U.S. Residential Real Estate Overview

• On the national scale, home sales peaked more than two years ago and we believe we are about two-thirds of the way through this housing correction.

• New home sales will likely bottom out by late spring 2008.

• The demand for housing is derived from the underlying growth in the economy, which is growing. Rising foreign demand for homes is helping offset some of the weakness in the second home demand.

North Carolina – Employment and Income Growth Remain Solid

• North Carolina’s economy is still seeing solid employment gains; however, the unemployment rate has been relatively flat in recent months as low rates in major metro areas are being offset by higher rates in many rural parts of the state.

• North Carolina has seen strong population gains in recent years.

• The state did not experience the same rapid price appreciation during the boom as was seen in some parts of the country. As a result, home prices are holding up relatively well and median prices are roughly in line with the national median.

• New single-family activity has declined from cycle highs, as national builders scale back to bolster their balance sheets.

Charlotte – On a Phenomenal Roll but Slowing Slightly

• Population growth continues to surge throughout the Charlotte area and we expect population growth to accelerate further in 2008.

• Housing activity has come off sharply in recent months as national builders curtailed activity due to slower sales of upper and lower-priced homes.

• Home price growth slowed late last year and we expect prices changes will be flat to modestly up in 2008.

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