Fannie Mae 2006 Annual Report Download - page 17

RESIDENTIAL MORTGAGE MARKET OVERVIEW
We operate in the U.S. residential mortgage market, specifically in the secondary mortgage market where
mortgages are bought and sold. We discuss below the dynamics of the residential mortgage market and our
role in the secondary mortgage market.
Residential Mortgage Market
Our business operates within the U.S. residential mortgage market, and therefore, we consider the amount of
U.S. residential mortgage debt outstanding to be the best measure of the size of our overall market. As of
March 31, 2007, the latest date for which information was available, the amount of U.S. residential mortgage
debt outstanding was estimated by the Federal Reserve to be approximately $11.2 trillion (including $10.4
trillion of single-family mortgages). Our mortgage credit book of business, which includes mortgage assets we
hold in our investment portfolio, our Fannie Mae mortgage-backed securities held by third parties and credit
enhancements that we provide on mortgage assets, was $2.6 trillion as of March 31, 2007, or approximately
23% of total U.S. residential mortgage debt outstanding. “Fannie Mae mortgage-backed securities” or “Fannie
Mae MBS” generally refers to those mortgage-related securities that we issue and with respect to which we
guarantee to the related trusts that we will supplement amounts received by those MBS trusts as required to
permit timely payment of principal and interest on the Fannie Mae MBS. We also issue some forms of
mortgage-related securities for which we do not provide this guaranty.
The U.S. residential mortgage market has experienced strong long-term growth. According to Federal Reserve
estimates, growth in U.S. residential mortgage debt outstanding averaged 10.6% per year from 1945 to 2006,
which is faster than the 6.9% average growth in the overall U.S. economy over the same period, as measured
by nominal gross domestic product. Growth in U.S. residential mortgage debt outstanding was particularly
strong between 2001 and mid-2006 (with an average annualized growth rate of 12.8%). As indicated in the
table below, which provides a comparison of overall housing and mortgage market statistics to our business
activity, total U.S. residential mortgage debt outstanding grew at an even faster rate of approximately 14% in
2005. Growth in U.S. residential mortgage debt slowed to approximately 9% in 2006, and slowed further in
early 2007, with an annualized first quarter growth rate of nearly 6%, the slowest rate of growth in almost
10 years.
Housing Market Data
2006 2005 2004 2006 2005
% Change
from Prior
Year
Housing and mortgage market:
(1)
Home sales (units in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,529 8,359 7,981 (10)% 5%
Home price appreciation
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1% 13.1% 10.7% — —
Single-family mortgage originations (in billions) . . . . . . . . . . . . . . . . . $ 2,761 $ 3,034 $2,791 (9) 9
Purchase share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.4% 49.8% 47.8% — —
Refinance share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.6% 50.2% 52.2% — —
ARM share
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.6% 31.4% 32.0% — —
Fixed-rate mortgage share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.4% 68.6% 68.0% — —
Residential mortgage debt outstanding (in billions). . . . . . . . . . . . . . . . $11,017 $10,066 $8,866 9 14
Fannie Mae:
New business acquisitions
(4)
(in billions) . . . . . . . . . . . . . . . . . . . . . . . $ 603 $ 612 $ 725 (2) (16)
Mortgage credit book of business
(5)
(in billions) . . . . . . . . . . . . . . . . . $ 2,526 $ 2,356 $2,340 7 1
Interest rate risk market share
(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6% 7.2% 10.2% — —
Credit risk market share
(7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.4% 21.8% 24.2% — —
2