Forestar Group Inc. (NYSE: FOR) today reported first quarter 2009 net loss of ($3.9) million, or ($0.11) per basic share, compared with first quarter 2008 net loss of ($0.2) million, or ($0.01) per basic share outstanding. First quarter 2009 results include approximately $3.2 million paid to outside advisors regarding an evaluation by our Board of Directors of an unsolicited shareholder proposal.

“Market conditions continue to be challenging for each of our segments,” said Jim DeCosmo, president and chief executive officer of Forestar Group. “Even with a significant slowdown in real estate sales, we are focused on positioning Forestar to generate positive cash flow by significantly reducing investment in real estate development and lowering costs.”

Forestar Group manages its operations through three business segments:

• Real estate,
• Mineral resources, and
• Fiber resources

Our real estate segment includes over 363,000 acres of land owned directly or through ventures located in nine states and twelve markets. Mineral resources include about 622,000 net acres of oil and gas mineral interests located in Texas, Louisiana, Alabama and Georgia. Mineral resources also include a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.38 million acres in Texas, Louisiana, Georgia and Alabama. Fiber resources include the sale of wood fiber, primarily in Georgia, and manages our recreational leases.

REAL ESTATE

First quarter 2009 real estate segment earnings were negatively impacted by $1.2 million principally associated with an impairment charge and increased legal reserves.

During first quarter 2009, 2,192 acres of undeveloped land were sold at an average sales price of approximately $3,800 per acre.

Residential sales activity for all wholly and partially-owned projects during first quarter 2009 included the sale of 107 lots at an average price of approximately $72,400 per lot. First quarter 2008 residential lot sales activity includes the sale of 192 high density lots for approximately $24,300 per lot at a mixed-used venture located near Houston, Texas.

Commercial activity for all wholly and partially-owned projects during first quarter 2009 included the sale of four acres at an average price of approximately $215,600 per acre.

“Although residential lot sales have declined, our average residential lot price has remained stable, driven by the quality and location of our residential and mixed-use real estate developments,” added Jim DeCosmo.

Real Estate Pipeline

Forestar’s real estate segment includes over 363,000 acres of land owned directly or through ventures located in nine states and twelve markets.

* Total acres excludes Forestar’s 58% ownership interest in the Ironstob, LLC venture which controls approximately 16,000 acres of undeveloped land

Entitlement Activity

Forestar has 24 real estate projects representing 33,600 acres in the entitlement process, including ventures. During first quarter 2009, we entitled one project located near Atlanta, Georgia which includes about 25 residential acres and 80 commercial acres. Including venture activity, Forestar has over 14,100 acres of entitled land, representing over 25,400 residential lots and almost 1,600 commercial acres.

Development Activity

Forestar has 2,700 acres developed and under development owned directly or through ventures.

Investment Activity

During first quarter 2009, Forestar did not acquire additional real estate. In addition, the company invested only $7.6 million in real estate development activity, compared with approximately $20.6 million in first quarter 2008. “Excluding our contributions to the resort at Cibolo Canyons, first quarter 2009 investment in development was down almost 70% compared with first quarter 2008,” added Mr. DeCosmo.

MINERAL RESOURCES

Mineral Activity

Forestar owns 622,000 net acres of oil and gas mineral interests in Texas, Louisiana, Alabama and Georgia.

During first quarter 2009, our share of oil and gas production related to our royalty interests was about 26,200 barrels of oil and approximately 394.7 MMCF of natural gas. In addition, Forestar generated other lease revenues of $2.4 million principally related to the leasing of over 6,100 net mineral acres for $347 per acre.

Minerals Activity

Forestar’s mineral resources segment includes approximately 622,000 net mineral acres located in Texas, Louisiana, Alabama and Georgia.

FIBER RESOURCES

Fiber Sales Activity

During first quarter 2009 Forestar generated approximately $3.7 million in revenues from the sale of about 0.3 million tons of fiber, the majority of which was sold to Temple-Inland Inc. at market prices.

Strategic Initiatives Update

Forestar previously announced the following strategic initiatives to enhance shareholder value:

• Generate significant cash flow, principally from the sale of approximately 175,000 acres of HBU timberland
• Reduce debt by approximately $150 million, and
• Repurchase up to 20% of the company’s outstanding shares

Debt reduction and share repurchases will be funded by proceeds from the asset sales described above.

“We announced a definitive agreement with Hancock Timber Resource Group May 4, 2009, to sell approximately 75,000 acres of timberland in Georgia and Alabama for $120 million in a cash transaction. We are confident in our ability to successfully execute our strategic initiatives and this initial sale represents a significant first step, despite difficult market conditions. The transaction is expected to close in second quarter 2009, and we intend to use proceeds from this sale to reduce debt. We firmly believe that our strategic initiatives will enhance shareholder value,” said Jim DeCosmo, president and chief executive officer.

The Company will host a conference call on May 6, 2009 at 10:00 am EDT to discuss results of first quarter 2009. The meeting may be accessed through webcast or by conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-866-730-5762 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-857-350-1586. The password is Forestar. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-888-286-8010 in North America and at 1-617-801-6888 outside North America. The password for the replay is 58752126.

About Forestar Group

Forestar Group Inc. operates in three business segments: real estate, mineral resources and fiber resources. The real estate segment owns directly or through ventures over 363,000 acres of real estate located in nine states and twelve markets in the U.S. The real estate segment has 24 real estate projects representing 33,600 acres currently in the entitlement process, and 75 entitled, developed and under development projects in seven states and eleven markets encompassing almost 17,000 acres, comprised of almost 30,000 residential lots and over 2,300 commercial acres. The mineral resources segment manages about 622,000 net acres of oil and gas mineral interests. The fiber resources segment sells wood fiber from its land primarily located in Georgia, and leases land for recreational uses. The company also has a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.38 million acres in Texas, Louisiana, Georgia and Alabama. Forestar’s address on the World Wide Web is www.forestargroup.com.

Forward-looking Statements

This release contains “forward-looking statements” within the meaning of the federal securities laws. These statements reflect management’s current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertainties could cause our actual results to differ significantly from the results discussed in the forward-looking statements. Factors and uncertainties that might cause such differences include, but are not limited to: general economic, market, or business conditions; the opportunities (or lack thereof) that may be presented to us and that we may pursue; fluctuations in costs and expenses including development costs; demand for new housing, including impacts from mortgage credit availability; lengthy and uncertain entitlement processes; cyclicality of our businesses; accuracy of accounting assumptions; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond our control. Except as required by law, we expressly disclaim any obligation to publicly revise any forward-looking statements contained in this news release to reflect the occurrence of events after the date of this news release.

Information about our real estate projects and our ventures for first quarter-end 2009 follows:

A summary of projects in the entitlement process^(a) at first quarter-end 2009 follows:

A summary of activity within our entitled,^(a) developed and under development projects at first quarter-end 2009 follows:

A summary of our commercial operating properties, commercial projects and condominium projects at first quarter-end 2009 follows:

Forestar Group Inc.
Chris L. Nines, 512-433-5210