It is STILL all about Jobs…

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 9.70
9 70 9.70
9 70 9.70
9 70 9.90
9 90 9.70
9 70 9.50
9 50 9.50
9 50 9.60
9 60 9.60
9 60 9 60
9.60 9 80
9.80
2009 7.70 8.20 8.60 8.90 9.40 9.50 9.40 9.70 9.80 10.10 10.00 10.00
2008 5.00 4.80 5.10 5.00 5.40 5.50 5.80 6.10 6.20 6.60 6.90 7.40
Wage Growth Stabilizing
Personal Income remains flat
Dollar Continues to Weaken
Commodities Rally, led by Oil
US Savings Rate appears to be settling in

Last Updated: Nov.

Nov 24th, 2010

Bottom line: we have witnessed an increase in the savings rate the

likes of which we have never seen since data tracking began.
Unprecedented 10 Year Bond Yields

Timeline: 3 PM Dec. 8th, 2010

Still near historical lows…
Inflation: appears to stay in downward trend
 US Economic Outlook (Quarterly View)

Q1 ’11
11 Q2 ’11
11 Q3 ’11
11 Q4 ’11
11 Q1 ’12
12 Q2 ‘12
12
Real GDP 2.6 2.1 2.7 2.7 3.1 2.9
Consumer Prices 1.8 1.8 2.5 2.6 2.8 2.3
Real Disposable Inc. 0.1 1.5 1.7 1.6 3.0 2.7
Consumer Confidence 51 53 54 58 61 61
Unemployment (%) 9.8 9.7 9.5 9.3 9.2 9.1
Fed Funds Rate 0.1 0.3 0.5 1.0 1.5 1.8

Source: NAR Research Division October 2010 Outlook

** Note: Discount Rate was raised 25 bps on 2/17/10

Bank of America: Confidential 10

Interest Rate Forecast

2008 2009 2010 2011 2012

30-Year Fixed Rate Mortgage 6.0 5.1 4.7 5.0 5.9

10-Year Treasury
y Yield 3.7 3.3 3.1 3.2 4.1

1-Year ARM 5.2 4.7 3.9 4.1 5.0

Prime Rate 4.5 3.3 3.1 3.5 5.0

Source: NAR Research October, 2010

 National Housing Forecast

Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Q2 ‘12

Existing Home Sales 4.8 5.2 5.4 5.2 5.1 5.4
New Single Family Sales 365 397 433 471 492 560
Housing Starts 698 746 791 843 875 979

Percentage Change – Year Ago

Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Q2 ‘12

Existing Home Sales -7.3 -6.6 29.9 14.5 7.1 3.0
New Single Family Sales 1.3 18.2 51.4 42.0 35.0 41.1
Housing Starts 13.1 24.0 33.1 29.1 25.4 31.2

New Home Sales: plunged to 300,000 in May from 446,000 in April. Interestingly, new home inventory
is at one of the lowest p
points in the p
past 30 yyears.

Source: NAR Research Division October 2010 Outlook

 Total Sales: Single-Family, Apartment Condos and Co-ops

Qtr % Year %
State ’07 ’08 ’09 2010.I 2010.II r 2010.III p Change Change

US 5,652
5 652 4,913
4 913 5,156
5 156 5
5,140
140 5
5,570
570 4
4,163
163 -25.3%
25 3% -21.2%
21 2%

NE 1,006 849 868 853 953 693 -27.3% -24.4%

MW 1,327 1,129 1,163 1,133 1,297 860 -33.7% -28.9%

South 2,235 1,865 1,914 1,893 2,093 1,637 -21.8% -16.4%

West 1,084 1,070 1,211 1,263 1,227 973 -20.7% -18.2%

Source: NAR Third Quarter 2010 Sales Report

Mortgage Originations (forecast)

