A Different World: Housing, Demographics and Technology Mid Columbia Workforce Housing Summit Hood River, Oregon April 6, 2007 John Mitchell Economist Western Region U.S. Bank

Spring 2007 Six Year Old Upturn Housing Contraction-Subprime Implosion Mixed Data Fed on Hold Global Strength Unemployment Rate at 4.5 Percent Wealth Increasing Regional Strength

Real GDP Growth-Year Six

The Last Six Quarters 05/Q305/Q406/Q106/Q206/Q306/Q4 GDP4.2%1.8%5.6%2.6%2%2.5% Consumer Equip Structures Residential Federal S&L Exports Imports

Wage and Salary Employment Changes 2003 to % Unemployment Rate February

U.S. Employment Year to February 2007 (1.5%)

Consumer Price Index and Core Year over Year February 2.4% Annual Average %

Yield Curve: What does it mean? Flight to Safety-Sorry about the Adjustables!

2007 Coasting and Changing Changing Leaders, Capacity Constraints Growth Moderating to 2.5% Inflation Back towards the Comfort Zone 2-2.5% Rates: “ Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless the economy seems likely to continue to expand at a moderate pace over coming quarters...In these circumstances the Committees predominant concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth as implied by the incoming information.” 3/21/2007

2007 Questions How will the housing correction play out? What does the subprime implosion mean? Will business investment and trade hold up? The investment data has softened. Housing/auto adjustment, energy price increases-piling on? How tight are labor markets and how fast can we grow?

Residential Permits (000, SAAR)-14.9% in 2006 Bottom?

NAR Resales Q4 (SAAR) Q4 2005Q4 2006% Change US6,943,0006,243, % Nevada97,60062, % Oregon98,80086, % California553,200435, % Arizona188,800138, % Washington164,800139, % Hawaii 32,40027, %

House Price Appreciation Annual to 12/31/2006 and ( Q4 06) OFHEO Q4/2006 US 5.9% (1.1%) Utah 17.55% (3.67%) Wyoming 14.29% (3.28%) Idaho 13.99% (2.14%) Washington 13.7% (1.93%) Oregon 13.49% (1.55%) New Mexico 13.08% (2.14%) Arizona 9.6% (1%) Hawaii 7.33% (-.8%) California 4.6% (-.38%) Kansas 4.47% (1%) Nevada 3.95% (-.16%) Colorado 3.32% (.87%) Iowa 3.07% (.9%) Nebraska 2.61%( -.24%) Minnesota 2.47% (.86%) Ohio 1.05% (.36%) Massachusetts.45%(.69%) Michigan -.44% (.51%) Kokomo, Indiana -5.3% Source: OFHEO NAR Q4 73 of 149 Metros down in Q4, 5 Unchanged, 71 up

OFHEO House Price Appreciation to December 31, 2006 YearQuarter5 Years US5.9%1.12%55.21% OR Bend Longview Eugene Medford Portland-Van Salem

Perspective and How Does it end? MBA 4.95% of Mortgages Delinquent in Q4 13.3% of Subprime Majority of Subprime have no escrow for INS and Taxes Fed 2004 Survey 69.4% of Homeowners have mortgage 47.9% of all Families Mortgage Equity Withdrawal is Plummeting (-47% Annual Rate in Q4 Greenspan and Kennedy) Construction Decline and Removal from Market Increased Affordability: Prices, Rates, Income Changed Expectations

Job Growth Update –January 2007 Data-49 States Growing Louisiana 1 Arizona 2 Utah 3 Idaho 4 Nevada 5 Wyoming 6 Hawaii 7 North Dakota 8 New Mexico 13 Washington 14 Oregon 19 California 20 Florida 21 New York 29 Massachusetts 30 Indiana 46 Wisconsin 48 Ohio 49 Michigan 50

Oregon Job Change Year to February 2007 (2%)

Oregon Long Run Employment Growth

Washington Employment Change Year to February (2.1%)

Washington Job Growth Year to February 2007 MetroJob ChangePercentage Spokane5,9002.8% Seattle46, Olympia2, Wenatchee1, Tacoma Tri Cities2, Bellingham3, Clark3,3002.5

Washington Long Run Employment Growth

Regional Job Growth and Population Changes CountyJobs 2006Change % Pop 2006Change Klickitat5, % 19,8003.3% Skamania2, %10,6007.4% Gilliam %1, % Hood River % 21,3354.5% Sherman %1, % Wasco9, % 24,0701.2% Wheeler % 1,5651.2% Sources: Employment, PSU. DFM

Annual Average Wage and Salary Employment

Environment Adjacency: To Portland: One Metro County Regional Centers Falling Communications Costs-Maintain Infrastructure and Skills Amenities-Gorge, Mountains, etc. Dramatic Taxation Differences Regulatory Hangover Aging Crew

A Different World Monthly Labor Review 11/06 Average Annual Labor Force Growth Rates % % % % % 65 plus5.3%