It’s All About the Price: Washington-W

all

Street -Real Estate and the Economy

Ted C. Jones Chief Economist Stewart Title Guaranty Co.

Recession Recovery

The recovery in every

recession since 1949

has been led by a

recovery in the

housing m

arket

US Civilian Employment

131.0

133.0

135.0

137.0

'07

'08

'09

Millions of Jobs

247 Thousand Jobs Lost in July 2009

6.59 M

illion Jobs Lost Since January 2008

4.864 M

illion Job Losses Since Nov 2008 Elections

US Civilian Employment Job Loss

010

020

030

040

050

060

070

0 '08 J

anFe

b MarAp

r MayJu

nJu

l Aug SepOc

t Nov Dec '09

Jan

Feb Mar

Apr May Jun

r Jul p

Thousands of Jobs Lost Per Month

US Car Sales

05

10

15

20

25

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

Millions –Seasonally-Adjusted Annualized Rate

Cash For Clunkers

•$3 Billion

•$3,500 to $4,500 Per Car ($4,000)

•750,000 Sales

•Less Than ½

US Made Models

1.Ford Focus 6. Ford Escape

2.Toyota Corolla 7. Hyundai Elantra

3.Honda Civic 8. Dodge Caliber

4.Toyota Prius 9. Honda Fit

5.Toyota Camry 10. Chevy Cobalt

Obama Stimulus Plan

$787 Billion Cost

Save or Create 3.5 Million Jobs

Spending

787,000,000,000

$

Jobs

3,500,000

Cost Per Job

224,857

$

Ted’s No-Tax Solution Stimulus

Allow every homeowner that is current

on their loan to refinance at 5

percent

Include all jumbos --No cash out

Make Fannie and Freddie buy all

and guaranty repayment of principle

after three years

Federal Budget Surplus (Deficit)

-$500.0

-$400.0

-$300.0

-$200.0

-$100.0

$0.0

$100.0

$200.0

90

91

92

93

94

95

96

97

98

99

'00

'01

'02

'03

'04

'05

'06

'07

'08

$ Billions

Federal Budget Surplus (Deficit)

-$2,000.0

-$1,800.0

-$1,600.0

-$1,400.0

-$1,200.0

-$1,000.0

-$800.0

-$600.0

-$400.0

-$200.0

$0.0

$200.0

9091929394

9596979899

'00'01'02'03'04

'05'06'07'08f'09f

$ Billions

Deficit Growth Per Household

112.992 Million Households

$11.53 Trillion Current US

Federal Debt

$102,000 US Federal Debt

Per Household

Deficit Growth Per Household

112.992 Million Households

$2 Trillion Deficit 2009

$17,700 Increase in US Debt

Per Household in 2009 Alone

17.4 Percent Increase in 1 Year

Ted’s Solution Stimulus

Force Congress to No Deficit

And then….

Give EVERY Household $10,000

Deficit W

ould Shrink 43.5 Percent

$0

$20

$40

$60

$80

$100

$120

$140

72

75

78

81

84

87

90

93

96

99

'02

'05

'08

4710

13

16

19

Oil Prices

30-Year

Residential

Rates %

Oil Prices & 30-Year Conventional Loan Rates

April 2009 Dollars

$20

$40

$60

$80

$100

$120

$140

'02

'03

'04

'05

'06

'07

'08

'09

$0.85

$1.05

$1.25

$1.45

$1.65

Oil Prices

Dollars

Per

Euro

Oil Prices & Exchange Rates $US Per Euro

Oil inApril 2009 Dollars

Oil Price

Housing

30-Year

Rate

6.0

6.2

‘09

Ted’s Forecast12-31-09

Big 2010

Upside…

LETTER TO THE BANK

Dear Banker,

In view of current developments in the

banking m

arket,

if one of my checks is

returned m

arked ‘insufficient funds',

does that refer to m

e or to you?

Sincerely Yours,

Loans

EXOTIC

$3.5 Trillion in Total

Commercial Loans

$400 Billion to

Refinance

Per Year for Next

10 Years

Commercial Real Estate

“….only $8 billion in significant apartment, industrial,

office and retail had traded. The quarter-over-quarter

pace of decline in volume actually accelerated to 59

percent during the first three m

onths of 2009 from the

already depressed level of transactions at year-end 2008.”

Deutsche Bank analysts said that tougher

underw

riting standards and an eventual 50% drop in

property values would prevent a "vast swath" of

commercial real estate borrowers from refinancing

their loans as they come due over the next four years

.

1. Las Vegas

2. Portland, Ore.

3. Orlando

4. San Diego, Calif.

5. Phoenix

6. Chapel Hill, N.C.

7. Atlanta

8. Madison, Wisc.

9. Youngstown, Ohio

10. Austin, Texas

Top 10 Do-Business Cities

“California remains

one of the top places

to create

asuccessful small

business; all you

need is to have

isasuccessful large

business to begin

with.”

