What’s To Come in the Year Ahead for the U.S. Economy & Charlotte? February 21, 2008

Table of Contents National Economic Overview Residential Real Estate Summary North Carolina Appendix Wachovia Economics Group

National Economic Overview Wachovia Economics Group

Wachovia U.S. Economic Forecast U.S. Economic Overview National Economic Overview The Economy Had Solid Momentum But Has Obviously Been Affected by the Recent Credit Crisis Highlights The economy had solid momentum going into the subprime mortgage crisis. We have scaled back our estimate for consumer spending and are looking for continued declines in homebuilding. Business fixed investment and commercial construction are still expected to rise, albeit much less rapidly. Exports have risen more than residential construction has fallen over the past two years, providing a strong positive offset. Wachovia U.S. Economic Forecast Source: Federal Reserve Board, U.S. Department of Commerce, U.S. Department of Labor and Wachovia Corp. Wachovia Economics Group

U.S. Economic Overview National Economic Overview Income Growth Is Strong Enough To Support Consumer Spending & Interest Rates Remain Relatively Low Highlights Worries about a negative wealth effect may be overstated. The wealth effect is believed to be, at most, 3 to 4 percent over a two year period. Housing prices are still rising in metro areas containing 65 percent of the U.S. population but this will likely fall in coming quarters. Past experience suggests spending will not fall, it will merely rise less rapidly than after-tax income. Despite the recent up-tick, unemployment remains near what is normally referred to as full employment. Over the long-run, nominal GDP and Treasury yields should align. Core inflation pressures could give the Fed trouble later in the year, but they currently remain focused on growth and employment worries. Source: Federal Reserve Board, U.S. Department of Commerce, U.S. Department of Labor and Wachovia Corp. Wachovia Economics Group

Global Growth & The Dollar National Economic Overview Global Growth Remains Steady But The Dollar Is Poised For Turnaround Highlights Global growth has been very strong, but should slow somewhat this year. Some foreign central banks have begun easing, we expect others will follow suit as growth slows and inflation subsides. The dollar should begin to appreciate versus European currencies as the Fed easing cycle comes to an end. Wachovia Major Currency Forecast Source: Bloomberg LP, Federal Reserve Board, International Monetary Fund and Wachovia Corp. Wachovia Economics Group

Residential Real Estate Summary Wachovia Economics Group

Homebuilding Residential Real Estate Summary Four Years Of Overbuilding Has Pushed Inventories Of Unsold Homes Up By Around 875,000 Units Highlights We calculate that we need to build about 1.55 million homes a year to meet underlying demographic demand. 1.2 million for population growth, 0.35 million units for obsolescence, and a few for second homes at this point. Home sales peaked more than two years ago and we believe we are about two-thirds of the way through this housing correction. New home sales will likely bottom out by late spring 2008. The demand for housing is derived from the underlying growth in the economy, which is growing. Our estimated overbuild of 875,000 units compares favorably with the 815,000 rise in the number of vacant homes for sale. Rising foreign demand for homes is helping offset some of the weakness in second home demand. Source: U.S. Department of Commerce and Wachovia Corp. Wachovia Economics Group

OFHEO Residential Real Estate Summary Over Sixty Percent of the U.S. Population Live in Cities With Positive Home Price Growth OFHEO Home Price Index Wachovia Economics Group

Investor & Second-Home Mortgages Residential Real Estate Summary Investors Were Responsible For More than Half of the Purchases in Some Markets in 2006 Non-Owner Occupied Purchase Loans: 2006 Wachovia Economics Group

North Carolina Wachovia Economics Group

North Carolina Employment & Income Growth Remain Solid Highlights North Carolina’s economy is still seeing solid employment gains; however, the unemployment rate has been relatively flat in recent months as low rates in major metro areas are being offset by higher rates in many rural parts of the state. North Carolina has seen strong population gains in recent years. The state did not experience the same rapid price appreciation during the boom as was seen in some parts of the country. As a result, home prices are holding up relatively well and median prices are roughly in line with the national median. New single-family activity has declined from cycle highs, as national builders scale back to bolster their balance sheets. Source: Office of Federal Housing Enterprise Oversight, U.S. Department of Commerce, U.S. Department of Labor and Wachovia Corp. Wachovia Economics Group

