Being a lawyer, I consistently dwell in the realm of worst-case scenarios. So, the phrase that best describes my outlook for the next year is cautious optimism.
The reasons for being optimistic arise from the progress the Las Vegas Valley has made in traditional industries, such as construction and entertainment. New home, residential remodeling and manufacturing construction are on the rise — and if light rail and other infrastructure development comes into play, construction will grow even further. Construction provides good wages for a large amount of people, thereby allowing them disposable income that should further stimulate the economy. When people have more disposable income, they spend it on items like entertainment. In entertainment, Las Vegas has welcomed more casinos, nightclubs and celebrity residences. Beyond these known trades, we also have the addition of professional sports franchises (the Golden Knights and Raiders), technology start-ups (such as Faraday Future) and recreational cannabis (which is likely to bring in millions of dollars in tax revenues). These are all reasons for valley residents to be optimistic about the near future.
Judah Zakalik
Of course, this coin has another side — caution. What leads me to be most cautious is the less-than-ideal rise in income figures. In the past three years, Las Vegans’ median household income has increased just 0.79 percent, far less than the national increase of 5.17 percent, and even Nevada’s statewide increase of 2.07 percent. In fact, the median income in Clark County remains about 10 percent lower than it was in 2006, before the bubble burst. This lethargic growth in the median household income, which has been outpaced by the rising costs of living, inflation and home values, may lead to another oversupply of housing. As we saw in 2007-08, stagnant wages and rampant construction in the residential market can cause supply to outpace demand. If this happens again, we may see another drop in home sales and values.
Given our recent history of being one of the hardest-hit cities in the nation, any downturn in the housing market can cause people to panic, which may lead to them selling their homes and thereby further increasing supply. Additionally, any decrease in residential building can have a severe impact on our construction industry, depressing incomes further and negatively affecting people’s disposable income and spending.
Finally, many people in Las Vegas leveraged credit-card debt to make it through the downturn. Some of them counted on their incomes returning to pre-bubble levels, but that hasn’t happened. Now, with their credit limits maxed out, these people are being forced to consider bankruptcy or other debt-relief options.
There are many ways the valley’s economy is growing and diversifying, but we cannot forget the painful lessons of borrowing and spending that punished us when the bubble popped. If we do forget the recent past, we’re bound to relive the same nightmare.
Judah Zakalik is a founding partner at Peters and Associates.