Technology

Analyst

Alaska Jobs

1.58%

1.28%

0.29%

0.47%

-0.32%

-1.00%

1.00%

10 Years

5 Years

3 Years

2 Years

June Comparison Compound Annual Growth Rate

1 Year

1 Year

-5.5%

-3.5%

-1.5%

0.5%

2.5%

4.5%

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

US

Alaska

Percent Change from Same M

onth Prior Year

Alaska Job Growth

1,100 Net Lost Jobs in the Past 12 M

onths

Not Seasonally Adjusted

Anchorage Jobs

1.77%

1.25%

0.52%

0.52%

-0.28%

-1.00%

1.00%

10 Years

5 Years

3 Years

2 Years

June Comparison Compound Annual Growth Rate

1 Year

1 Year

-5.5%

-3.5%

-1.5%

0.5%

2.5%

4.5%

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

US

Anchorage

Percent Change from Same M

onth Prior Year

Anchorage Job Growth

500 Net Lost Jobs in the Past 12 M

onths

Not Seasonally Adjusted

Anchorage

Civilian Unemployment Rate

0.0

2.0

4.0

6.0

8.0

'07

'08

'09

Percent Unemployment Seasonally Adjusted

7.9 Percent

US Existing Housing Sales

75%

100%

125%

'02

'03

'04

'05

'06

'07

'08

'09

2002 Q1 = 100 Percent

National Association of REALTORS®

Washington Housing Sales

50%

75%

100%

125%

150%

'02

'03

'04

'05

'06

'07

'08

'09

2002 Q1 = 100 Percent

National Association of REALTORS®

Florida Housing Sales

50%

75%

100%

125%

150%

'02

'03

'04

'05

'06

'07

'08

'09

2002 Q1 = 100 Percent

National Association of REALTORS®

California Housing Sales

50%

75%

100%

125%

'02

'03

'04

'05

'06

'07

'08

'09

2002 Q1 = 100 Percent

National Association of REALTORS®

Alaska Housing Sales

75%

100%

125%

150%

175%

200%

225%

'02

'03

'04

'05

'06

'07

'08

'09

2002 Q1 = 100 Percent

National Association of REALTORS®

Anchorage Residential Closings

0

100

200

300

400 '0

0

'01

'02

'03

'04

'05

'06

'07

'08

'09

Number Per Month

Anchorage Residential Closings

180

200

220

240

260

280

300 '0

0

'01

'02

'03

'04

'05

'06

'07

'08

'09

Average Number Per Month For Prior 12 Months

Anchorage Months Inventory

01234567 '95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

(Active Listings/Number Sold in Prior 12 Months) x 12

Anchorage Home Prices

$0

$100,000

$200,000

$300,000 2008

July

2009

July

Average Price

Anchorage

Single

Multi

Year

Family

Family

Total

98

1,152

549

1,701

99

783

482

1,265

00

821

369

1,190

01

1,055

910

1,965

02

923

1065

1,988

03

885

1,502

2,387

04

767

1,008

1,775

05

668

998

1,666

06

550

812

1,362

07

309

526

835

08

223

177

400

09p

239

268

507

Residential Building Perm

its

Anchorage

Last 12 M

onths

New Jobs

(500)

Residential Perm

its

507

New Jobs Per Dwelling

(0.99)

Jobs Per Dwelling

Norm

al markets typically create 1.25

to 1.5 net new jobs per new

dwelling unit.

Interest Rates Vs. Price Changes

Original $100,000 Loan

Price Change

0%

-5%

-10%

-15%

-20%

Loan Amount

100,000

$

95,000

$

90,000

$

85,000

$

80,000

$

Interest Rate

Monthly Payment

4.0%

$477.42

$453.54

$429.67

$405.80

$381.93

4.5%

$506.69

$481.35

$456.02

$430.68

$405.35

5.0%

$536.82

$509.98

$483.14

$456.30

$429.46

5.5%

$567.79

$539.40

$511.01

$482.62

$454.23

6.0%

$599.55

$569.57

$539.60

$509.62

$479.64

6.5%

$632.07

$600.46

$568.86

$537.26

$505.65

7.0%

$665.30

$632.04

$598.77

$565.51

$532.24

7.5%

$699.21

$664.25

$629.29

$594.33

$559.37

8.0%

$733.76

$697.08

$660.39

$623.70

$587.01

2009-2010 Economic Concerns

•Wall Street—

Washington--Liquidity

•Tim

e Bomb Loans

•Cold W

ar II—Terrorists

•Pandemic (bird flu…..) 2 years ago forecast

•Inflation (and Cap Rates)--Recession

•Tax Cut Clock Ticking…………….

•Energy: US Imports 63 Percent of Oil

•Real Estate-Autos-Credit Cards-Banks

Ted’s Blog

http://blog.stewart.com/

2009It’s All About the Price

Washington-W

all Street

Real Estate and the Economy

Ted C. Jones PhD

Senior Vice President-Chief Economist

Stewart Title Guaranty Company

Director of Investor Relations

Stewart Inform

ation Services Corporation