RECENT ECONOMIC ANDRESIDENTIAL MARKET

TRENDS AND FORECAST

PORTLAND METROPOLITAN AREA

TICOR TITLEJanuary 2010

Jerry JohnsonPrincipal

Johnson Reid, LLC

NATIONAL GDP GROWTH

-8%

-6%

-4%

-2%

0%

2%

4%

6%1Q

042Q

043Q

044Q

041Q

052Q

053Q

054Q

051Q

062Q

063Q

064Q

061Q

072Q

073Q

074Q

071Q

082Q

083Q

084Q

081Q

092Q

093Q

094Q

091Q

102Q

103Q

104Q

101Q

11

QUARTER

ANN

UAL

IZED

RAT

E O

F G

ROW

TH

HistoricBaseline Forecast

CONSUMER CONFIDENCE SERIES

0

25

50

75

100

125

150

Dec

-00

Jun-

01

Dec

-01

Jun-

02

Dec

-02

Jun-

03

Dec

-03

Jun-

04

Dec

-04

Jun-

05

Dec

-05

Jun-

06

Dec

-06

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

1985

= 1

00

NEGATIVE EQUITY MORTGAGES

SOURCE: First American CoreLogic, August 2009

RESIDENTIAL LOAN BALANCES THAT WILL EXPERIENCE PAYSHOCK

HOME PRICING TRENDS

SOURCE: Case-Schiller

0

50

100

150

200

250

300

Jan-

87

Jan-

88

Jan-

89

Jan-

90

Jan-

91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

AZ-Phoenix

CA-Los Angeles

CA-San Diego

CA-San Francisco

NV-Las Vegas

WA-Seattle

OR-Portland

National-Standard & PoorsCase-Shiller Home Price Indices

S&P Case-Shiller Index - Portland

100105110115120125130135140145150155160165170175180185190

Mar

-01

Jul-

01

Nov

-01

Mar

-02

Jul-

02

Nov

-02

Mar

-03

Jul-

03

Nov

-03

Mar

-04

Jul-

04

Nov

-04

Mar

-05

Jul-

05

Nov

-05

Mar

-06

Jul-

06

Nov

-06

Mar

-07

Jul-

07

Nov

-07

Mar

-08

Jul-

08

Nov

-08

Mar

-09

Jul-

09

National-Standard & PoorsCase-Shiller Home Price Indices

S&P Case-Shiller Index - Portland

100105110115120125130135140145150155160165170175180185190

Purchased 12/23/05

Area 147 …LO/WL Average Sales Price

West Linn & Lake Oswego Average Price - Sold

$300,000

$350,000

$400,000

$450,000

$500,000

$550,000

$600,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Area 151 …Wilsonville Average Sales Price

Wilsonville/Tigard Area Ave Sold $

$125,000

$150,000

$175,000

$200,000

$225,000

$250,000

$275,000

$300,000

$325,000

$350,000

$375,000

$400,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

COMMERCIAL PRICING TRENDS

SOURCE: MIT

TRANSACTIONS-BASED PRICE INDEX

50

100

150

200

250

300

350

1Q94

1Q95

1Q96

1Q97

1Q98

1Q99

1Q00

1Q01

1Q02

1Q03

1Q04

1Q05

1Q06

1Q07

1Q08

1Q09

Rental Apartments

Industrial

Offi ce

Retail

NATIONAL HOME SALES TRENDS

SOURCE: NAR

FINANCING FOR HOMEBUYERSOCTOBER 2009

SOURCE: Campbell Communications

25%

6%

72%22%

12%

6%

22%

61%

2%32%

21% 20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CurrentHomeowner

First-TimeHomeowner

Investor

All OtherFHAFannie/FreddieCash

YEAR OVER YEAREMPLOYMENT CHANGEPortland Metro Area

SOURCE: OLMIS

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

Jan-

01A

pr-0

1Ju

l-01

Oct

-01

Jan-

02A

pr-0

2Ju

l-02

Oct

-02

Jan-

03A

pr-0

3Ju

l-03

Oct

-03

Jan-

04A

pr-0

4Ju

l-04

Oct

-04

Jan-

05A

pr-0

5Ju

l-05

Oct

-05

Jan-

06A

pr-0

6Ju

l-06

Oct

-06

Jan-

07A

pr-0

7Ju

l-07

Oct

-07

Jan-

08A

pr-0

8Ju

l-08

Oct

-08

Jan-

09A

pr-0

9Ju

l-09

EMPLOYMENT CHANGEBY SECTOR – Portland

Metro AreaSep-08-Sep-09

SOURCE: OLMIS

ABSOLUTE GROWTH

(12,400)

