Housing Industry Outlook

Creating New Opportunities with21st Century Solutions

Vaughn D. Irons, CEOAPD Solutions

October 7, 2009

This presentation is a conglomeration of information and details provided by multiple sources including:

•MD Sass/Waterfall Asset Management•Morgan-Stanley•Standard & Poors•Goldman Sachs•Duetsche Bank•Brookings Institute•Pew Center for Social Research

Housing Industry Outlook

Who is APD Solutions?

Firm Background

APD Solutions is a National Neighborhood Revitalization Firm created to meet the current housing industry challenges

Affiliated with APD, Inc. established in 1990 with the help of the FDIC and Resolution Trust Corp. (RTC)

National reputation in developing redevelopment strategies for low-to-moderate, historic and minority neighborhoods

Experience

Over 225 years experience in housing, finance, affordable programs and neighborhood development

APDS Company Profile

Our Core Values

For us it isn’t only important what we do… but also why we do it.

Community Development

Consulting

Acquisition andAsset Management

NeighborhoodProgram Design and

Oversight

Sub-serviceProviders*

Real Estate &DispositionStrategies

SociallyResponsible

Investing

What We Provide

Urban &Neighborhood

Planning

Our Clients

Real Estate Market Performance

Unprecedented Housing Crisis:• Foreclosures have increased by 71% since last year

• 1.2 million REOs by the end of 2008

• 2 million foreclosures in the first 6 months of 2009

• Only 325,000 modifications

Enormous Impact on Entire Communities:• 40.6 million homes in neighborhoods surrounding foreclosed

homes will suffer price decline

• $352 billion total decline in property values

• Localities will lose $4.5 billion in property taxes and other local tax revenue

Recap of the Last Year

“It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”

Charles Darwin

Old Views and Skills Won’t Work in the Future

Real Estate Performance•Market Recovery Projections•Foreclosure Focus•The Impact on Home Price Appreciation

The Impact of “In” Migration•The South is the biggest beneficiary •Georgia is #1 African-American

Household Growth (11% or 1.2mm HH/yr)•Childless households•Racial/ethnic household changes •Immigrant household growth

Presentation Overview: Future Trends

Projections of Market Recovery

Foreclosed Properties Up to 40% of Transactions

2010-2011 Price Forecast

Focus on Pre-2003 Purchasers

Considering The Shadow Inventory

Foreclosed Properties Create More AffordabilityPrice to Income - Foreclosed

Affordability for Existing Homes Still a ChallengePrice to Income - Existing

The Negative Equity Issue

Rising Home Inventory Levels

have not been met with Rising Demand, as

“Prime” Loan Underwriting

Guidelines have tightened,

excluding many borrowers from

qualifying.Today homebuyers are being asked to qualify with 700 minimum credit scores, 5% down, sufficient reserves, 33/41 debt to income ratios, and stellar credit history.

Yesterday homebuyers were being asked to qualify with 580-600 minimum credit scores, 0% down, no reserves, and 45 debt to income ratios.

Qualified Buyer Pools are Much Smaller

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Apr '07

Mar '07

Jun '07

Jul '07

Aug '07

Sep '07

Oct '07

Nov '07

Dec '07

Jan '08

Feb '08

Mar '08

Apr '08

REO Liquidation REO from Foreclosures

2009

Yet the Banks are only finding Buyers for roughly 10% of the unsold home inventory…

New Demographic Shifts

Understanding Household Growth

Racial & Ethnic Minorities• Racial and ethnic minorities account for large

share of household growth• Minorities will account for 65% of net household

growth• Hispanic and Asian household growth will account for

the largest share of the minority increase• Because they are younger, minorities will constitute

large part of first-time homeownership demand• Minority homeownership rate has dropped

due to foreclosures

Household Growth This Decade (2000-2010)

-1,900

6,177

1,104 1,263

2,320

1,2721,076659

-4,000

-2,000

0

2,000

4,000

6,000

8,000

Age Under 55 Age 55 and Over

Age of Household Head

Thou

sand

s of

Hou

seho

lds

White

Black

Hispanic

Other

Educational Attainment Impacts Homeownership

Immigration Still an Opportunity• 11% of U.S. population is foreign-born

• 44% of foreign-born have entered the U.S. since 1990 (relative newcomers)

• 27% of total household growth in next decade will result from immigration

Immigration will be concentrated in Gateway Regions

• Hispanic household growth will be largest contributor

51% of foreign-born are from Latin America

CA Immigrant Growth

The Number vs. Percentage

Changes in Households (2000 to 2010)

5,276

-76

-11

1,023

4,948

572

-500

500

1,500

2,500

3,500

4,500

5,500

6,500

Th

ou

san

ds

of H

ou

seh

old

s

Married, Childless

Married, Children

Single Parents

Other Family

Single Person

Other Nonfamily

Changes in Households Beyond 2010

Childless Households Dominate Growth

So What… Now What?

How Can APDS Help?

Acquisition

Asset Management

Disposition

Acquisition DispositionAsset

Management

Overall Program Design

Continuity of Responsibility

31

Property Acquisition Services (BuySmart)

Atlanta Sample MapFor Waterfall A.M.Pre Portfolio Acquisition

45 units

32

Sample of APD Mapping and GIS Capabilities

33

Sample of APD Tracking and Targeting Capabilities (Chattanooga)

34

Sample of APD Tracking and Targeting Capabilities (Chattanooga)

Community Participation

Accountability

Socially Responsible Options

Targeted Intervention/Clustering4

3

2

1

Two-Pronged Marketing Approach

Aggressive Implementation7

6

5Rehabilitate a superior product

APDS Property Disposition Principles

The APDS Approach

Force Everything to Work Together

APDS Housing Programs

Galvanized

Disposition

TypicalHousing Programs