1. Meeting your business information needs. Friday at the Beach Economic Update Rick Harper, Director UWF Haas Center January 11 th, 2008

2. Meeting your business information needs. The National Picture: Economic Drivers Slower GDP growth (1% going forward) Housing market correction (consumer spending) Subprime debacle spreads (whose bonds?) Recession risk up (>50% chance) Energy prices / inflation (oil, food up, $ down) Monetary policy (Fed hemmed in, but lowers) Growth abroad (makes up for lower US growth) Trade deficit shrinks (US as bargain basement)

3. Meeting your business information needs. Panama City Outlook 2008/2009: Insurance crisis Housing affordability Growth somewhat faster than national average, fail to close the gap with pre-hurricanes growth rate Real estate market returns to pre-boom quantities, prices still need to fall Unemployment rises Availability of skilled labor

4. Meeting your business information needs. The Housing Market Subprime excesses continue to haunt the housing market – and the broader economy. Pool of potential buyers has contracted sharply. Flow of mortgage credit has slowed to a trickle. Low interest rates won’t cure what ails housing market. Inventory glut will worsen during 2008. Current downturn a blessing and a curse for rental market. It’s not all bad – long-term housing fundamentals remain positive.

5. Meeting your business information needs. thousands of units Source: U.S. Census Bureau, Mission Residential Residential Construction Building permits Housing starts

6. Meeting your business information needs. Non-prime lending sustained the boom

7. Meeting your business information needs. Homeownership rate, % of households, 4-quarter moving average Source: U.S. Census Bureau Homeownership rates rose during the boom

8. Meeting your business information needs. “Active” mortgage equity withdrawal, $ billion, SAAR, 4-qtr moving average Source: Federal Reserve There is still unspent housing equity, but the flow is slowing

9. Meeting your business information needs. Ratio of median house price to median household income, U.S. Source: Moody’s Economy.com, Mission Residential Affordability took a hit during the housing boom

10. Meeting your business information needs. Source: Ken Simonson, AGCA

11. Meeting your business information needs. Source: Ken Simonson, AGC

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22. Meeting your business information needs. Real GDP growth of 2.0% in 2007, 2.1% in 2008. Plenty of downside risks: U.S. consumers fall into full retreat; Credit squeeze evolves into full-blown credit crunch; Energy shocks push prices higher/limit supplies; Congress acts on growing protectionist sentiment, rides to the rescue of the housing market, heals health care; Limited scope for any additional Fed funds rate cuts. Long-term housing fundamentals are positive, but the near- term road will be rocky. Global growth will survive U.S. slowdown, but U.S. recession would be a different matter. Forecast Summary

23. Meeting your business information needs. Questions? Rick Harper, Ph.D. Director