Market Analysis for Real Estate Appraisers – Part 3
This is part three of a 5 - part series on Market Analysis for Appraisers. A new part will appear each day. We’ve talked about the “who and the what” so now its time for the “when” as in when things change.” To read part 1 "click here." For part 2 "click here."
Employment is the trigger that signals economic booms and busts. Every base industry job generates two additional secondary jobs … the multiplier effect. However employment is not the only catalyst for change in a community.
While gaming and tourism dominates employment in Southern Nevada, as in any metropolitan area growth itself has become a multiplier in the Las Vegas economy. Expansion of major employment (gaming, tourism and hospitality related businesses) creates construction employment, both direct (for the gaming properties themselves) and indirect (infrastructure-roads, airport/transportation, housing, retail, industrial, etc.).
As a city and its population expand, the demand for products and services reaches a level that triggers the development or relocation of business that were once outside the market area. In the 1970’s, grocery stores shipped products daily by truck from Los Angeles to stores in Las Vegas. As Vegas grew, these companies developed warehouses to hold goods here so stores could re-stock locally, eliminating the need to truck-in daily. This in turn generated local jobs, which in turn increased demand for other goods and services.
Likewise, the introduction of new or the expansion of population elements can become a multiplier. As
mentioned in Part 2 of this series, the growth of a population element (retirees) can serve as an economic multiplier and change the ratios. Relocating retirees or new people looking for a job bring home equities and savings accounts into an economy from another market area.
As those dollars are spent, demand is created (housing, retail activity, etc.) and that demand creates new jobs that in turn cause the cycle to repeat itself. The chart below shows the growth of the Las Vegas MSA in recent years and some of the changes as a result of the “multiplier effect.”
One key is to reconize changes that have "longer term" impacts such as seniors and retirees moving to the area in large numbers vrs. those with "short term" impacts such as people moving into a market for seasonal employment (construction jobs) or the rapid rise in the population to rooms ratio that combined with other indicators, may signal more hotel construction.
In the next segment, we’ll take a look at the Las Vegas market and how to use the data to understand and project housing demand.
AUTHOR: Patrick Egger, Stewart Title of Nevada, is a Certified General Appraiser and the creator of several Real Estate CE Classes including "DeMystifying the Appraisal - Appraisal Techniques for Real Estate Agents" and “Understanding the Las Vegas Marketplace” … Market Analysis for Real Estate Professionals” from which this article was excerpted. He also has his own blog - Intouch. Contact: [email protected]
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