Charlotte-Gastonia-Concord AreaLocal Market Report, First Quarter 2010

Local Trend

Today's Market…

3-year (12-quarter) Appreciation (2010 Q1)

Prices are still down from a year ago, but the trend is improving-0.5%1-year (4-quarter) Appreciation (2010 Q1) -0.1%

-22 1%-7 7%

Current Median Home Price (2010 Q1)

U.S.Price Activity

Charlotte

$171,400 $166,733

$0

$50,000

$100,000

$150,000

$200,000

$250,000

-15%

-10%

-5%

0%

5%

10%

15%

2010 Q1

Q32009 Q1

Q32008 Q1

Q32007 Q1

Q32006 Q1

Q32005 Q1

Q32004 Q1

Q32003 Q1

Q32002 Q1

Q32001 Q1

Median Price (Red Line) and One-year Price Growth

State Existing Home Sales (2010 Q1 vs 2009 Q1)

Most buyers in this market have access to government-backed finacingFHA Loan Limit $303,750

11.4%

$417,000Conforming Loan Limit*

3-year (12-quarter) Appreciation (2010 Q1)

U.S.Home Sales North CarolinaSales are much stronger than a year ago,

but growth is slowing

-$14,2007-year (28 quarters) Housing Equity Gain

$729,250

*Note: the 2009 loan limits for FHA and the GSEs were extended through 2010.41%

15.9%

-$47,333$25,400 -$467

3-year (12-quarter) Housing Equity Gain-22.1%-7.7%

$30,400

Real estate remains a long-term investment: those who bought early in the

boom still hold some equity$22,733

not comparable

$417,000

9-year (36 quarters) Housing Equity Gain

Local Median to Conforming Limit Ratio

$0

$50,000

$100,000

$150,000

$200,000

$250,000

-15%

-10%

-5%

0%

5%

10%

15%

2010 Q1

Q32009 Q1

Q32008 Q1

Q32007 Q1

Q32006 Q1

Q32005 Q1

Q32004 Q1

Q32003 Q1

Q32002 Q1

Q32001 Q1

Median Price (Red Line) and One-year Price Growth

0

50

100

150

200

250

300

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2010 Q1

Q32009 Q1

Q32008 Q1

Q32007 Q1

Q32006 Q1

Q32005 Q1

Q32004 Q1

Q32003 Q1

Q32002 Q1

Q32001 Q1

State Home Sales (Red Line) and Sales Growth1,000s

(2010 Q1 vs 2009 Q1) but growth is slowing

$0

$50,000

$100,000

$150,000

$200,000

$250,000

-15%

-10%

-5%

0%

5%

10%

15%

2010 Q1

Q32009 Q1

Q32008 Q1

Q32007 Q1

Q32006 Q1

Q32005 Q1

Q32004 Q1

Q32003 Q1

Q32002 Q1

Q32001 Q1

Median Price (Red Line) and One-year Price Growth

0

50

100

150

200

250

300

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2010 Q1

Q32009 Q1

Q32008 Q1

Q32007 Q1

Q32006 Q1

Q32005 Q1

Q32004 Q1

Q32003 Q1

Q32002 Q1

Q32001 Q1

State Home Sales (Red Line) and Sales Growth1,000s

Natural Resour 4.8% 35.2 Natural 13.6%

#N/A #N/A Natural #N/A

#N/A #N/A Constru #N/A

Not Comparable

-53,700

9.7%

-4.0%

8.6%

Charlotte's unemployment situation is worse than the national average and

weighs on confidence11.9%

U.S.

Not Comparable

12-month Job Change (Feb)

Job losses are a problem and will weigh on demand, but layoffs are declining which could help buyer confidence

12-month Job Change (Mar) -20,900

Year-ago Unemployment Rate

U.S.Local Economic Outlook

Not Comparable

Drivers of Local Supply and Demand…

Charlotte

11.1%

1-year (12 month) Job Growth Rate -2.5%

-27,500

36-month Job Change (Mar)

Current Unemployment Rate (Mar)

Weak, but better than most markets

Share of Total Employment by IndustryCharlotte-Gastonia-Concord Area

Trade/Transportation/Uti

lities22.9%Other

Services4.2%

Government

16.4%

Trade/Transportation/U

tilities8.9%

Other Services10.0%

Government

4.1%

#N/A #N/A Constru #N/A

Trade/Transpo 22.9% 168 Trade/T 8.9%

Information 2.9% 21.1 Informa18.8%

Financial Act 9.2% 67.6 Financi2.1%

Prof. & Busin 17.0% 124.5 Profess5.8%

Educ. & Heal 11.3% 82.9 Educat 12.8%

Leisure & Ho 11.4% 83.3 Leisure15.1%

Other Service 4.2% 30.5 Other S10.0%

Government 16.4% 120.2 Govern4.1%

Prof. & Business Services -1,3002,200-2,200-8001,200

-9,100NANA

-1,600-400

-3,900

Educ. & Health ServicesLeisure & HospitalityOther Services

U.S.

