HFO Investment Real Estate January 9, 2014 John W. Mitchell 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% -1.00% Q4 Q1 Q2 Q3 13 GDP

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1 HFO Investment Real Estate 9, 214 John W. Mitchell Happy Group in 21 The Party is NOT Over Almost as Long as the Average Postwar Recovery Broad Based Growth Low Inflation Rate like Japan Monetary Policy Shift Underway Brookings Metro Monitor Portland 9 th in Most Recent Release Q4 Q1 Q2 Q GDP Consumption Equipment Intellectual Property Non-Res Structures Residential Federal State and Local Exports % 2.5% 2.% 1.5% 1.%.5%.% -.5% -1.% Source: BEA Imports

2 March May September November March May September November March May September November.8%.6%.4%.2%.% -.2% -.4% -.6% Source: BLS Total Core 2,5, 2,, 1,5, 1,, 5, -5, 4.5% 4.%.5%.% 2.5% 2.% 1.5% 1.%.5%.% 5/1/21 1//214 1 month months 6 months 1 year 2 years years 5 years 7 years 1 years 2 years years

3 Zero Short Term Rates Since 28 Long Rates Bounced after May 22 nd Bernanke Speech No Taper in September Default Theatre in October Embarked on Tapering This Month Mortgage Rates were.5% in Early May and 4.48% on week ending 27th Consensus Moving from 1.7% in 21 to 2.5% in 214 IMF Similar Fed 21 GDP % and % in 214 Inflation Staying Below 2% Through 214 Federal Funds Rate Target -.25% until 215 or Beyond Wait Until Next Year Once More! Diminishing Fiscal Drag Housing Rebound Net Worth Recovery Balance Sheet Strength World Economy Stronger No Replay of October or 211 State and Local Improved Financial Picture Shifting Monetary Policy 2,5 2, 1,5 1, 5 Jan-5 Jul-5 1-Jan Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jan-1

4 5,, 25, 2, 15, 1, 5, 1,24 27,9 26,62 21,11 11,676 7,9 6,868 7,66 1,969 1, Single Family Multi-Family $1, $8, $6, $4, $2, $ Source: Fed As of Q adjusted for inflation and household numbers about 98.2% of Wealth Loss Recovered Q1 7 to Q1 9 Per Household Net Worth Real down 26.1% /1 28/1 29/1 21/1 211/1 212/1 21/1 21/ Household Debt Mortgage Consumer (Billions) $77. Trillion in Q Center for Household Financial Stability Q -6-8

5 12.% 1.% 8.% 6.% 4.% 2.%.% 21/1 2 Source: Rockefeller Institute te 4 211/ / /1 21/2 21/ Deficit Estimates Falling-Short Term 212 Cliff-Payroll Tax Holiday Over, New Medicare Taxes, Some Tax Cuts Expired, Deduction Phase Out, Sequester Delayed and Implemented- Budget Control Act of 211-If Super Committee failed cuts to Discretionary Spending Lets Make a Deal! Murray/Ryan Package- Relaxes Sequester, Misc. Fees, Contributions, No Debt Ceiling Change Fed Prevent Collapse, Support Tapering- $4 B Treasuries and $5 B Upturn-Massive Liquidity Injections-Fed Funds Mortgage Backed Rate at -.25%, Long Term Asset Purchases to Hold Down Long Term Rates, Side Effect on Statement: likely will be appropriate Currency, Helped Boost Financial Asset Prices to maintain current target range for the federal Balance Sheet end of 21 held $.8 Trillion funds rate well past the time that the Two Aspects of Policy- Short Term Rates and unemployment rate declines below 6.5 percent. Purchases the QE-Until This Month $85 Billion How will long rates move? Per Month-$45B Treasuries and $4B Mortgage Independence Backed $2.4 Trillion in Excess Reserves in Banking Low Rates as Long as unemployment above 6.5% System and Inflation Expectations Out 2 Years Less than 2.5%-Since 212 William McChesney Martin Fed Chair How will this go down?

6 North Dakota 1 Texas 2 Florida Idaho 4 Georgia 5 Oregon 6 Utah 7 Indiana 8 Delaware 9 Colorado 1 Arizona 11 Nevada 12 South Carolina 1 Missouri 14 New Jersey 15 Mississippi 16 Massachusetts 17 California 18 South Dakota 19 Michigan 2 Kansas 21 Minnesota 22 New York 2 Tennessee 24 North Carolina 25 Wisconsin 26 Washington 27 Maryland 28 Montana 6 Connecticut 7 Pennsylvania 45 Ohio 46 Kentucky 47 New Mexico 48 Alabama 49 Alaska 5 Case Shiller Portland House Prices up 12.7% to October Underwater Homeowners CoreLogic 8.2% Personal Income Q Oregon 1.1% same as US Oregon Population Growth.78% US was.72% 1,75 Source: Employment ment Dept. 1,7 1,65 1,6 1,55 1,5 Aug-7 Total Government Other Services Leisure & Hosp. Ed. and Health Prof. Services TP,W and Util Finance Information Trade Construction Mine & Log Manufacturing -1, 1, 2,, 4,

7 Total Government Other Services Leisure & Hosp. Ed. and Health Prof. Services TP,W and Util Finance Information Trade Construction Mine & Log Manufacturing Source: Employment ment Dept. 4, 2, -2, -4, -6, Source: Employment ment Department , 5, 1, 15, 2, -8, Population Growth Slightly Faster than National Average Rising Employment Tighter Mortgage Lending Environment than the Boom, but Easing for Commercial Real Estate Rising Household Formation Aging Population ACA and Housing Part Time/Full Time Entrepreneurial Activity The Mandate and the Young? Rules Changed Daily? Is Having Insurance the same as Having Care? New Shopping Experience? A Giant IT Project The Supply Response? Cost Containment? What Will The System Look Like When it is Done?

8 214-Less Fiscal Restraint, Better Balance Sheets, Falling Energy Prices, State and Local Health, Global Help, Housing Upturn : Ingredients Falling Into Place