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

2. Table of Contents National Economic Overview
Residential Real Estate Summary
North Carolina
Appendix
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3. National Economic Overview
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4. 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

5. 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

6. 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

7. Residential Real Estate Summary
Wachovia Economics Group

8. 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 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

9. 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

10. 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
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11. North Carolina
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12. 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

13. 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

14. Appendix
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15. Economics Group Publications
Appendix
A Sampling of Our Recent Special, Regional & Industry Commentary
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16. 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
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17. 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.
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U.S. Macro Economy
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Monetary Policy
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