12-month Employment Change by Industry in the Charlotte-Gastonia-Concord Area

Natural Resources/Mining/Construct

GovernmentFinancial Activities

Natural Resources and MiningConstructionTrade/Transportation/Utilities

-1.2%

-6.7%

The economy of North Carolina is weaker than the rest of the nation, but improved

modestly from last month

North Carolina

-4.3%

-1.3%

36-month change (2010 - Mar)

12-month change (2010 - Mar)

State Economic Activity Index

Information

Trade/Transportation/Uti

lities22.9%

Information2.9%

Financial Activities

9.2%

Prof. & Business Services17.0%

Educ. & Health

Services11.3%

Leisure & Hospitality

11.4%

Other Services

4.2%

Government

16.4%

Trade/Transportation/U

tilities8.9%

Information18.8%

Financial Activities

2.1%

Professional &

Business Services

5.8%

Educational & Health Services12.8%

Leisure & Hospitality

15.1%

Other Services10.0%

Government

4.1%

The current level of construction is 65.6% below the long-term average

-6.1%

not comparable

U.S.Charlotte

14,899

5,120 not comparable

Construction

Construction is down from last year, but appears to have bottomed.

Reduced construction will limit new supply to the market, allowing demand to

catch up with current supply and foreclosures more quickly

-11.4%Single-Family Housing Permits (Mar 2010) 12-month sum vs. a year ago

Local Fundamentals

12-month Sum of 1-unit Building Permits through Mar 2010

Long-term average for 12-month Sum of 1-Unit Building Permits

5,000

10,000

15,000

20,000

25,000

Construction: 12-month Sum of Local Housing Permits (Historical Average Shown in Red Dashed Line)

0

5,000

10,000

15,000

20,000

25,000

Construction: 12-month Sum of Local Housing Permits (Historical Average Shown in Red Dashed Line)

0

5,000

10,000

15,000

20,000

25,000

Construction: 12-month Sum of Local Housing Permits (Historical Average Shown in Red Dashed Line)

Monthly Mortgage Payment to Income

22.6% More affordable than most markets

11.6%Charlotte

10.4%14.1%

Ratio for 2008Ratio for 2010 Q1Historical Average

14.4%

U.S.15.3% Historically strong and an improvement

over the fourth quarter of 2009

Affordability

0%

5%

10%

15%

20%

25%

30%

2009200720052003200119991997199519931991

Ratio of Local Mortgage Servicing Cost to Income (Local Historical Average Shown in Red, U.S. Average in Green)

Ratio for 2010 Q12.4

Charlotte

1.8

Ratio for 2009

Historical Average

Median Home Price to Income

1.8

2.7 Affordable compared to most markets2.21.6

Local affordability has improved and is below the historical average

U.S.

0%

5%

10%

15%

20%

25%

30%

2009200720052003200119991997199519931991

Ratio of Local Mortgage Servicing Cost to Income (Local Historical Average Shown in Red, U.S. Average in Green)

0%2%4%6%8%

10%12%14%16%

2010 Q12009 Q42009 Q32009 Q22009 Q12008 Q42008 Q32008 Q2

Recent Trend - Local Mortgage Servicing Cost to Income(Historical Average Shown in Red Dashed Line)

0%

5%

10%

15%

20%

25%

30%

2009200720052003200119991997199519931991

Ratio of Local Mortgage Servicing Cost to Income (Local Historical Average Shown in Red, U.S. Average in Green)

0%2%4%6%8%

10%12%14%16%

2010 Q12009 Q42009 Q32009 Q22009 Q12008 Q42008 Q32008 Q2

Recent Trend - Local Mortgage Servicing Cost to Income(Historical Average Shown in Red Dashed Line)

The Mortgage Market

2 5

3.06.57.0

30-year Fixed Mortgage Rate and Treasury Bond Yield (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2009200720052003200119991997199519931991

Ratio of Local Median Home Price to Local Average Income (Local Historical Average Shown in Red, U.S. Average in Green)

Signs of economic strength during the first quarter pressed up on the 10-year Treasury yield, while Fed purchases of mortgage backed securities helped to keep long-term mortgage rates low. The spread between the 30-year fixed rate mortgage and the 10-year Treasury continued to shrink through the first quarter of 2010 as a result. In the first two months of the second quarter, new concerns about domestic employment growth and international banking issues have sent investors clamoring to long-term Treasuries for safety, easing inflation concerns (temporarily) and sending the yield sliding. Private demand for mortgage backed securities rose in wake of the Treasury's cessation of its mortgage purchase program, muting upward pressure on long-term mortgage rates. Figures for the second quarter, due out in a few months, will likely show a flat or slightly wider spread between the 10-year Treasury and 30-year FRM. The debt crisis in Greece and fear of a contagion have caused long-term Treasury yields to tumble as nervous investors sought a shelter. The decline in the Treasury yield has not been matched by moderating mortgage rates leading to a increase in the spread.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2.02.53.03.54.04.55.05.56.06.57.0

2010 Q1Q32009 Q1Q32008 Q1Q32007 Q1Q32006 Q1Q32005 Q1

30-year Fixed Mortgage Rate and Treasury Bond Yield (%)

Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2009200720052003200119991997199519931991

Ratio of Local Median Home Price to Local Average Income (Local Historical Average Shown in Red, U.S. Average in Green)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2.02.53.03.54.04.55.05.56.06.57.0

2010 Q1Q32009 Q1Q32008 Q1Q32007 Q1Q32006 Q1Q32005 Q1

30-year Fixed Mortgage Rate and Treasury Bond Yield (%)

Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2009200720052003200119991997199519931991

Ratio of Local Median Home Price to Local Average Income (Local Historical Average Shown in Red, U.S. Average in Green)

Monthly Market Data

Foreclosures by Type

Looking Deeper….

