Freddie Mac 2014 Annual Report Download - page 57

52 Freddie Mac
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read this MD&A in conjunction with "BUSINESS" and our consolidated financial statements and related
notes for the year ended December 31, 2014.
MORTGAGE MARKET AND ECONOMIC CONDITIONS, AND OUTLOOK
Mortgage Market and Economic Conditions
Overview
The U.S. real gross domestic product rose by 2.5% during 2014, measured on a fourth quarter to fourth quarter basis,
compared to an increase of 3.1% in 2013, according to the Bureau of Economic Analysis. The national unemployment rate was
5.6% in December 2014, compared to 6.7% and 7.9% in December 2013 and December 2012, respectively, based on data from
the U.S. Bureau of Labor Statistics. An average of approximately 246,000 and 194,000 monthly net new jobs (non-farm) were
added to the economy during 2014 and 2013, respectively, which shows evidence of continued improvements in the economy
and the labor market. The average interest rate on new 30-year fixed-rate conforming mortgages averaged 4.2% in 2014,
compared to 4.0% in 2013, based on our weekly Primary Mortgage Market Survey. Average long-term mortgage interest rates
were slightly higher in 2014 and led to a significant decline in the volume of single-family mortgage refinance activity in the
market in 2014 compared to 2013.
Table 7 — Mortgage Market Indicators
Year Ended December 31,
2014 2013 2012
Home sale units (in thousands)(1) 5,365 5,519 5,028
National home price change(2) 5.2% 9.3% 6.0%
Single-family originations (in billions)(3) $ 1,240 $ 1,890 $ 2,120
ARM share(4) 18% 14% 11%
Refinance share(5) 60% 73% 84%
U.S. single-family mortgage debt outstanding (in billions)(6) $ 9,855 $ 9,887 $ 9,983
U.S. multifamily mortgage debt outstanding (in billions)(6) $ 969 $ 932 $ 895
(1) Consists of sales of new and existing homes in the U.S. Source: National Association of Realtors news release dated January 23, 2015 (sales of existing
homes) and U.S. Census Bureau news release dated January 27, 2015 (sales of new homes).
(2) Calculated internally using estimates of changes in single-family home prices by state, which are weighted using the property values underlying our
single-family credit guarantee portfolio to obtain a national index. The rate for each year presented incorporates property value information on loans
purchased by both Freddie Mac and Fannie Mae through December 31, 2014. The percentage change will be subject to revision based on more recent
purchase information. Other indices of home prices may have different results, as they are determined using different pools of mortgage loans and
calculated under different conventions than our own.
(3) Source: Inside Mortgage Finance estimates of originations of single-family first-and second liens dated January 30, 2015.
(4) ARM share of the dollar amount of total mortgage applications. Source: Mortgage Bankers Association’s Mortgage Applications Survey. Data reflect
annual average of weekly figures.
(5) Refinance share of the number of conventional mortgage applications. Source: Mortgage Bankers Association’s Mortgage Applications Survey. Data
reflect annual average of weekly figures.
(6) Source: Federal Financial Accounts of the United States dated December 11, 2014. The outstanding amounts for 2014 presented above reflect balances
as of September 30, 2014.
Single-Family Housing Market
Home prices increased on a national basis in 2014 and 2013 (based on our index), though some localities continued to be
affected by weakness in their housing market and experienced declines in home values during these periods. Home price
appreciation, on a national basis, moderated in 2014, with our nationwide index registering approximately a 5.2% increase from
December 2013 to December 2014, compared to a 9.3% increase from December 2012 to December 2013. These estimates
were based on our own non-seasonally-adjusted price index of one-family homes funded by mortgage loans owned or
guaranteed by us or Fannie Mae. Other indices of home prices may have different results, as they are determined using home
prices relating to different pools of mortgage loans and calculated under different conventions than our own.
Based on data from the National Association of Realtors, sales of existing homes in 2014 were 4.93 million, decreasing
3% from 5.09 million in 2013. Based on data from the U.S. Census Bureau and HUD, sales of new homes in 2014 were
approximately 435,000, increasing 1.4% from approximately 429,000 in 2013.
The serious delinquency rate of our single-family loans declined during both 2014 and 2013 and was 1.88% as of
December 31, 2014. The Mortgage Bankers Association reported in its National Delinquency Survey that serious delinquency
rates on all single-family loans in the survey declined to 4.65% as of September 30, 2014 (the latest information available),
from 5.41% at December 31, 2013.
Based on the latest available National Delinquency Survey data, we estimate that we owned or guaranteed approximately
23% of the single-family mortgages outstanding in the U.S. at September 30, 2014, based on number of loans, and we estimate
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