The document summarizes the current state of the U.S. economy, housing market, and mortgage industry. It finds that while economic growth is positive, it is weak, and employment and consumer inflation are concerns. The housing market is stabilizing in many metro areas as excess supply declines and affordability rises, though prices remain depressed. Subprime lending disproportionately impacted African American homeownership rates, though rates have remained steady overall. Improving affordability will be key to sustaining the market's recovery.

1. The Current Status and Outlook for the U.S. Economy, Housing and Mortgage Markets Specially Prepared for: The 61 st Annual NAREB Convention Memphis, TN Presented by: LaVaughn M. Henry, Ph.D. Director, U.S. Economic Analysis Economics & Strategy Group August 9, 2008

3. The National Economy

4. GDP Growth is Positive, but Weak

5. Employment Growth is Under Growing Pressure, but Strong by Historical Standards

6. Consumer Inflation is Rising and the Outlook Remains Uncertain

7. Consumer Inflation is Being Driven by Continuing Increases in Food and Energy Prices

8. Consumer Confidence has fallen, but Spending has not fallen dramatically…Yet

9. As Real Estate Loan Delinquencies and Charge-offs have Risen…

10. Growth in Bank Credit has Gone to Zero.

11. Regional Housing Markets

13. Actual Decline Percent vs. Predicted Percent 4 th Qtr 1986 to 3 rd Qtr 2005 Risk Rank 5 Risk Rank 4 Risk Rank 3 Risk Rank 2 Risk Rank 1

14. Geographic Distribution of House Price Risk 1 st Quarter 2008 - 1 st Qtr 2010

16. Four Characteristic MSAs Chicago Miami Washington, DC Dallas

18. Excess Housing Supply is Falling Source: Census Bureau / Moody’s Economy.com

19. MSA Comparisons of Excess Housing Supply Source: Census Bureau / Moody’s Economy.com

21. Housing Affordability is Rising Source: Census Bureau / Moody’s Economy.com

22. MSA Comparisons of Housing Affordability Source: Census Bureau / Moody’s Economy.com

24. House Price/Rent Ratios are Coming back into line with Historical Standards Source: National Association of Realtors / HUD / Moody’s Economy.com

25. MSA Comparison of Housing Price-to-Rent Ratios Source: National Association of Realtors / HUD / Moody’s Economy.com

27. Existing Home Sales are Flattening Out, but at Significantly Lower Levels Source: National Association of Realtors / Moody’s Economy.com

28. MSA Comparison of Existing Single Family Home Sales Source: National Association of Realtors / Moody’s Economy.com

30. House Prices are still Declining in General, but the Rate of Decline is Slowing in Many Areas Source: Loan Performance Corporation

31. MSA Comparison of House Price Appreciation Source: Loan Performance Corporation

33. Unemployment is Rising in Many Sectors of the Economy Source: Bureau of Labor Statistics

34. MSA Comparison of Civilian Unemployment Rates Source: Bureau of Labor Statistics

36. Foreclosures are Rising at Record Rates Source: Mortgage Bankers Association

37. The State of the African-American Housing Market

38. Homeownership Rates have Remained Fairly Steady for All Ethnic Groups…Despite

39. … The Growth in Subprime Lending. Percent of Conventional Mortgage Loans by Subprime Lenders By Race and Ethnic Group, 2005