2009 Economic Forecast Presentation by David Fair and Hexter Fair Title. Agents attended the seminar from Southlake Texas, Flower Mound Texas,Highland Village Texas,Frisco Texas,Coppell Texas and other surrounding cities

1. DFW Real Estate
“State of the Market”
David Fair & Britt Fair
Hexter-
Hexter-Fair Title Company
January 28, 2009

2. Roadmap of Today’s Discussion
p y
Current state of the DFW housing market
The big difference between the DFW
economy and housing market and those of
y g
the rest of the US
The “ace in the hole” for housing
ace hole
Conclusions

3. “State of the Market”
The most important word is “certainty”
The current economic uncertainty keeps people/businesses
from making big decisions, such as purchasing a home
Last Tuesday’s inauguration is first step to “certainty”
Ongoing government i
O i intervention i another k to
i is h key
repairing “certainty”
Bailouts of Wall Street firms (including Bank of America this
( g
month) to help keep liquidity in the market
Infusion in other areas (automakers, secondary mortgage
market, etc.) trying to stimulate economy and maintain jobs
, )yg y j
Foreclosure relief plan to help consumers is likely in next
tranche of TARP money

4. Today’s Market
NTREIS S l – YTD D ‘08
Sales Dec‘08
% Change % Change Average % Change
# of vs. Prior Average vs. Prior Days on vs. Prior
Sales Year Sale Price Year Market Year
S. Denton County 3,521 -21% $239,322 -4% 70 19%
N.
N Denton County 2,610
2 610 -12%
12% $151,098
$151 098 -5%
5% 75 -3%
3%
Frisco 2,790 -10% $295,517 1% 89 16%
Plano 3,429 -16% $274,276 -1% 68 24%
The Colony 523 -13% $149,272 -2% 69 19%
Carrollton/F.Branch 1,647 -11% $191,783 6% 61 11%
Coppell 530 -20% $312,513 7% 54 13%
Colleyville 373 -19% $515,652 -3% 73 18%
Grapevine 486 -16% $247,593
$247 593 3% 51 13%
Keller 750 -19% $339,281 5% 81 27%
Southlake 485 -19% $634,944 3% 78 10%
Trophy Club / Westlake 164 -15% $472,345 3% 85 25%

5. Today’s Market, cont’d
DFW S l YTD D ’08 (
Sales Dec’08 (page 1)
# sales YTD % change vs.
(12 mos 2008) prior year
i
Sale P i R
S l Price Range
$1 to $19,999 757 45%
$20,000 to $29,999 1225 40%
$30,000 to $39,999 1669
669 3%
32%
$40,000 to $49,999 1998 12%
$50,000 to $59,999 2042 0%
$60,000 to $69,999 2429 -2%
$70,000 to $
$ $79,999 2,937 -7%
$80,000 to $89,999 3,376 -14%
$90,000 to $99,999 3,493 -15%
$100,000
$100 000 to $109 999
$109,999 3,350
3 350 -21%
$110,000 to $119,999 4,051 -20%
$120,000 to $129,999 4,488 -18%
$130,000 to $139,999 4,125 -18%
$140,000 to $149,999 3,661 -17%

6. Today’s Market, cont’d
DFW S l YTD D ’08 (
Sales Dec’08 (page 2)
# sales YTD % change vs.
(12
( mos 2008) ) p
prior year
y
Sale Price Range
g
$150,000 to $159,999 3,354 -20%
$160,000 to $169,999 3,109 -21%
$170,000 to $179,999 2,775 -19%
$180,000
$180 000 to $189 999
$189,999 2,429
2 429 -15%
$190,000 to $199,999 1,975 -17%
$200,000 to $249,999 7,323 -15%
$250,000 to $299,999 4,777 -13%
$300,000 to $399,999
$300 000 t $399 999 4,921
4 921 -18%
18%
$400,000 to $499,999 2,194 -17%
$500,000 to $599,999 1,003 -18%
$600,000 to $699,999 661 -17%
$700,000 to $799,999 452 -18%
$800,000 to $899,999 258 -27%
$900,000 to $999,999 185 -20%
$1,000,000
$1 000 000 and more 822 -11%
11%
Total 75,839 -14%

