1. March 4, 2009 Economic Outlook

2. CCIM Institute 2 Table of Contents I.National Economic Overview II.Residential Real Estate Summary III.North Carolina Appendix

3. CCIM Institute 3 National Economic Overview

4. CCIM Institute 4  With the economy trudging through month fourteen of the recession, this downturn already qualifies as the longest recession since 1981-82. Unfortunately, weakness will persist through this year and perhaps much longer.  Labor markets continue to struggle—job losses have exceeded 3.5M. We expect total losses will top 6.5M before the end of the cycle. The unemployment rate may exceed nine percent by the end of the year.  With the global recession intensifying and asset prices declining, inflation concerns have turned to deflation concerns. Wachovia U.S. Economic Forecast Highlights The U.S. Will Continue to Struggle through a Long and Deep Recession for Months to Come U.S. Economic Overview Source: Federal Reserve Board, U.S. Department of Commerce, U.S. Department of Labor and Wachovia National Economic Overview

5. CCIM Institute 5  Real "core" GDP, or private domestic final sales, lines up with the recession and shows the persistent weakness in the domestic economy more clearly than GDP. The measure has been negative in four of the last five quarters and we expect it will continue to contract until early 2010.  The nation's trade balance added significantly to growth in 2008. Export growth remained strong for most of the year while the domestic economy weakened. However, by year-end both export and import activity were collapsing; on net we see little impact from trade on GDP in 2009.  Inventory growth has been weak for some time, yet businesses have shown indications of unintentional builds. We expect massive liquidations in coming months as retailers and manufacturers alike cut back.  Nominal GDP, a measure of revenue growth for the economy, will likely continue to fall, having already seen the steepest decline since 1958. Highlights The Domestic Economy Has Been and Will Continue to Be Extremely Weak U.S. Economic Overview Source: U.S. Department of Commerce and Wachovia National Economic Overview

6. CCIM Institute 6 Consumer Overview Consumer Spending Is Plunging at Unprecedented Rates, but Gains may Return by the Second Half  Collapsing Labor Market  The torrent of layoffs and job losses is unlikely to abate before year-end.  Housing & Home Equity  Housing prices and home equity are falling, weighing on consumer spending and sentiment.  Consumer Confidence  Nervous consumers are in no mood to shop for big ticket items.  Declining Energy Prices  Positives are few and far between for U.S. consumers, thus the declines in energy prices in late 2008 were a welcome respite.  Fiscal Stimulus  A reduction in payroll withholdings may provide a lift to take-home pay by mid-year. Negative Discretionary Consumer Spending Positive Source: U.S. Department of Commerce and Wachovia National Economic Overview

7. CCIM Institute 7  Credit markets have begun a slow thaw and the TED spread, one of our favorite measures of fixed income market stress, has fallen to its lowest level since last summer. The risk for new shocks still remains, however.  Credit remains expensive for businesses and consumers alike and is extremely constrained.  Mortgage rates have been volatile in recent weeks. Lower rates have the potential to speed a housing bottom, but credit availability remains a major concern. Highlights We are not of the Woods yet, but Some Signs are Looking Up Credit Spreads & The Yield Curve Source: Bloomberg LP, Federal Reserve Board, Freddie Mac, Wachovia Securities and Wachovia National Economic Overview

8. CCIM Institute 8  The global economy will likely contract for the first time since IMF records began.  Weakness in Europe may even exceed that of the U.S., with the Euro-zone and the U.K. now both in recession. Central banks across Europe have cut their policy rates aggressively in response.  The dollar should continue to grind higher against most major currencies over the next year, but may give back all of those gains over the following year. Wachovia Major Currency Forecast Highlights The Global Recession Intensifies Global Growth and the Dollar Source: Bloomberg LP, Federal Reserve Board, International Monetary Fund and Wachovia National Economic Overview

9. CCIM Institute 9 Residential Real Estate Summary

10. CCIM Institute 10  We estimate that an overbuild of 2.0M units occurred at the peak, and unfortunately little progress was made in reducing inventories in 2008 despite the collapse in construction. This will continue to pressure both new construction activity and prices.  Housing starts have fallen to record lows—less than a fourth of the peak rate from 2006. While we are closing in on a bottom, declines have not stopped quite yet. We are probably two years away from seeing starts back above one million units.  Excess supply from builders and the rising tide of foreclosed properties has driven prices sharply lower. We expect the pace of declines to moderate in coming months, and we do not expect to see housing prices bottom out until the second half of this year or the first half of 2010 at the earliest. Residential Real Estate Summary Construction May Bottom in the Coming Months, but That Will Not Be the End of the Problems for Housing Homebuilding Highlights Wachovia Housing Outlook Source: Federal Housing Finance Agency, National Association of Realtors, S&P Corp, U.S. Department of Commerce and Wachovia Residential Real Estate Summary

11. CCIM Institute 11  New home sales fell sharply during the latter part of 2008 despite lower mortgage rates and incentives from builders. Unfortunately, sales will continue to struggle in the first half.  Existing sales held up better, but since such a large proportion were distressed, sales could actually fall sharply if foreclosure moratoriums and other efforts to modify existing mortgages gain traction. We would not necessarily see that as a bad thing.  Affordability measures soared to multi- decade highs as mortgage rates and median home prices fell rapidly. The near-term relevance of the measure has diminished because prices are being pushed lower by foreclosure activity, and tighter credit standards mean fewer consumers have access to today’s lower rates.  Credit standards remain exceptionally tight for all types of borrowers—about half of loan officers indicated they were still tightening standards in the first quarter, despite all of their previous tightening. The continued caution is understandable given the rise in delinquency rates and foreclosures. Highlights Residential Real Estate Summary While Construction May See a Trough in Coming Months, Prices Will Continue to Decline for Some Time Residential Real Estate Source: Federal Reserve, National Association of Realtors, S&P Corp, U.S. Department of Commerce and Wachovia Residential Real Estate Summary

