1. Economic Outlook CCIM Charlotte Market Forecast
March 30, 2011

2. Economic Growth
Inventory rebuilding, exports and economic stimulus have help produce a modest economic recovery. The economy ended 2010 on a surprisingly strong note and appears to have momentum going into 2011
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

3. Output Gap
Despite stronger economic growth, an enormous output gap remains in place
Source: Congressional Budget Office, U.S. Department of Commerce and Wells Fargo Securities, LLC

4. Industrial Production & Exports
A pick up in international trade is boosting industrial production and exports, though it’s not likely to create a whole lot of jobs as growth is concentrated in capital intensive industries
Industrial Production
Exports
Source: U.S. Department of Commerce, Federal Reserve Board and Wells Fargo Securities, LLC 4

5. Labor Market
Job losses exceeded every post-World War II downturn and the modest recovery to date has been extremely disappointing
Source: U.S. Department of Labor and Wells Fargo Securities, LLC

6. Labor Market
Not only is unemployment remaining exceptionally high, but a large number of people have remained unemployed for a long period of time
Source: U.S. Department of Labor and Wells Fargo Securities, LLC

7. Homebuilding
We believe housing starts have bottomed and will increase modestly through 2012 and return to a “normal” level by 2015
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

8. Real Estate Prices
Prices remain weak in both residential and commercial real estate markets
Residential
Commercial
Source: Federal Housing Finance Agency, National Association of Realtors, Moody’s, RCA, S&P Corp. and Wells Fargo Securities, LLC

9. Nonresidential Construction
We believe nonresidential construction spending will show modest improvement over the next few years
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

10. The apartment market now appears to be in full recovery as
net absorption is growing much faster than completions
Prices
Supply & Demand
Source: Real Capital Analytics, Reis, Inc. and Wells Fargo Securities, LLC

11. Office
In Q4 2010, demand for office space posted its first increase since early-2008
Prices
Supply & Demand
Source: Real Capital Analytics, Reis, Inc. and Wells Fargo Securities, LLC

12. Industrial property fundamentals appear to be improving as net
absorption outpaced completions over the past three quarters
Prices
Supply & Demand
Source: Real Capital Analytics, Property & Portfolio Research, Reis, Inc. and Wells Fargo Securities, LLC

13. Retail
Better-than-expected holiday retail sales and improving personal consumption expenditures have not yet given way to a meaningful recovery in retail leasing
Prices
Supply & Demand
Source: Real Capital Analytics, Reis, Inc. and Wells Fargo Securities, LLC

14. North Carolina

15. Data show a modest improvement in employment
North Carolina
Data show a modest improvement in employment
Source: U.S. Department of Labor and Wells Fargo Securities, LLC

16. North Carolina
The unemployment rate is falling, mainly as a result of job creation in private services industries and education & healthcare services
Source: U.S. Department of Labor and Wells Fargo Securities, LLC

17. North Carolina – Unemployment Rate Composition
Unemployment Rate by County
North Carolina Unemployment Rate
January 2011
Greater than 13.0%
Less than 9.0%
9.0% to 10.5%
11.5% to 13.0%
10.5% to 11.5%
Source: US Department of Labor and Wells Fargo Securities, LLC

18. North Carolina – MSA Employment
Some NC metro areas continue to struggle. Private sector payrolls began to turn up in early 2010, but recent months have seen gains slip away
Source: U.S. Department of Labor and Wells Fargo Securities, LLC

19. North Carolina – Population Growth
The recession cut into North Carolina's population growth
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

20. Charlotte MSA
Private sector employment growth improved through most of 2010, but dipped towards the end of the year. The unemployment rate remains well above the national average
Employment
Unemployment Rate
Source: U.S. Department of Labor and Wells Fargo Securities, LLC

21. Home prices saw a slight bounce in Q3 2010, though
Charlotte MSA
Home prices saw a slight bounce in Q3 2010, though
construction activity has slowed to a crawl
Home Prices
Housing Permits
Source: FHFA, U.S. Department of Commerce and Wells Fargo Securities, LLC 21

22. Charlotte MSA – Population Growth
Population growth slowed from its record pace, but remains strong nonetheless
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

23. North Carolina Wrap-Up
Observations
North Carolina Through the Years
The recovery is making progress in North Carolina
The unemployment rate is falling in the state, mainly as a result of accelerating job creation in private services industries and public administration
The state’s housing market continues to slowly heal
Though elevated foreclosures pose significant risks to the state’s housing outlook
Home prices remain constrained by rising distressed sales – particularly in metro areas such as Charlotte
Tax revenues have begun to improve over the past two quarters, but the state’s high unemployment rate combined with the slow pace of hiring and nominal wage gains will continue to put downward pressure on the growth of both sales and personal income tax collections
Newspaper Commentary
“Some of North Carolina's biggest corporations are pushing for a change in U.S. tax law that would allow them to spend foreign earnings in this country without paying the U.S. corporate tax rate of 35 percent on those earnings.
– News and Observer of Raleigh, 03/29/2011
“Department of Social Services (DSS) offices throughout the state are facing an increasing struggle to meet the needs of low-income households. A recent report released by the Food Research & Action Center (FRAC) reveals that North Carolina ranks sixth in the nation for food hardship.”
– StarNews, 03/17/2011
“North Carolina's economy will improve this year, though the recovery remains more anemic than anticipated, UNC Charlotte economist John Connaughton said Tuesday.”
– Charlotte Observer, 03/16/2011

24. Issues to Watch Credit Availability & Finreg Deleveraging Trade Wars &
Currency
Devaluations
Earthquake & Tsunami in Japan
Asian Real Estate Bubble?
European Debt Crisis
Geopolitical
Tensions
Energy/Commodity
Bubbles?

25. Our Forecast

26. Appendix

27. Wells Fargo Economics Group Publications
A Sampling of Our Recent Special, Regional & Industry Commentary
To view any of our past research please visit:
economics
To join any of our research distribution lists please visit:
economics
Recent Special Commentary

28. Wells Fargo Securities, LLC Economics Group
Global Head of
Research and Economics:
Diane Schumaker-Krieg
Chief Economist:
John Silvia
301 S. College Street
MAC D
Charlotte, NC
28288
John Silvia, Chief Economist
Mark Vitner, Senior Economist
Jay Bryson, Global Economist
Scott Anderson, Senior Economist
Eugenio Aleman, Senior Economist
Sam Bullard, Senior Economist
Anika Khan, Economist
Azhar Iqbal, Econometrician
Ed Kashmarek, Economist
Tim Quinlan, Economist
Michael Brown, Economist
Tyler Kruse, Economic Analyst
Joe Seydl, Economic Analyst
Sarah Watt, Economic Analyst
Peg Gavin (Charlotte), Executive Assistant
Carol Nightengale (Minneapolis), Executive Assistant
Senior Economists
Economists
Economic Analysts
Executive Assistants
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