7. NTREIS Dollar Volume S ce 2004
S o a o u e Since 00

8. Interest Rates Near Historic Lows
te est ates ea sto c o s
Conforming rates have fallen to 5% and below
below,
down from over 6% a year ago
Decline in conforming rates driven by US Treasury’s
purchase of $50 billi i 4Q’08 and F d will
h f billion in 4Q’08, d Fed ill
purchase $500 billion in first half of 2009
Many experts p j
yp project these secondary market p
y purchases
by the US government will drive rates to 4.5% and below
Refi boom is currently starting, which then works its way
through economy, but not as many p p or homes will
g y y people
qualify as in last refi boom
Jumbo rates have not fallen as fast as those of
conforming loans

9. Sep’07 Spike in “Jumbo Spread”
Source: Freddie Mac & HSH Associates

10. Sp e
Spike in “Jumbo Spread”
Ju bo Sp ead
Spread between conforming and jumbo rates
continues to be much larger than normal
158 b spread on 1/26/09 per b k t
b.p. d 1/26/09, bankrate.com
(7.00% versus 5.42% conforming)
Increased spread likel slo ing do n some
likely slowing down
qualified homebuyers in higher price ranges
The spread will eventually return to a more
normal range with the return to “certainty”

11. Strong DFW economy keeps real
g y p
estate values up
Strong job creation
Continuing corporate and individual
g p
relocations
Oil & gas industry especially in the Barnett
industry,
Shale!
Barnett Shale created 83k jobs in 2007 and
generated $8.2 billion into the local economy

12. Employment Changes - 1/08 to 12/08, pg
py g / / , pg.1
Prelim Dec. Year/Year
Dec. 2007 2008 Change
State
Alabama 2,018,000 1,976,300 ‐41,700
Arizona 2,659,300 2,543,900 ‐115,400
Arkansas 1,206,400 1,187,700 ‐18,700
California 15,171,000 14,913,600 ‐257,400
Connecticut 1,706,500
1 706 500 1,677,200
1 677 200 ‐29,300
29 300
Florida 8,039,400 7,784,200 ‐255,200
Georgia 4,159,700 4,041,300 ‐118,400
Hawaii 626,000 612,600 ‐13,400
13,400
Idaho 657,300 628,800 ‐28,500
Illinois 5,986,500 5,885,800 ‐100,700
Indiana 2,994,900 2,883,000 ‐111,900
Kentucky 1,880,000 1,843,200 ‐36,800
Maine 619,800 608,100 ‐11,700
Michigan 4,227,600 4,054,600 ‐173,000
Minnesota 2,776,300 2,720,400 ‐55,900
Source: US Bureau of Labor Statistics

13. Employment Changes - 1/08 to 12/08, pg
py g / / , pg.2
Prelim Dec. Year/Year
Dec. 2007 2008 Change
State
Mississippi 1,154,600 1,128,400 ‐26,200
Nevada
N d 1,293,300
1 293 300 1,261,100
1 261 100 ‐32,200
32 200
New York 8,781,100 8,661,200 ‐119,900
North Carolina 4,187,700 4,067,500 ‐120,200
Ohio 5,418,700
5 418 700 5,329,700
5 329 700 ‐89,000
89 000
Oregon 1,740,600 1,695,200 ‐45,400
Pennsylvania 5,808,300 5,732,100 ‐76,200
Rhode Island 490,800 468,800 ‐22,000
22,000
South Carolina 1,958,100 1,903,900 ‐54,200
Tennessee 2,806,800 2,742,700 ‐64,100
Texas 10,475,100 10,628,800 153,700
Utah 1,264,800 1,237,700 ‐27,100
Vermont 308,500 302,700 ‐5,800
Washington 2,958,300 2,920,200 ‐38,100
Wisconsin 2,882,100 2,819,500 ‐62,600
Source: US Bureau of Labor Statistics

14. Job creation 12/07 to 11/08
/ /
US Metro Areas
12-Month Job
Rank Metro Area Growth
1 Houston-Sugarland-Baytown 54,300
2 Dallas-Fort Worth-Arlington 46,900
3 Washington-Arlington-Alexandria
Washington Arlington Alexandria 31,100
31 100
4 Seattle-Tacoma-Bellevue 19,900
12 Month
12-Month
Rank Metro Area Growth Rate
1 Houston-Sugarland-Baytown 2.10%
2 San Antonio 2.00%
3 Austin-Round Rock 1.60%
4 Dallas-Fort Worth-Arlington 1.60%
5 Virginia Beach-Norfolk-Newport News 1.50%
Source: US Bureau of Labor Statistics