12. CCIM Institute 12 FHFA (OFHEO) Home Price Index Home Price Declines Have Become Quite Pervasive and are Likely to Continue into 2010 Home Price Declines From Peak Source: FHFA and Wachovia Residential Real Estate Summary

13. CCIM Institute 13 North Carolina

14. CCIM Institute 14  North Carolina’s unemployment rate has spiked significantly higher over the past year. While labor force growth has contributed to the rise, layoffs will continue to mount going forward.  North Carolina saw near-record population gains again in 2008, with the Charlotte and Raleigh-Durham regions leading the way.  With the exception of some coastal areas, the state did not experience the same rapid price appreciation during the housing boom as was seen in other parts of the country. Home prices just barely rose in the fourth quarter after a notable decline in the third. We do not expect meaningful growth anytime in 2009.  New single-family building activity has declined considerably from cycle highs as local and national builders have scaled back to bolster their balance sheets and reduce inventories. Highlights Unemployment and Housing Cool the Economy North Carolina Source: Federal Housing Finance Agency, U.S. Department of Commerce, U.S. Department of Labor and Wachovia North Carolina

15. CCIM Institute 15  The labor market has shown considerable weakness in Greensboro since late 2007. Employment growth has turned negative, and the unemployment rate has risen more than two percentage points in just six months, now sitting well above the national average.  New activity has slowed significantly in the housing market, but not to the same degree that it has in the bubble markets. The Triad did not see the same run-up in activity or prices during the boom time and thus should avoid some of the fallout. However, prices in the fourth quarter declined at an alarming six percent annual rate.  Population growth remains steady in the Greensboro metro area, which added near record numbers in both 2006 and 2007. Relatively attractive labor and housing markets brought employers to the area. Highlights Greensboro Source: Federal Housing Finance Agency, U.S. Department of Commerce, U.S. Department of Labor and Wachovia North Carolina Unemployment Is a Growing Concern

16. CCIM Institute 16  Winston-Salem has seen a spike in the unemployment rate in recent months. The labor market has clearly weakened over the past year. The recent spike in the jobless rate likely reflects a moderation in overall job growth coupled with still steady labor force growth.  Nonfarm employment declined late last year, with layoffs in manufacturing and construction offset by gains in education and health care.  Home prices are moderating and likely to decline between 5 and 10 percent peak-to-trough  New home construction has fallen to the lowest level in the modern era, reflecting tightening credit conditions  Population growth continues to support Winston-Salem. This will benefit businesses in the future. Highlights Winston-Salem Source: Office of Federal Housing Enterprise Oversight, U.S. Department of Commerce, U.S. Department of Labor and Wachovia North Carolina

17. CCIM Institute 17 Appendix

18. CCIM Institute 18  Monthly Economic Outlook  Weekly Economic & Financial Commentary  Special Reports  Economic Indicators  Global Economic Commentary  Federal Reserve Commentary  Real Estate & Housing  Consumer & Retail  Chief Economist List  To join any of our research distribution lists please visit our website:  http://www.wachovia.com/economicse mail http://www.wachovia.com/economicse mail Distribution ListsRecent Special Commentary A Sampling of Our Recent Special, Regional & Industry Commentary Economics Group Publications Appendix

19. CCIM Institute 19 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 Economics Group Coverage Economics Group Real Estate Tech, Media & Telecom Consumer & Healthcare Industrial Growth Energy & Power Financial Institutions Appendix

20. CCIM Institute 20 Economics Group John E. Silvia, Ph.D. Chief Economist  john.silvia@wachovia.com john.silvia@wachovia.com  U.S. Macro Economy  Interest Rates  Monetary Policy Mark Vitner Senior Economist  mark.vitner@wachovia.com mark.vitner@wachovia.com  U.S. Macro Economy  Real Estate  Regional Economics Jay H. Bryson, Ph.D. Global Economist  jay.bryson@wachovia.com jay.bryson@wachovia.com  Global Economies  Foreign Exchange Sam Bullard Economist  sam.bullard@wachovia.com sam.bullard@wachovia.com  Desk Operations  Financial Services Anika Khan Economist  anika.khan@wachovia.com anika.khan@wachovia.com  U.S. Macro Economy  Real Estate  Retail & Automotive Azhar Iqbal Econometrician  azhar.iqbal@wachovia.com azhar.iqbal@wachovia.com  Quantitative Macro- Economic Modeling Adam G. York Economic Analyst  adam.york@wachovia.com adam.york@wachovia.com  U.S. Macro Economy  U.S. Consumer  Real Estate Tim Quinlan Economic Analyst  tim.quinlan@wachovia.com tim.quinlan@wachovia.com  U.S. Macro Economy  Business Investment  Global Economies Kim Whelan Economic Analyst  kim.whelan@wachovia.com kim.whelan@wachovia.com  U.S. Macro Economy Yasmine Kamaruddin Economic Analyst  yasmine.kamaruddin@wachovia.com yasmine.kamaruddin@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. © 2009 Wachovia Appendix