(3,500)

(4,100)

(3,300)

(3,000)

1,300

(6,300)

(1,700)

(2,000)

(11,400)

(12,100)

-20,

000

-15,

000

-10,

000

-5,0

00 0

5,00

0

Construction

Manufacturing

Wholesale Trade

Retail Trade

T.W.U. 1/

Financial Activities

Professional & Business Services

Educational & Health Services

Leisure & Hospitality

Other Services

Government

PERCENT GROWTH

-18.0%

-10.0%

-6.1%

-3.8%

-8.7%

-4.4%

-8.8%

1.0%

-6.2%

-4.5%

-1.4%

-20%

-15%

-10% -5

% 0% 5%

EXPANDING AND DECLINING INDUSTRY SECTORS - OREGON

SOURCE: OLMIS

Nat. Resources

Construction

Wood Products

Metals & Machinery

Electronics

Trans. Equipment

Food

Retail Trade

Wholesale Trade

T/W/Util Information

Finance

Prof. & Bus. Services

Health Services

Leisure & Hospitality

Govt excl Education

Public Education

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-25% -20% -15% -10% -5% 0% 5% 10%Year-over-year % change

Qtr-

to-q

tr %

chan

ge

Contracting Newly Slowing

Newly Expanding Expanding

UNEMPLOYMENT RATEBaseline and with

Discouraged

SOURCE: BLS

0

2

4

6

8

10

12

14

16

18

20

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

PERC

ENT

U-6U-3

NET CHANGE IN POPULATIONPORTLAND METRO AREA

SOURCE: Portland State Pop Center and Washington Office of Financial Management

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

POPULATION BY COUNTYLast Ten Years

SOURCE: Portland State Pop Center and Washington Office of Financial Management

SOURCE: Oregon Office of Economic Analysis, Washington Office of Financial Management, and JOHNSON REID

SHARE OF 10-YEAR POPULATION GROWTH

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Popu

latio

n

Natural Increase

Net Migration

22.4%

24.9%14.5%

38.3%

Clackamas Clark

Multnomah Washington

RESIDENTIAL PERMIT TRENDS

Period20082009YOY Δ

SOURCE: US Census and JOHNSON REID

SINGLE FAMILY DETACHED RESIDENTIAL PERMITSClackamas Clark Multnomah Washington Metro Total

1,713698 817 643 852 3,010

-43%-49% -48% -46% -31%355 428 346 584

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*

Resi

denti

al P

erm

its

Clackamas

Clark

Multnomah

Washington

HOMEOWNER VACANCY RATES – NATIONAL AVERAGE

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

VACA

NCY

RA

TE

SOURCE: Census Bureau

CMA – Vacancy

RENTAL VACANCY RATES – NATIONAL AVERAGE

SOURCE: Census Bureau

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

VACA

NCY

RAT

E

ECONOMIC/DEMOGRAPHIC TRENDS SUMMARY

• CONFIDENCE LOW– High Unemployment– Significant Percentage of Negative Equity

• BANKS WILL REMAIN ON DEFENSIVE– Residential Bust Followed by Commercial Bust– Foreclosures Likely to Continue

• LOCAL EMPLOYMENT TRENDS NEGATIVE– Loss of 60,000 Jobs– Employment Back at 2005 Levels

• PRICING APPEARS TO HAVE FOUND A BOTTOM– Lots of Residential Overhang Remains

OWNERSHIP RESIDENTIAL MARKET

CASE-SHILLER INDEX

SOURCE: S&P/Case Shiller, Seasonally Adjusted

6.0%

4.2%

3.0%

-5.7

%

-9.6

%

-11.