15. Positive signs in DFW housing
g g
5.7 months’ inventory on home resale listings
Six months is generally considered equilibrium
g y q
Continued population growth offers support
DFW has only 3 1 months’ inventory of new
3.1 months
home (finished and vacant) inventory, per
Metrostudy
Builders have shown significant restraint in
keeping housing starts low

16. PMI U.S. Market Risk Index:
US
DFW steady despite US uncertainty
On 1/14/09, The PMI Group released a study which
measures the riskiness of the 50 largest MSAs in the US
Risk measured as the % chance that home prices will be
lower in 2 years
The 5 markets with the highest risk:
g
1. Riverside, CA: 99.9% chance of price decline
2. Miami, FL : 99.9% chance of price decline
3. Fort Lauderdale, FL: 99.8% chance of price decline
4. Los Angeles, CA: 99.8% chance of price decline
5. West P l B
5 W t Palm Beach, FL 99.6% chance of price decline
h FL: 99 6% h f i d li

17. PMI U S Market Risk Index, continued:
U.S. Index
DFW steady despite US uncertainty
The 5 MSAs with the lowest risk of a price
decline in the next two years:
46.San Antonio : 1% chance
47.Pittsburgh,
47 Pittsburgh PA: <1% chance
48.Houston-Sugar Land-Baytown: <1% chance
49.Fort Worth-Arlington: <1% chance
49 F t W th A li t 1% h
50.Dallas-Plano-Irving: <1% chance

18. S&P Case-Shiller Index:
Case-
DFW flat relative to national price declines
Monthly analysis of price changes in 20 major
US markets
November’s price index released 1/27/08
Showed that NATIONAL prices had
declined by a record 18.2% year over year
However, Dallas area had just a 3.3% price
decline over that same period, which was
the best of the 20 markets measured

19. Housing’s “Ace in the Hole”
Inflation!!!
Typically considered to be something bad
yp y g
In fact, the Fed’s mandate is quot;to promote effectively the
goals of maximum employment, stable prices, and
moderate long term interest rates
long-term ratesquot;
However, today’s economic environment is
anything but typical
We are currently experiencing “DEFLATION”, which
governments hate even more than inflation

20. Housing’s “Ace in the Hole”, cont’d
How i fl i will ultimately l
H inflation ill l i l loom over us
US leaders (Congress, President, Treasury Secretary, the Federal
Reserve, etc.) doing everything possible to keep economy from
collapsing
Original $700 billion bailout
$350 billion for equity investments in banks
Remaining $350 billion to make other investments
Tax rebate(s) of 2008
Lowered Fed Funds rate to 0.25%
Obama’s $850 billion “second bailout” announced in mid-January
Fed’s balance sheet has climbed from $850 billion to $2.25 trillion in two
months, with promises to spend $1 trillion more
The same thing is happening in many nations across the globe
Governments are printing money and throwing it at the problem!!!

21. Housing’s “Ace in the Hole”, cont’d
How inflation will help real estate
The value of commodities (gold, real estate, oil,
etc.) rises without any i
t)i ith t increase i underlying
in d l i
demand
Because real estate is typically purchased with the
leverage of a mortgage, this inflation will provide a
higher percentage return than other commodities
Such a rise will actually “bail out” many
homeowners who are “under water” on their
mortgages, p
g g , preventing future foreclosures
g

22. Housing’s “Ace in the Hole”, cont’d
Why governments might err toward inflation
Individuals on the brink of foreclosure get “bailed
out” without anyone having t go on record voting
t” ith t h i to d ti
for it
Banks get bailed out because their distressed
assets gain in value before they have to be
marked to market
Additional benefit of minimizing impact of defined
future payments (automaker pensions, Social
Security,
Security national debt payments etc )
payments, etc.)

23. Housing Market Crystal Ball
January always is the slowest month for residential sales
Seasonal uptick begins thereafter
Construction to remain sluggish until summer
Building rebound date dependent on each neighborhood s
neighborhood’s
supply/demand
Inflationary pressures toward the end of 2009 will make real
estate in stable markets like DFW an excellent i
t t i t bl k t lik ll t investment
t t
As “certainty” (from federal bailouts, interest rates, job security,
inauguration, etc.) returns over the coming months, DFW
residential market is poised to rebound in the spring of 2009
National market will not rebound until 2010