is $453,000, and for an existing home it’s $365,000 (it was $230,000 for new and $150,000 for existing in 2011). Home prices have increased about 150 percent over the past eight years. The local Housing Opportunity Index (opportunity to own a home based on housing prices, mortgage rates, and household income) recently dropped to a level not seen since 2008 (about “38”) compared to a high of “86” in 2012 (when prices were depressed). For context, the index was “18” from 2006 – 2007. As a whole, the state of Nevada experienced the highest home-price appreciation in 2018 than any other state (about 15 percent annual growth).

  • Rental housing prices in the Reno-Sparks area have shot up nearly 50 percent over the past four years due to the local housing shortage. The average rent for all types of landlord units was about $890 in 2014 but hit $1,330 by late 2018. More specifically, rents on three-bedroom/two-bathroom homes and apartments have surged 62 percent, going from about $1,100 in 2014 to $1,780 by late last year. The vacancy rate of local rental housing-unit stock has plunged to 1.6 percent, showing just how “tight” inventory has become.

  • Some local housing advocates feel that Reno-Sparks leaders could take on initiatives to increase homebuilding in the area—whether single-family or multi-family homeownership, or rentals. Their ideas consist of: supporting multi-family housing zoning; reducing building fees and giving waivers for housing at the city planning level; incentivizing multi-family “infill” developments; discounting “Not in My Backyard” (NIMBY) resistance to infill developments; accelerating local government approvals; building on smaller lots with smaller/simpler units; and accessing more private-sector financial assistance.

  • Population growth from 2016 – 2017 in the Reno-Sparks region shows just how much the area is expanding every year. The region scored in the upper 30 percentile within the largest 30 metropolitan areas of the United States that are growing the fastest in population (about 1.5 percent annually). This puts Reno-Sparks on par with fast residential-growth cities such as Atlanta, Seattle, Tampa, Phoenix, San Antonio, Charlotte, Dallas, Las Vegas, and Orlando (ranging from 1.5 – 2.3 percent growth), and above others (Houston, Sacramento, Denver, Portland, Minneapolis, Washington D.C., Kansas City, San Francisco, Los Angeles, New York, Detroit, and many others).

  • Corporations and small businesses continue migrating into the Reno-Sparks region, helping local recruitment and attraction organizations hit new milestones. In 2018, EDAWN helped the Northwest Nevada region attract a record number of technology firms, as well as a record number of corporate headquarter relocations (a combined 29 companies in both categories—with nearly half from California). This created more than 2,000 new jobs—32 percent in manufacturing, 32 percent in distribution/logistics and e-commerce, and 36 percent in technology and aerospace (with nearly 850 of these 2,000 positions paying $30 per hour).

  • Each month at least 5 – 10 companies from outside the Reno-Sparks region (and with substantial means for capital investment and job creation) scout the local area to consider either establishing an operations center or relocating their entire headquarters. This trend started in 2011 and hasn't stopped. Going into 2019, EDAWN had “pending” company announcements from four technology companies and three manufacturing firms (from California, Delaware, Minnesota, and elsewhere in Nevada)—another 1,100 additional jobs. In addition, another 2,000 jobs are on the “hot prospects” list from companies currently based in Wisconsin, Florida, New York, Kansas, California, and internationally (manufacturing, aerospace, distribution/logistics, technology, and back-office operations).

  • These trends have helped propel the Reno-Sparks region to “No. 1” in metropolitan job growth nationwide and “No. 11” in the category of best-performing cities. The average wage-range of employees at companies moving into the region from July – December of 2018 was $58,000 - $69,000 (and has increased steadily from $36,400 in 2015). Local leaders feel they have built a technology foundation for employers to thrive and are now shifting their focus over the next several years to attracting the next phase of firms—namely companies and entrepreneurs focused on the development of blockchain technology, Internet of Things (IoT), bio-technology, fintech, and business-to-business software. Special focus will also be placed on attracting companies and worker talent coming out of the Bay Area/Silicon Valley region of California.

  • Local leaders in the Reno-Sparks region are continuing their strategic focus on attracting high-wage jobs, company headquarters, and other goals. They also include: building the region’s technology worker talent pool; strengthening the region’s growing connection to the Bay Area/Silicon Valley region of California; enhancing the local economic “ecosystem” and nurturing its sophistication; increasing capital investment; and improving outside perceptions of the surrounding area. Some of this will entail trying to increase business “start up” density and local entrepreneurial “founder” role models/consultants.

  • You can view the presentation slides: view EDAWN CEO Mike Kazmierski’s presentation here, or Applied Analysis Principal Analyst Jeremy Aguero’s presentation here.

Employer-Worker Coalition Launched
More than 40 public and private entities in the Northwest Nevada region recently formed the Career and Technical Education Messaging Coalition of Northern Nevada (CTE-MCNN). The coalition's goal is to match potential employees with the many job and certificate opportunities available in the “New Nevada.”

CTE-MCNN has created a website, www.NewNevadaJobs.com, which provides students, college and school graduates, and job seekers one point of access to research “good, quality jobs and connect to training and job placement, while also allowing companies to brand to potential employees.”

Nevada Forecast
The Nevada Economic Forum—a yearly public-private partnership mandated by the state government—recently released its economic forecast and snapshot in its "Report to the Governor and the Legislature on Future State Revenues". This report provides guidance for the state’s biennial budget cycle.

Besides commentary and data from experts on Nevada’s general fund, breakdown of revenue, and a review of local and state taxes, the report also covers the following areas: economic overview, growth projections, future indicators, and trends in the statewide and national labor force, wages, household income, housing, population, interest rates, inflation, jobs, consumer spending and more.

Demographic Profile and Projections: Washoe County and Carson City combined*

  • Total population: 516,000 (and will hit 587,000 by 2025).
  • Working-age individuals (15 - 64 years old): 66 percent of total population in 2015 (and will fall to 64 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 264,000 out of 416,000 adult population.
  • Labor force participation rate (adults who “want” to work): 63 percent (or 264,000 individuals).
  • Unemployment rate: 3.6 percent (versus 4.4 in NV and 4 in U.S.)
  • Unemployed workers: 9,500.
  • Median household income: $58,000 as of 2017 (compared to $56,600 for NV and $61,400 for U.S.)
  • Poverty rate: 13 percent (versus 13.8 in NV and 14 in U.S.)
  • Education of population: 29 percent have a college degree; 34 percent some college; 24 percent high school diploma; and 13 percent no high school diploma.
  • * Data as of January 2018 from the Nevada Department of Taxation; Nevada Demographer’s Office; Nevada Department of Employment, Training and Rehabilitation; Center for Business and Economic Research at the University of Nevada Las Vegas; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; U.S. Census Bureau; and Bureau of Labor Statistics

CU Quarterly Performance Report
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