6%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

20-Year 10-Year 5-Year 3-Year 2-Year 1-Year

AZ-PhoenixCA-Los AngelesCA-Los AngelesNV-Las VegasOR-Portland

PORTLAND METRO AREA MEDIAN HOME PRICE

TRENDS

* Based on price trend between 1994 and 2002

SOURCE: Johnson Reid, LLC

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,00019

94

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Med

ian

Pric

e

Median Sale Price

Historic Trendline*

HOUSING TRENDS

PORTLAND METRO AREA MEDIAN HOME PRICE

TRENDS

SOURCE: RMLS and JOHNSON REID

$200,000

$225,000

$250,000

$275,000

$300,000

$325,000

$350,000

$375,000

$400,000

$425,000

Jan-

08

Feb-

08

Mar

-08

Apr-

08

May

-08

Jun-

08

Jul-0

8

Aug-

08

Sep-

08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb-

09

Mar

-09

Apr-

09

May

-09

Jun-

09

Jul-0

9

Aug-

09

Sep-

09

Med

ian

Pric

e

New Construction

New and Existing Homes

PORTLAND METRO AREA MEDIAN HOME PRICE

FORECASTYear-over-Year Price

Change-7.7%

Precent (%) Change from Peak of Bubble

-18.4%

Percent (%) to Return to Trend

-6.0%

Estimated Return to Price Equilibrium

January 2010

STANDING RESIDENTIAL INVENTORY IN MONTHSPORTLAND METRO AREA

SOURCE: Realtors Multiple Listing Service

0

2

4

6

8

10

12

14

16

18

20

Jan-

04

May

-04

Sep-

04

Jan-

05

May

-05

Sep-

05

Jan-

06

May

-06

Sep-

06

Jan-

07

May

-07

Sep-

07

Jan-

08

May

-08

Sep-

08

Jan-

09

May

-09

Sep-

09

MO

NTH

S O

F IN

VEN

TORY

STANDING RESIDENTIAL INVENTORY IN MONTHSPORTLAND METRO AREA

SOURCE: RMLS and JOHNSON REID

NEW CONSTRUCTION ALL HOMES (New & Existing)

0

2

4

6

8

10

12

4Q07

1Q08

2Q08

3Q08

4Q08

3981

4

3984

5

3987

3

3990

4

3993

4

3996

5

3999

5

4002

6

4005

7

Inve

ntor

y (In

Mon

ths)

0

2

4

6

8

10

12

4Q07

1Q08

2Q08

3Q08

4Q08

3981

4

3984

5

3987

3

3990

4

3993

4

3996

5

3999

5

4002

6

4005

7

Inve

ntor

y (In

Mon

ths)

RESIDENTIAL INVENTORYPORTLAND METRO AREA

SOURCE: Realtors Multiple Listing Service

0

5,000

10,000

15,000

20,000

25,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

UN

ITS

20052006200720082008

RESIDENTIAL INVENTORYPORTLAND METRO AREA

SOURCE: Realtors Multiple Listing Service

0

5,000

10,000

15,000

20,000

25,000

Nov

-04

Feb-

05

May

-05

Aug-

05

Nov

-05

Feb-

06

May

-06

Aug-

06

Nov

-06

Feb-

07

May

-07

Aug-

07

Nov

-07

Feb-

08

May

-08

Aug-

08

Nov

-08

Feb-

09

May

-09

Aug-

09

RESI

DEN

TIAL

LIST

ING

S

NEW LISTINGSAND CLOSED SALES

PORTLAND METRO AREA

SOURCE: Realtors Multiple Listing Service

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Nov

-04

Jan-

05M

ar-0

5M

ay-0

5Ju

l-05

Sep-

05N

ov-0

5Ja

n-06

Mar

-06

May

-06

Jul-0

6Se

p-06

Nov

-06

Jan-

07M

ar-0

7M

ay-0

7Ju

l-07

Sep-

07N

ov-0

7Ja

n-08

Mar

-08

May

-08

Jul-0

8Se

p-08

Nov

-08

Jan-

09M

ar-0

9M

ay-0

9Ju

l-09

Sep-

09

UN

ITS

New Listings

Closed Sales

UNIT INVENTORYBY GEOGRAPHY AND TYPE

GEOGRAPHY New Existing AllConstruction1 Homes2 Homes

Clackamas County 150 2,927 3,077

Clark County 175 3,146 3,321

Multnomah County 102 3,828 3,930

Washington County 252 2,919 3,171

TOTAL 679 12,820 13,499

1 Unsold Spec Inventory

2 Current Listings not new construction

SOURCE: RMLS, New Home Trends, and JOHNSON REID

UNIT INVENTORY

RESIDENTIAL INVENTORY TRENDS

Year Clackamas Clark Multnomah Washington Total2003 1,079 2,341 557 2,037 6,014 2004 1,182 2,452 557 2,273 6,464 2005 1,268 2,348 712 2,084 6,412 2006 991 1,126 453 1,210 3,780 2007 834 1,022 379 1,111 3,346 2008 494 686 224 753 2,157

2009* 305 448 132 457 1,342

Year Clackamas Clark Multnomah Washington Total2003 5,580 6,798 10,772 7,877 31,027 2004 5,930 7,335 11,861 8,402 33,528 2005 6,261 7,925 13,210 9,085 36,481 2006 5,313 6,475 10,789 7,394 29,971 2007 4,410 5,138 9,018 6,082 24,648 2008 3,096 3,847 6,430 4,311 17,684

