1. Austin Area
Local Market Report, Third Quarter 2009
Today's Market…
Median Price (Red Line) and One-year Price Growth
$250,000 12%
10%
$200,000 8%
6%
$150,000
4%
2%
$100,000
0%
$50,000 -2%
-4%
$0 -6%
2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009
Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3
Austin U.S. Local Trend
Price Activity
Current Median Home Price (2009 Q3) $189,100 $177,900
Prices are down compared to a year
1-year Appreciation (2009 Q3) -0.9% -11.7% earlier and continue to weaken
3-year Appreciation (2009 Q3) 7.7%
7 7% 0.5%
0 5%
3-year (12-quarter) Housing Equity Gain $13,600 $867 This area has held onto a modest
7-year (28 quarters) Housing Equity Gain $32,100 -$45,900 improvement in equity despite the market
9-year (36 quarters) Housing Equity Gain $38,100 $3,467 decline
Conforming Loan Limit* $417,000 $729,250 Most buyers in this market have access
Local Median to Conforming Limit Ratio 45% not comparable to government-backed finacing
*Note: the 2009 loan limits for FHA and the GSEs were extended through 2010.
State Home Sales (Red Line) and Sales Growth
1,000s
700 25%
20%
600
15%
500 10%
400 5%
0%
300 -5%
200 -10%
-15%
100
-20%
0 -25%
2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009
Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3
Home Sales and Construction Growth Texas U.S.
Sales growth during the third quarter
State Existing Home Sales
-1.9% 5.9% remains sluggish compared to the
(
(2009 Q3 vs 2008 Q3))
national average

2. Drivers of Local Supply and Demand…
Local Economic Outlook Austin U.S.
Not
1-year Job Change (Sep) -8,700 Job losses are a problem and will weigh
Comparable
on demand, but layoffs are declining
Not
1-year Job Change (Aug) -10,900 which could help buyer confidence
Comparable
Not Unemployment has risen since the same
3-year Job Change (Sep) 37,500
Comparable period last year, but Austin's labor market
Current Unemployment Rate (Sep) 7.2% 9.8% has been more resilient than the national
Year-ago Unemployment Rate 4.6% 6.2% average
1-year (12 month) Job Growth Rate -1.1% -3.1% Respectable compared to other markets
State Economic Activity Index Texas U.S.
Texas's economy has contracted more
12-month change (2009 - Sep) -4.3% -3.2%
than the rest of the nation and continues
36-month change (2009 - Sep) -0.1% -1.1% to soften
Local Fundamentals Austin U.S.
12-month Sum of 1-unit Building Permits through The current level of construction is 61.0%
6,642 not comparable
Sep 2009 (1,000s) below the long-term average
Excess supply reduction could result in
Long-term average for 12-month Sum of 1-Unit price escalation over the longer-term if, in
17,010
, not comparable
p
Building Permits (1,000s)
(1 000s) the future there is rapid and robust
future,
increase in demand
Single-Family Housing Permits (Sep 2009) Low construction will help to maintain a
-28.5% -34.9%
12-month sum vs. a year ago tight supply and to stabilize prices
Construction: 12-month Sum of Local Housing Permits
(Historical Average Shown in Red Dashed Line)
30,000
25,000
20,000
15,000
10,000
5,000
0

3. Affordability
Affordability - Local Mortgage Servicing Cost-to-Income
(Historical Average Shown in Red Dashed Line)
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Monthly Mortgage Payment to Income Austin U.S.
Ratio for 2008 13.7% 19.5% Historically strong and an improvement
Ratio for 2009 Q3 12.5% 15.6% over the second quarter of this year
Historical Average 14.1% 23.2% Good relative to the nation
Recent Trend - Local Mortgage Servicing Cost to Income
(Historical Average Shown in Red Dashed Line)
16%
14%
12%
10%
8%
6%
4%
2%
0%
2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3

4. Median Home Price to Income Austin U.S.
Ratio for 2008 5.0 7.1 Local affordability conditions have
Ratio for 2009 Q3 5.0 6.2 weakened relative to local history
Historical Average 4.6 7.2 Affordable compared to most markets
Ratio of Local Median Home Price to Local Average Income
(Historical Average shown in Red Dashed Line)
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
The Mortgage Market
30-year Fixed Mortgage Rate and Treasury Bond Yield (%)
3.0 7.0
6.5
2.5 6.0
2.0 5.5
5.0
1.5 4.5
4.0
1.0 3.5
0.5 3.0
2.5
0.0 2.0
2004 Q3 Q1 2005 Q3 Q1 2006 Q3 Q1 2007 Q3 Q1 2008 Q3 Q1 2009 Q3
Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)
The spread between the 30-year fixed rate mortgage and the 10-year Treasury bond fell again in the third quarter and
stands close to the historic average. This decline of the spread suggests that the financial markets view the risk on
mortgage debt as close to a "normal" state and that the private sector will buy up excess demand if yields rise.
Consequently, the Fed is likely to phase out its program of buying up mortgages in the secondary market to keep rates low,
leaving the private sector to fill the void. Mortgage rates are likely to rise in first or second quarter of 2010 as the Fed exits
the mortgage market.

5. Looking Deeper….
State Total Foreclosure Rate vs. U.S Average
(U.S. Average in Blue Dashed Line)
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Source: Mortgage Bankers' Association
Monthly Market Data -
August 2009 Austin U.S.
12.3
9.2% The A ti
Th Austin market h a l
k t has lower share of
h f
Market Share: %
90.8% 87.7% subprime loans than the average market,
Prime (blue) vs.
90.8 87.7 but rising prime foreclosures are
Subprime + Alt-A
% % becoming a problem
9.2% 12.3%
There was a substantial increase versus
0.7 0.7% 2.3%
PRIME: 0.5 2.3% July of this year
% 1.7%
Foreclosure + REO %
Rate Compared to the national average,
0.5% 1.7%
Jul-09 Aug-09 Jul-09 Aug-09 today's local rate is low
There has been little change locally
6.8% 18.0%
SUBPRIME: 6.8%
18.8 compared to July
% 18.0
Foreclosure + REO 6.4% %
Rate Locally, today's foreclosure rate is low
6.4% 18.8%
Jul-09 Aug-09 Jul-09 Aug-09 relative to the national average
Relatively little local change versus July
4.0% 14.5%
ALT-A: 14.5 of this year
4.0% 12.1 %
Foreclosure + REO 3.8% %
Rate The August rate for Austin is low
3.8% 12.1%
Jul-09 Aug-09 Jul-09 Aug-09 compared to the national average
The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have completed
the foreclosure process and are owned by banks divided by the total number of mortgages for that area.
Source: First American CoreLogic, LoanPerformance data