2008 2009 2010 2011 2012

Total 1- to 4-Family (Bil $) 1,509 1,995 1,401 996 1,187

Purchase 731 665 480 626 877

Refinance 777 1,365 921 370 310

Refinance Share (%) 52 67 66 37 26

Source: Mortgage Bankers Association October 26th, 2010

Midterm (1 – 3 years) Challenges to Housing
Recovery

Q3 Webinar Focus
I. Job and Wage Growth/Consumer Confidence
II. Negative Equity
III. Distressed Sales Activity
IV. Regulatory
g y Reform/Uncertainty
y

Q4 Webinar Focus
I. State Budget Deficits/Continued Unemployment
II Distressed
II. Di t dSSales
l A Activity
ti it ((more granular)
l )
 I. Job and Wage Growth will continue to come under
fire in states with significant budget deficits

October (p) 2010 Projected Fiscal '11 Deficit as

State
unemployment rate % of Budget
N
Nevada
d 14 2%
14.2% -54.0%
54 0%
Michigan 12.8% -9.2%
California 12.4% -21.6%
Florida 11.9% -20.2%
Rhode Island 11.4% -13.9%
South Carolina 10.7% -25.6%

South Carolina 10.7% -25.6%

Kentucky 10.0% -8.8%
Ohio 9.9% -11.3%
Indiana 9.9% -9.4%
Georgia 9.9% -26.2%
Source: Labor Department and CBPP
II. Distressed Sales Activity

Source: Realty Trac September 30th 2010

Fannie Mae Serious Delinquency Rates
continue to decline
 Q3 2010 Total Foreclosure (FC) Sales
Avg. Pre-
Avg. FC Avg. REO FC
%∆ from %∆ from Avg. FC Disc Disc Disc
# of FC Q2 Q3 Pct. of All Sales ount ount ount
State Sales 2010 2009 Sales Price % % %
U.S. Total 188,748 -25.07 -30.83 24.89 $169,523 32.12 40.53 19.44

Alabama 606 -39.64 -13.55 13.75 $142,577 22.27 25.26 3.33

Alaska 118 -51.84 -35.52 7.44 $224,034 17.02 14.36 22.94

Arizona 14,343 -27.35 -32.46 46.54 $138,525 25.03 31.98 15.03

Arkansas 521 -47.53 -47.74 12.76 $128,368 20.6 25.21 11.75

California 45,825 -26.79 -43.48 39.68 $251,756 38.56 45.87 28.9

Colorado 4,079 -26.02 -19.51 23.19 $184,582 30.83 34.83 23.36

Delaware 275 -14.33 -9.84 14.14 $171,983 33.97 37.5 24.87

District of 126 -16 -37 7.11 $292,648 39.56 48.12 30.41

Colum
bia
Florida 34,186 -13.34 -7.65 36.75 $120,030 28.23 37.96 19.74

Georgia 6 340
6,340 -27.13
27 13 -35.46
35 46 29 36
29.36 $116 086
$116,086 40 22
40.22 44 97
44.97 32 72
32.72

Hawaii 404 -24.06 -27.86 12.29 $353,540 25.51 28.89 21.08

Source: RealtyTrac 12/2/10

 Q3 2010 Total Foreclosure (FC) Sales
Avg. Pre-
FC
Avg. FC Avg. FC Avg. REO Discount
# of FC %∆ from %∆ from Pct. of All Sales Discount Discount %
State Sales Q2 2010 Q3 2009 Sales Price % %
U.S. Total 188,748 -25.07 -30.83 24.89 $169,523 32.12 40.53 19.44