Charlotte North Carolina The Charlotte Region Has Been On A Phenomenal Roll But Growth Is Showing Signs Of Cooling Off Highlights The unemployment rate moved largely sideways during 2007 and remains near the national average. Employment growth has slowed in the region, particularly in residential construction and financial services. Population growth continues to surge throughout the Charlotte area. We expect population growth accelerated further this past year.. Housing activity has come off sharply in recent months as national builders curtailed activity due to slower sales of upper and lower-priced homes. Home price growth has slowed late in the year and we expect prices changes will be flat to modestly up in 2008. On the commercial front, Charlotte has the lowest office vacancy rate of any downtown area in the country. Source: Office of Federal Housing Enterprise Oversight, U.S. Department of Commerce, U.S. Department of Labor and Wachovia Corp. Wachovia Economics Group

Appendix Wachovia Economics Group

Economics Group Publications Appendix A Sampling of Our Recent Special, Regional & Industry Commentary Distribution Lists Recent Special Commentary Monthly Outlook Weekly Economic & Financial Commentary Special Reports Economic Indicators Global Commentary Regional Commentary Chief Economist List To join any of our research distribution lists please email us: wachovia.economics@wachovia.com Wachovia Economics Group

Economics Group Comprehensive Coverage of the U.S. Economy Appendix Economics Group Coverage U.S. Macro Economy Comprehensive Coverage of the U.S. Economy Monthly Economic Forecast Weekly Analysis & Outlook Timely Commentary on Daily Economic Data Releases Global Economies Macro Level Coverage of Major Foreign Economies Macro Forecasts of 11 Economies Monthly Forecasts of 19 Dollar Exchange Rates Weekly Analysis & Outlook U.S. Regional Economics Regional and MSA Level Expertise Extensive Coverage Across the Wachovia Footprint Ground level Analysis & Commentary of Local Markets Industry Coverage Across CIB Industry Groups Regular Commentary on Economic Developments by Industries Real Estate Industrial Growth Consumer & Retail Energy & Power Financial Services Media Healthcare Tech Wachovia Economics Group

Economics Group John E. Silvia, Ph.D. Mark Vitner Jay H. Bryson, Ph.D. Appendix John E. Silvia, Ph.D. Chief Economist Mark Vitner Senior Economist Jay H. Bryson, Ph.D. Global Economist 704.374. 7034 john.silvia@wachovia.com U.S. Macro Economy Interest Rates Monetary Policy 704.383.5635 mark.vitner@wachovia.com U.S. Macro Economy Real Estate Regional Economics: State & MSA Level 704.383.3518 jay.bryson@wachovia.com Global Economies Foreign Exchange Sam Bullard Economist Huiwen Lai, Ph.D. Quantitative Analyst Anika Khan Economist 704.383.7372 sam.bullard@wachovia.com Desk Operations Financial Services 704.715.7415 huiwen.lai@wachovia.com Quantitative Macro-Economic Modeling 704.715.0575 anika.khan@wachovia.com U.S. Macro Economy Consumer & Retail Non-residential Real Estate Azhar Iqbal Quantitative Analyst Adam G. York Economic Analyst Tim Quinlan Economic Analyst 704.383.6805 azhar.iqbal@wachovia.com Quantitative Macro-Economic Modeling 704.715.9660 adam.york@wachovia.com U.S. Macro Economy Real Estate Industrial Growth & Services 704.383.9613 tim.quinlan@wachovia.com U.S. Macro Economy Wachovia Corporation Economics Group publications are distributed by Wachovia Corporation directly and through subsidiaries including, but not limited to, Wachovia Capital Markets, LLC, Wachovia Securities, LLC and Wachovia Securities International Limited. The information and opinions herein are for general information use only. Wachovia does not guarantee their accuracy or completeness, nor does Wachovia assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. © 2007 Wachovia Corp. Wachovia Economics Group

Logo Page