2009* 2,375 3,163 4,546 3,259 13,343

* Year to Date (September 2009)SOURCE: RMLS and JOHNSON REID

NEW CONSTRUCTION

ALL HOMES (new and existing)

STANDING INVENTORY IN MONTHS

1 2 3 4 5 6 7 8 9 10 11 12Months of Inventory at Existing Supply Levels

679

13,499

Exi

ig

nitI

nven

tory

(tt

oSc

ale)

New Construction2.7 - 4.5 months

All Homes9.1 - 11.2 months

STANDING INVENTORYBY PRICE RANGE – SEPT-

09

SOURCE: RMLS and JOHNSON REID

4.9

6.1

6.3

8.0

8.6

9.6

10.3

20.4

3.0

5.2

5.0

6.2

7.3

7.0

9.0

12.6

$100,000 - $149,999

$150,000 - $199,999

$200,000 - $249,999

$250,000 - $299,999

$300,000 - $349,999

$350,000 - $399,999

$400,000 - $499,999

$500,000+

Inventory, (In Months)

3Q09

3Q07

STANDING INVENTORYBY PRICE AND COUNTY –

SEPT-08

SOURCE: RMLS and JOHNSON REID

6.7

6.3

9.4

9.9

9.8

13.8

25.7

5.2

6.3

7.3

8.7

9.4

13.5

14.4

29.8

4.4

5.6

6.5

7.0

7.7

7.8

7.8

15.6

5.5

6.4

5.1

7.9

8.3

9.5

8.2

16.4

6.2$100,000 - $149,999

$150,000 - $199,999

$200,000 - $249,999

$250,000 - $299,999

$300,000 - $349,999

$350,000 - $399,999

$400,000 - $499,999

$500,000+

Inventory, (In Months)

Clackamas

Clark

Multnomah

Washington

RESIDENTIAL LOT INVENTORY

PORTLAND METRO AREATotal Vacant or

COUNTY Recorded Lots Unsold

5,000 2,590

7,270 3,955

1,534 771

5,364 2,881

19,168 10,197 SOURCE: New Home Trends and JOHNSON REID

TOTAL LOT SUPPLY

SHARE OF VACANT AND UNSOLD LOT INVENTORY

CLACKAMAS COUNTY

CLARK COUNTY

MULTNOMAH COUNTY

WASHINGTON COUNTY

Washington(28%)

Clackamas(25%)

Clark(39%)

Multnomah(8%)

ESTIMATED INVENTORY OF LOTS IN MONTHS

SOURCE: Realtors Multiple Listing Service

5 10 15 20 25 30 35 40 45 50 55 60Months of Inventory at Existing Supply Levels

10,197

Exst

ngLo

tIv

nto

yN

otto

Sca

)

Metrowide Inventory24.7 - 47.6 months

PENDING LOT INVENTORYPORTLAND METRO AREA

Prelim FinalCOUNTY Review Approval Review Total

109 2,391 20 2,520

931 5,706 446 7,083

250 155 330 735

987 1,376 55 2,418

2,277 9,628 851 12,756

SOURCE: New Home Trends and JOHNSON REID

TOTAL LOT SUPPLY

SHARE OF UNRECORDED LOT INVENTORY

CLACKAMAS COUNTY

CLARK COUNTY

MULTNOMAH COUNTY

WASHINGTON COUNTY

Washington(19%)

Clackamas(20%)

Clark(56%)

Multnomah(6%)

MARKET CONCLUSIONS• FUNDAMENTALS IMPROVING

– Standing Inventory at 6.5 Months– Very Low New Home Inventory

• THREATS REMAIN ON HORIZON– Pricing Stabilizing, but Foreclosures Coming– Unemployment Too High – Will Peak in 2010

• PRICING POWER LIMITED– Shadow Inventory– Limited Confidence

• CONDO MARKET DEAD UNTIL FURTHER NOTICE

MARKET CONCLUSIONS• FIRST TIME TAX CREDIT

– Less Effective over Time– May be Setting Up FHA for Crash

• CHANGE IN PRODUCT TYPE– First Time Homebuyer Target– Loss in Equity Will Impact Move-Up Markets

• METRO – URBAN GROWTH REPORT– Not Even Trying Anymore– Expect No New Residential Land

PRELIMINARY UGRRESIDENTIAL CAPACITY

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Low Baseline High

New Urban Areas"Subsidized" RefillResidential RefillExisting PlatsENV & Title 13Units Not FeasibleVacant Land