LARRY BURROWS
President and CEO, Weyerhaeuser Real Estate Company

SITUATION SNAPSHOT

• The dramatic correction in the national housing markets affected our operations in 2007. Excess housing inventories and weak demand created a competitive sales environment in which price discounting on new homes occurred in most markets.
• Disruption in the mortgage markets caused additional weakness, particularly at lower price points. Interest rates are favorable in a historical context, but credit standards have tightened.
• These powerful market forces pushed home prices lower, affecting consumer confidence.
• With deteriorating demand trends and declining home prices, underlying land values in many communities also declined.
• Despite these difficult business conditions in 2007, WRECO ended the year as the second-highest “absolute” earning homebuilder in the industry. For several consecutive years, our business has performed among the industry leaders in terms of pretax margin and return on investment.
• The outlook for 2008 forecasts continued challenges. This extended disruption in the markets will likely result in some compelling land-related opportunities over time.
• Our business is well positioned for the long term with experienced leadership, desirable markets and an enviable land position.

OPERATING STRATEGY

• Position our operations to take advantage of opportunities presented by the severity and length of the housing market downturn.
• Refresh our distinctive market-driven strategies to penetrate target regional niches.
• Maintain focus on capital efficiency by optimizing our land pipeline and controlling inventories.
• Enhance business processes to improve customer satisfaction, and selectively invest in technology to support future business expansion.
• Attract, retain and develop highly talented employees in anticipation of our growth plans.