Feb. 25 (Bloomberg) -- Nevada went to bust from boom in a decade as population growth, once the fastest in the U.S., slowed to almost zero while homeowners struggled with plunging values and the nation's highest unemployment rate.
After adding people at the most rapid pace for 18 years, Nevada slipped in 2004 relative to neighboring Arizona. Nevada’s population increased 35.1 percent to 2,700,551 in 2010 from 2000, U.S. Census Bureau data show, although the growth rate slumped to about 1 percent between 2008 and 2009.
Residents caught in the downturn are likely to stay put, said Robert E. Lang, a sociologist and demographer at the University of Nevada, Las Vegas. That’s because the state tops national rankings besides unemployment: It has the highest negative home equity and percentage of homes in foreclosure. Lenders in Nevada can garnish wages if a homeowner defaults.
“The idea of a mass exodus is not true,” Lang said. “People can’t leave because they would have to bring a check to the closing, or declare bankruptcy.”
Kevin M. O’Donnell was one who left, though not with his family. He said he won’t walk away from the 3,000-square-foot home he and his wife bought in 2006 in Henderson, a suburb of Las Vegas, for $575,000. In a typical Nevada story, he was laid off, the value of the house dropped by half and family income has fallen even more.
“I committed to paying a mortgage,” said O’Donnell, a 48-year-old New Jersey native. “I don’t feel it’s moral or right to just turn around to the bank and say, ‘Hey, you’re in this with me so I’m not going to pay this loan.’”
A civil engineer specializing in land development who migrated to Nevada for a job with a firm working on residential, mix-used and municipal projects, O’Donnell moved to Great Falls, Montana, for work. He left behind his wife, who lost her job at an architecture firm when Boyd Gaming Corp. mothballed its Echelon casino resort project, and 10-year-old daughter.
The Nevada slowdown after years of rapid growth forced cuts to public school and university budgets and left the government with a projected shortfall of more than $2 billion over the next two years. Nothing on the horizon suggests a rebound, said Thomas Cargill, an economics professor at the University of Nevada, Reno.
“It is going to be a decade of reduced economic and financial development, if not stagnation,” Cargill said.
Nevada’s growth between 2000 and 2010 was above the national average of 9.7 percent and enough to gain a fourth U.S. House member in 2012. Clark County, which includes Las Vegas and most of its suburbs, grew 41.8 percent to 1,951,269 in 2010 from 1,375,765 in 2000, according to the census.
All major racial and ethnic groups made gains in the decade, census data released yesterday show. Hispanics increased 81.9 percent to account for 26.5 percent of the total in 2010. Whites, who retained a majority statewide at 54.1 percent, are in the minority in Las Vegas, accounting for 47.9 percent, according to the data. The city is now 31.5 percent Hispanic, 10.1 percent black and 4.7 percent Asian.
The number of Hispanic children under 4 equals non-Hispanic whites of the same age, marking the first time Latinos have caught up to whites in any age group, said Jeff Hardcastle, the state demographer.
Most of the recent population growth can attributed to births, particularly among Hispanics, not migration, he said. That shows why Nevada will be majority Latino in the next few years, according to Otto Merida, president and chief executive of the Latin Chamber of Commerce in Las Vegas.
“All of their kids are going to have babies,” he said.
Nevada’s growth spurt was propelled by a surge in construction as revenue for casinos climbed and Las Vegas Strip gambling set records. Unemployment reached a 10-year low in April 2000, at 3.8 percent. It’s now an adjusted 14.5 percent.
MGM Resorts International, Las Vegas Sands Corp. and Wynn Resorts Ltd., the three biggest publicly traded Las Vegas-based casino owners, have said the worst has passed. While the Strip is recovering from an unprecedented two-year slump, the other pillar of the economy is flattened.
“The real recovery problem is going to be the construction industry,” said Glen Atkinson, an emeritus professor of economics at the University of Nevada, Reno. “It was one of the major industries in Nevada with pretty high wages. It’s hard to see how it’s going to turn around.”
Thousands of roofers, carpet layers, drywall installers, road pavers and other workers poured into the state in the early 2000s as stretches of desert were transformed into subdivisions, apartment complexes and malls. Many are empty now.
Driving through Henderson, the state’s second-largest city, Realtor Terry Nacion, who migrated from Hawaii in 2003, said she remembered when there was waiting list of 1,500 for 300 condo units that were priced at $99,000 and that went for as much as $225,000. “Now they are worth $50,000 to $60,000,” she said.
Nacion said the bottom hasn’t hit because of shadow inventory, foreclosed homes that banks haven’t placed on the market. “Distressed properties are not a niche -- they are the market,” she said.
Las Vegas led the nation in homes with negative equity, at 81.5 percent of all properties with mortgages, Zillow Inc. estimated in a fourth quarter report. Nevada had the highest proportion of distressed sales, with 57 percent of residential transactions involving homes seized by banks or at risk of foreclosure, according to RealtyTrac Inc.
Vacant houses in Clark County climbed to 14.9 percent in 2009 from 8.5 percent in 2000, according to the U.S. Census.
Construction was Nevada’s biggest industry by employment, with about 160,000 jobs in 2007, said Lang, the UNLV demographer. He estimated it now employs about 55,000 to 60,000.
Gaming -- the largest single component of Nevada’s economy -- may create jobs in the next few years, said Stephen Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
“Gaming, tourism and the hospitality industry are showing signs of a recovery,” Brown said.
Because gambling is dependent on the discretionary income of non-Nevadans, the state’s fortunes will rise and fall with those of high rollers from New York to Dubai, Cargill said.
“Nevada is sort of like a cork in a rough sea,” Cargill said. “It really has no control over what goes on around it.”
Mining has been a bright spot, Atkinson said. Dubbed the Silver State for its deposits, Nevada produced more than any state except Alaska in 2010, according to the U.S. Geological Survey. The industry employs an estimated 11,600 people, the Nevada Mining Association said.
Business and political leaders in Nevada have touted the state as a center for renewable-energy development, a potential that has so far gone unrealized, Atkinson said.
O’Donnell, the civil engineer, rents a basement apartment. His wife and daughter may eventually join him in Montana. They would rent out their Henderson house, into which they sank the profit from the home they sold in New Jersey.
“No one really knew or predicted how bad it was going to become,” he said. His mother “doesn’t remember it being nearly that bad in Pennsylvania during the Great Depression.”