The first chart shows the peak to trough housing price decline in Las Vegas versus the “snowbird” cities and the national average. The 43% decline in Las Vegas is steeper than any of the cities shown, and by a wide margin with the exception of Cleveland. Las Vegas is suddenly a much more affordable place to live. As long as government doesn’t eliminate the Nevada income tax advantages (there are no income taxes) and the climate stays favorable, the relative appeal of living in Nevada will continue to rise in these difficult economic times. Of course, if you believe the “end of the world” crowd, I suppose we need to worry what global climate change will do the comparative weather advantage.
The second chart details the projected population growth in the retiree age group of 65 and over. The Nevada Small Business Development Center appropriately projects nice long term growth in this segment. However, migration in to Nevada based on the state’s comparative advantages is not reflected in those estimates. We believe migration will push that growth rate higher.
The upshot to this discussion of population growth, demographics, and retirees is that the Las Vegas metro area is likely to sustain population growth (both retirees and workers) at a rate higher than the national average, potentially much higher. This is the primary reason we are bullish (non-consensus) long-term on the locals Las Vegas gaming market, despite the near-term issues. In fact, as we discussed in our 02/05/09 post, “THE LAS VEGAS LOCALS MACRO MODEL”, gaming revenue growth could resume as soon as 2010.
The play on this analysis is clearly Boyd Gaming. Not only would BYD benefit from the market growth, LV locals is its largest, but with the market’s largest player Station Casinos in dire straits, BYD could end up a much bigger player by picking off some or all of Station’s assets. The synergies would be immense in our opinion, and only fractured competition would remain.