Idaho 1,439 -35.47 6.36 25.24 $154,983 15.1 21.27 10.67

Illinois 6,844 -24.34 -23.96 24.74 $142,214 41.34 49.91 20.9

Indiana 2,427 -33.2 -40.06 17.56 $112,544 27.53 31.86 17.87
Iowa 420 -23.77 -13.76 5.71 $96,861 33.56 38.17 -0.2
y
Kentucky 926 -24.22 -0.22 14.93 $95,208
, 44.31 50.79 30.96
Louisiana 534 -29.18 -18.6 10.07 $135,784 28.34 33.89 16.42
Maryland 2,338 -47.57 -16.97 16.95 $207,544 35.86 41.7 32.19
Massachusetts 499 -65.18 -75.24 34.9 $181,088 25.34 25.9 25.21
g
Michigan 9,587 -25.55 -26.78 31.75 $72,266 40.52 44.24 21.26
Minnesota 1,721 -26.45 -40.45 12.18 $147,711 31.2 34.88 21.73
Missouri 2,669 -23.41 -23.92 16.36 $113,297 28.94 28.87 29.23
Montana 144 -23.81 53.19 6.7 $197,005 5.32 12.37 -14.33

Nevada ,
8,917 -15.07 -35.47 53.88 $135,221
$ , 19.01 22.16 14.22

New Hampshire 127 -65.58 -73.98 7.74 $166,129 33.42 38.46 29.9

New Jersey 2,487 -30.39 -32.1 12.66 $219,758 41.19 52.6 30.46

Source: RealtyTrac 12/2/10

 Q3 2010 Total Foreclosure (FC) Sales
Avg. Pre
FC
Avg. FC Avg. REO Disc
%∆ from %∆ from Avg. FC Disc Disc ount
# of FC Q2 Q3 Pct. of All Sales ount ount %
St t
State S l
Sales 2010 2009 S l
Sales Pi
Price % %
U.S. Total 188,748 -25.07 -30.83 24.89 $169,523 32.12 40.53 19.44

New Mexico 426 -17.76 17.68 8.62 $176,572 15.47 13.83 16.96

New York 2,147 -20.25 -34.28 7.22 $287,352 29.5 53.81 16.66
North Carolina 2,329 -26.81 -28.14 11.85 $147,522 28.2 31.23 17.86
Ohio 6,117 -26.85 -24.78 21.67 $79,695 44.54 50.66 20.54
Oklahoma 604 -37 15
-37.15 -39 66
-39.66 10 25
10.25 $96 377
$96,377 35 61
35.61 36 04
36.04 34 92
34.92
Oregon 2,381 -27.41 -14.69 26.59 $183,905 28.26 32.32 19.75
Pennsylvania 2,876 -11.15 -5.02 11.53 $123,249 40.35 47.44 22.74
South Carolina 1,918 -25.97 -8.45 19.44 $143,673 27.08 32.13 8.58

Tennessee 3 215
3,215 -29.97
29 97 -35.21
35 21 18 77
18.77 $95 512
$95,512 42 25
42.25 43 44
43.44 28 47
28.47
Texas 8,087 -27.85 -25.18 11.85 $146,858 26.69 28.07 23.03

Utah 1,905 -29.83 -20.99 20.31 $214,472 2.92 7.11 -7.32

Virginia 4,147 -28.18 -30.96 23.33 $229,933 33.86 38.56 25.08

Washington 2,513 -24.65 -35.58 14.08 $237,084 25.59 29.93 16.99

Wisconsin 1,254 -31.36 -45.29 13.6 $112,528 37.13 45.09 25.05

Source: RealtyTrac 12/2/10

Summary (December 13th, 2010)

I. 2010 - 2011 Economic “SeeSaw”: economic news will likely ebb and
flow between positive growth and recessionary fears with no clear
“short” and “mid” term direction.
“L” shaped recovery continues

II. 2010 looks like MIRROR Image of 2009: Q3 decline in new and
existing
i ti h home sales
l ffollowed
ll dbby stabilization
t bili ti iin Q4 2010
– First time home buyers pulled into current period from future
periods.

III. Interest Rates likely to stay low for longer than most economists
forecast
I
I. Potential for added Federal stimulus (Pros/Cons)

IV. Long Term:

– Rising rates driven by increased supply of government debt maybe
off set by improving employment environment in late 2011 and
2012.
– “New Normal” here to stay for next 3 – 5 years