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

State Total Foreclosure Rate vs. U.S Average(U.S. Average in Blue Dashed Line)

Source: Mortgage Bankers' Association

91.0% 4.0% 5.1% 88.5% 5.2% 6.3%

1.9% 2.7%

1.4% 2.3%

10.6% 17.9%

10.2% 18.0%

8.1% 14.8%

7.0% 14.5%

Source: First American CoreLogic, LoanPerformance data

The February rate for Charlotte is low compared to the national average

The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have completed the foreclosure process and are owned by banks divided by the total number of mortgages for that area.

ALT-A: Foreclosure + REO

Rate

A large local increase occurred compared to August of last year

Compared to the national average, today's local rate is low

There was a substantial increase versus August of this year

SUBPRIME: Foreclosure + REO

Rate

Monthly Market Data - February 2010

PRIME: Foreclosure + REO

Rate

Market Share: Prime (blue), Alt-A

(green), and Subprime (red)

Locally, today's foreclosure rate is low relative to the national average

There has been little change locally compared to August

Delinquencies by TypeU.S.

Suprime mortgages make up a larger than average share of the Charlotte

market, but rising prime foreclosures are also becoming a problem

Charlotte

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

State Total Foreclosure Rate vs. U.S Average(U.S. Average in Blue Dashed Line)

Source: Mortgage Bankers' Association

1.9%

1.4%

Feb-10Aug-09

2.7%2.3%

Feb-10Aug-09

10.6%10.2

%

Feb-10Aug-09

8.1%7.0%

Feb-10Aug-09

17.9%

18.0%

Feb-10Aug-09

14.8%14.5

%

Feb-10Aug-09

91.0%

4.0% 5.1%

88.5%

5.2%

6.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

State Total Foreclosure Rate vs. U.S Average(U.S. Average in Blue Dashed Line)

Source: Mortgage Bankers' Association

1.9%

1.4%

Feb-10Aug-09

2.7%2.3%

Feb-10Aug-09

10.6%10.2

%

Feb-10Aug-09

8.1%7.0%

Feb-10Aug-09

17.9%

18.0%

Feb-10Aug-09

14.8%14.5

%

Feb-10Aug-09

91.0%

4.0% 5.1%

88.5%

5.2%

6.3%

7.8% 6.2% 4.5% 7.6% 6.3% 4.9%

6.3% 4.6% 3.2% 6.5% 5.2% 3.8%

1.9% 1.4% 0.7% 2.7% 2.3% 1.7%

Source: First American CoreLogic LoanPerformance data

Charlotte U.S.Monthly Market Data - February 2010

Prime Foreclosures and Delinquencies in Process

Prime: 60-day Delinquent

Prime: 90-day Delinquent

The share of local 60-day delinquencies rose suggesting that the 90-day

delinquency rate is likely to rise in the near future

Charlotte's 90-day delinquency rate climbed faster than the national average suggesting a bulge of foreclosures in the

future

Rising 60 and 90-day delinquency rates will press up on local prime foreclosures

rates in the near future.

Prime: Foreclosure +

REO Rate

7.8%6.2

%4.5%

Feb-10Aug-09Feb-09

7.6%6.3%4.9%

Feb-10Aug-09Feb-09

6.5%5.2%3.8%

Feb-10Aug-09Feb-09

1.9%1.4

%0.7%

Feb-10Aug-09Feb-09

2.7%2.3%1.7%

Feb-10Aug-09Feb-09

6.3%4.6%3.2%

Feb-10Aug-09Feb-09

Source: First American CoreLogic, LoanPerformance data

Anson County, Cabarrus County, Gaston County, Mecklenburg County, Union County, and York County

More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/

The Charlotte area referred to in this report covers the geographic area of the Charlotte-Gastonia-Concord metro area as officially defined by the Office of Management and Budget of the U.S. Government. The official coverage area includes the

following counties:

Geographic Coverage

7.8%6.2

%4.5%

Feb-10Aug-09Feb-09

7.6%6.3%4.9%

Feb-10Aug-09Feb-09

6.5%5.2%3.8%

Feb-10Aug-09Feb-09

1.9%1.4

%0.7%

Feb-10Aug-09Feb-09

2.7%2.3%1.7%

Feb-10Aug-09Feb-09

6.3%4.6%3.2%

Feb-10Aug-09Feb-09