Freddie Mac 2015 Annual Report Download - page 13

Management's Discussion and Analysis Key Economic Indicators | Single-family Home Prices
Freddie Mac 2015 Form 10-K 11
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
KEY ECONOMIC INDICATORS
The following graphs and related discussion present certain macroeconomic indicators that can
significantly affect our business and financial results.
SINGLE-FAMILY HOME PRICES
NATIONAL HOME PRICES
(December 2000 = 100)
EFFECT ON FINANCIAL RESULTS
• Changes in home prices affect the amount
of equity that borrowers have in their homes.
Borrowers with less equity typically have
higher delinquency rates.
• As home prices decline, the severity of
losses we incur on defaulted loans that we
hold or guarantee increases because the
amount we can recover from the property
securing the loan decreases.
• Declines in home prices typically result in
increases in expected credit losses on the
mortgage-related securities we hold.
• Declines in home prices may result in
declines in the value of our non-agency
mortgage-related securities as lower home
values may increase default rates and affect
the prepayment activities of the borrowers.
COMMENTARY
• Home prices continued to appreciate during 2015, increasing 6.2%, compared to an increase of 5.2%
during 2014, based on our own non-seasonally adjusted price index of single-family homes funded by
loans owned or guaranteed by us or Fannie Mae.
• National home prices at the end of 2015 remained approximately 6% below their June 2006 peak
levels, based on our index.
• We expect near-term home price growth rates to moderate gradually and return to growth rates
consistent with long-term historical averages of approximately 2% to 5% per year.