1. SOUTHERN CALIFORNIA ECONOMIC AND HOUSING MARKET FORECASTS OCTOBER 2009

2. SOUTHERN CALIFORNIA’S REAL ESTATE CYCLE… YEARS 2005-2009

8. DISTRESSED HOUSING TRENDS AND FORECASTS

9. DISTRESSED HOUSING “SHADOW INVENTORY”

10. HOUSING CONSTRUCTION Record Low Construction Activity

11. NEW HOUSING SUPPLY WITH ‘SHADOW’ INVENTORY

12. WHAT DRIVES THE NEXT ECONOMIC CYCLE?

13. STIMULUS SPENDING California gets $24B in State Relief California gets a Large Share of Infrastructure

14. MEDICAL/PHARMACEUTICAL/ BIO-TECH

15. RENEWABLE ENERGY PHOTOVOLTAIC ROOFING ‘OFF-THE-GRID’ BATTERY-RUN HOUSING PARABOLIC VOLTAIC ‘FARMS’ SOLAR / ELECTRICAL VEHICLES

16. ENERGY TECHNOLOGY Lawrence Livermore Lab began project in 2001 ($2B spent thus far) World’s most powerful lasers focus on bb-sized hydrogen wafer. Ignites ‘mini sun’ that generates 500+ trillion watts of peak power Clean energy 1 st fusion power plant slated for 2030

17. EMPLOYMENT

18. 12-MONTH JOB CHANGE

19. UNEMPLOYMENT

20. HOUSING PERMIT ACTIVITY

21. HOUSING CONSTRUCTION PATTERNS

22. NEW HOUSING SUPPLY WITH ‘SHADOW’ INVENTORY

23. 30-YEAR FIXED MORTGAGE INTEREST RATES

24. POPULATION GROWTH

25. HOUSEHOLD INCOME GROWTH

26. HOUSING MARKET SUMMARY SOUTHERN CALIFORNIA

27. Southern California Housing

30. HOUSING MARKET FIVE-YEAR FORECASTS SOUTHERN CALIFORNIA

31. HOUSING DEMAND AND SUPPLY

32. HOUSING OVER/UNDER SUPPLY

33. HOUSING VALUATION

34. HOUSING OVER/UNDER VALUATION

35. MEDIAN HOME PRICES

37. California Long-Term Forecast Housing Price Appreciation Ideal Land Acquisition = Yr. 2009-10 Ideal Market Entry = Yr. 2011-12

38. SUMMARY AND CONCLUSIONS Southern California’s economy is in turmoil, with unprecedented job losses, but job losses are easing. Housing Construction is at an all-time low. Housing Affordability is an all-time high. Distressed Housing Inventory is burning off at a rapid rate. Significant levels (but not a flood) of distressed land inventory will soon be released. Banks will soon begin to work with Asset Management Teams. Economic growth resumes the latter half of Year 2010. Marginal price appreciation begins in Year 2010, and builds toward another cycle of double-digit appreciation.

39. REE Member Services Monthly National O/R Report Webinar Sponsorship Opportunities Full nationwide real estate consulting services Support for Financial Entities in determining: –Asset Valuation, –Asset optimization, –‘Workout/Build out’ strategies, –Liquidation/Distribution strategies Principal - Mark Robbins Boud mark.boud@realestateeconomics.com (949) 502-5151 x101 Director of Sales and Marketing – Judy Dool Judy.dool@realestateeconomics.com (949) 502-5151 x114 Customer Service - Sandy Rivera Sandy.rivera@realestateeconomics.com (949) 502-5151 x108

40. Mark Robbins Boud mark.boud@realestateeconomics.com REAL ESTATE ECONOMICS 8961 Research Drive Ste 200 Irvine, CA 92618 P: (949) 502-5151 F: (949) 502-5155