Freddie Mac 2012 Annual Report Download - page 89

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read this MD&A in conjunction with “BUSINESS — Executive Summary” and our consolidated financial
statements and related notes.
MORTGAGE MARKET AND ECONOMIC CONDITIONS, AND OUTLOOK
Mortgage Market and Economic Conditions
Overview
The U.S. real gross domestic product rose by 1.5% during 2012, compared to 2.0% in 2011, according to the Bureau of
Economic Analysis. The national unemployment rate was 7.8% in December 2012, compared to 8.5% in December 2011,
based on data from the U.S. Bureau of Labor Statistics. In the data underlying the unemployment rate, an average of
approximately 181,000 monthly net new jobs (non-farm) were added to the economy during 2012, which shows evidence of
a slow, but steady positive trend for the economy and the labor market.
Table 8 — Mortgage Market Indicators
Year Ended December 31,
2012 2011 2010
Home sale units (in thousands)(1) ......................................................... 5,027 4,566 4,513
Home price change(2) ................................................................. 6.4% (3.7)% (5.4)%
Single-family originations (in billions)(3) ................................................... $1,835 $ 1,470 $ 1,630
ARM share(4) ..................................................................... 11% 12% 10%
Refinance share(5) .................................................................. 84% 79% 80%
U.S. single-family mortgage debt outstanding (in billions)(6) ..................................... $9,926 $10,158 $10,413
U.S. multifamily mortgage debt outstanding (in billions)(6) ...................................... $ 847 $ 830 $ 835
(1) Consists of sales of new and existing homes in the U.S. Source: National Association of Realtors news release dated February 21, 2013 (sales of existing
homes) and U.S. Census Bureau news release dated January 25, 2013 (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, 2012 and 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 February 1, 2013.
(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 Flow of Funds Accounts of the United States dated December 6, 2012. The outstanding amounts for 2012 presented above reflect
balances as of September 30, 2012.
Single-Family Housing Market
The single-family housing market showed significant improvement in 2012 despite continued weakness in the
employment market and a significant inventory of seriously delinquent loans and REO properties in the market.
Based on data from the National Association of Realtors, sales of existing homes in 2012 were 4.66 million, increasing
9.4% from 4.26 million in 2011. Based on data from the U.S. Census Bureau and HUD, sales of new homes in 2012 were
367,000, increasing 19.9% from 306,000 in 2011. Home prices increased during 2012, with our nationwide index registering
approximately a 6.4% increase from December 2011 through December 2012 and a 0.4% increase from September 2012 to
December 2012 without seasonal adjustment. The increase in national home prices during 2012 represents the first such full-
year increase since 2006. These estimates were based on our own price index of mortgage loans on one-family homes funded
by us or Fannie Mae. 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.
The serious delinquency rate of our single-family loans declined during 2012, but remained near historically high levels.
The Mortgage Bankers Association reported in its National Delinquency Survey that serious delinquency rates on all single-
family loans in the survey declined to 6.8% as of December 31, 2012, down from 7.7% at year-end 2011. Residential loan
performance has been generally worse in areas with higher unemployment rates and where declines in property values have
been more significant during recent years. In its survey, the Mortgage Bankers Association presents delinquency rates both
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