Presentation made to HRP Executive Committee (ExCom) on 17-Oct 08 by ODU Economic Professor Dr. Larry Filer on the current economic crisis and the relationship to Hampton Roads.

1. Dr. Larry Filer
Associate Professor of Economics
Old Dominion University
Norfolk, VA 23529
Hampton Roads Partnership 10/17/2008

2. Hampton Roads Partnership 10/17/2008

3. The Housing Stock in
August of 2008
Housing Stock
$19.3 Trillion
Outstanding • 91.6% Prime
Debt • 8.4% Subprime
$10.6
Equity
$8.7
Source: Federal Reserve Hampton Roads Partnership 10/17/2008

4. Subprime Mortgage Originations
Percent of Percent of Percent of
Subprime Subprime Subprime
MSA
Originated Originated Originated
Dec 2007 Dec 2006 Dec 2005
Hampton Roads 7.4% 29.5% 22.4%
Richmond- 14.4 39.4 22.9
Petersburg
Danville (VA) 8.1 41.1 25.7
Jacksonville (FI) 20.2 31.2 23.9
Charlotte 15.2 34.5 23.0
Orlando 9.3 27.4 19.6
Atlanta 14.9 32.5 25.4
Source: Federal Reserve Hampton Roads Partnership 10/17/2008

5. Subprime Loans per 1000 Units
August 2008
Source: Federal Reserve Hampton Roads Partnership 10/17/2008

6. Share in Foreclosure
August 2008
Source: Federal Reserve Hampton Roads Partnership 10/17/2008

7. ARM Resets
August 2008 – August 2009
Source: Federal Reserve Hampton Roads Partnership 10/17/2008

8. ARM Resets Ending Early 2009
35 40
30.5% 34.1%
30 35
30
25
25
20
20
15
15
10
6.3% 10 7.4%
5 3.3% 5 3.6%
0 0
Next 12 12-23 24+ Next 12 12-23 24+
US VA
Source: Federal Reserve Hampton Roads Partnership 10/17/2008

9. Median Monthly Payment as a Percentage
of Median Monthly Household Income
(Resale Home)
45 U.S. Hampton Roads
40 37.8
35.5 35.9
35
30.8 32.1 33.4
30.1
30 28
26.1
Percent
25 21.5
20
15
10
5
0
1979 1989 1999 2007 2008f
Source: The Old Dominion
University Forecasting Project Hampton Roads Partnership 10/17/2008

10. Hampton Roads Resale Homes Sold
and Average Days on the Market
30,000 100
89
23,553 24,759 90
Average Days on The Market
25,000 80
67 65
Homes Sold
20,000 61 70
19,154 60
18,926
15,000 17,059 50
14,557 40
10,000 30
27 28 20
5,000
10
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008f
Homes Sold Average Days on Market
Source: Real Estate Information Network and
Old Dominion University Forecasting Project Hampton Roads Partnership 10/17/2008

11. Price Changes Across MSA’s
(Conforming Mortgages)
MSA 1 Year change 2nd Quarter 5 Year change
change
Honolulu, HI -0.26% -1.22% 83.50%
Va. Beach- -0.70 -1.21 78.75
Norfolk-NN
Coeur d’Alene, ID -0.37 -0.94 77.46
Flagstaff, AZ -3.10 -1.50 76.83
Miami, FL -10.68 -5.48 75.38
Source: Office of Federal Housing
Enterprise Oversight Hampton Roads Partnership 10/17/2008

12. Risk of Recession
August 2008
MSA Classification
Blacksburg-Christiansburg- In Recession
Radford
Charlottesville In Recession
Danville Recovery
Harrisonburg At Risk
Lynchburg In Recession
Richmond At Risk
Roanoke In Recession
Va. Beach-Norfolk-Newport News Expansion
Washington-Arlington-Alexandria Expansion
Winchester In Recession
Source: Economy.com Hampton Roads Partnership 10/17/2008

13. Hampton Roads Partnership 10/17/2008

14. Securitization of Mortgage Debt
1980 2008
Securitized Held Securitized Held
16%
41%
$958 Billion $11.3 Trillion
59%
84%
Source: Federal Reserve, Milken
Institute Hampton Roads Partnership 10/17/2008

15. Credit Default Swap Market
CDS volume
Trillions of $
70
60 62.2
58
50
40 42
30
20
10 13.9
0
Dec-05 Jun-07 Dec-07 Sep-08
Source: International Swaps and
Derivatives Association, Author’s
calculations Hampton Roads Partnership 10/17/2008

16. The TED Spread
Fed
introduces
Fed introduces PDCF
TSLF
Bear Stearns
hedge funds file
for bankruptcy
Ownit Mortgage becomes first major
subprime lender to file bankruptcy
Fed cuts discount
rate to 2.4% and
Fed Funds rate to
2.25%
Source: Economy.com, Author’s
calculations Hampton Roads Partnership 10/17/2008

17. Commercial Paper Market
Disintegrates
Source: Federal Reserve, Paul
Mizen Hampton Roads Partnership 10/17/2008

18. Senior Loan Officer Opinion
Survey
Net % of Banks Tightening
90
80
70
60
50
40
30
20
10
0
2007 Q4 2008 Q1 2008 Q2 2008 Q3
Large C&I Small C&I Prime Subprime
Source: Federal Reserve Hampton Roads Partnership 10/17/2008

19. Hampton Roads Partnership 10/17/2008

20. House Price Indices
25
20
15
10
5
0
-5
-10
-15
-20
OFHEO Case-Shiller
Source: OFHEO and S&P Hampton Roads Partnership 10/17/2008

21. The TED Spread
Fed
introduces
Fed introduces PDCF
TSLF
Bear Stearns
hedge funds file
for bankruptcy
Ownit Mortgage becomes first major
subprime lender to file bankruptcy
Fed cuts discount
rate to 2.4% and
Fed Funds rate to
2.25%
Source: Federal Reserve, Paul
Mizen Hampton Roads Partnership 10/17/2008

22. The World Slows
Real GDP Growth (PPP basis)
3.5
US Euro Area Japan
3
2.5
2
1.5
1
0.5
0
2006 2007 2008f 2009f 2010f
Source: World Bank Hampton Roads Partnership 10/17/2008

23. Policy Response
 Government  Federal Reserve
 HOPE Now  Fed Funds Cuts
 Housing and  Multiple Lending
Economic Recovery Facilities
Act
 Interest on Required
 Troubled Asset Relief and Excess Reserves
Program
Hampton Roads Partnership 10/17/2008