HIGHER MORTGAGE RATES ARE SLOWING HOME PRICE GROWTH

First Quarter 2006 Appreciation Slows To 8.7 Percent On An Annualized Basis

McLean, VA – Freddie Mac (NYSE: FRE) announced today that its quarterly national Conventional Mortgage Home Price Index (CMHPI) rose 8.7 percent in the first quarter 2006 on an annualized basis, down from a revised fourth quarter 2005 annualized rate of 12.9 percent and a third quarter 2005 growth rate of 13.7 percent.

"Home prices are starting to feel the effects of the upward trend in mortgage rates," said Frank Nothaft, Freddie Mac vice president and chief economist. "That trend continued during the first quarter with 30-year fixed mortgage rates climbing from an average 6.15 percent in January to 6.32 percent in March according to the Primary Mortgage Market Survey^SM. Rates on adjustable-rate mortgages rose even faster, with the introductory rates on 1-year Treasury-indexed ARMs rising from an average of 5.16 percent at the start of the year to 5.51 percent by the end of March.

"We have seen a lot of mixed news with respect to the housing market in the past few months. Construction employment, which had been one of the reliable growth sectors, was relatively flat throughout the first quarter. But a gradual and orderly slowing of the housing market has been anticipated for some time now as we come off of record high sales and single-family home construction. We anticipate about a seven percent decline in home sales this year and a transition from a sellers market to a buyers market.

"The first quarter of 2006 marks the third consecutive quarter of moderation in home-value growth. We are expecting about half of the increase that we saw in the national average home-value appreciation in 2005 for 2006, which puts annual home price growth between six and eight percent, depending on how fast interest rates rise over the remainder of the year. This would still be above the long-term average growth rate and reflects a still vibrant but normalizing housing market at the national level."

Nationally, home values increased 12.7 percent from the first quarter of 2005 through the first quarter of 2006, down from the 12.9 percent annual growth seen over the four quarters ended in March 2005.

The Pacific states posted the strongest home-value appreciation in the U.S., with quarterly appreciation of 13.3 percent at an annualized rate during the first quarter, followed by the South Atlantic region with gains of 12.7 percent. The Middle Atlantic region came next, with gains of 9.8 percent. The Mountain states experienced average price growth of nine percent with the West South Central states after that with 8.6 percent growth. The East South Central division saw an increase of 5.7 percent while New England had gains of 5.2 percent. The East North Central states had the second slowest annual appreciation of three percent annually. Finally, the West North Central states came in last with a growth rate of only 2.5 percent.

"The Pacific region reclaimed its title of real estate leader, with Hawaii gaining the fastest at a 20.7 percent annualized growth rate for the first quarter," noted Amy Crews Cutts, Freddie Mac deputy chief economist. "Two states, Iowa and South Dakota, are showing negative growth for the quarter, but year-over-year they are still up more than four percent.

"We are starting to see significant signs of weakness in areas that have been hard hit by manufacturing job losses. As a result of job losses three to five years ago we are seeing rising inventories of foreclosed properties in Michigan, Ohio and Indiana and other places and while most indices are still up, the home price growth rates in those areas are slowing markedly already. For example, in Detroit, home prices grew just 0.3 percent on an annualized basis in the first quarter and 1.9 percent over the last 12 months. But four smaller cities – Sandusky, OH, Anderson, IN, Muncie, IN, and Saginaw, MI – are already showing negative changes year-over-year.

The Conventional Mortgage Home Price Index shows the following regional performances:

Pacific Division (AK, CA, HI, OR, WA):  increased 3.2 percent (13.3 percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased 18.2 percent, and during the last five years, home values have increased 97.0 percent.
South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV):  increased three percent (12.7 percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased 17.9 percent, and during the last five years, home values increased 72.1 percent
Middle Atlantic Division (NJ, NY, PA):  increased 2.4 percent (9.8 percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased 14.2 percent, and during the last five years, home values increased 77.5 percent.
Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY):  increased 2.2 percent (nine percent, annualized) in the first quarter of 2006. In the last 12 months, home values increased 17.7 percent; during the last five years, home values increased 54.3 percent.
West South Central Division (AR, LA, OK, TX): increased 2.1 percent (8.6 percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased 8.2 percent, and during the last five years, home values increased 27.9 percent.
East South Central Division (AL, KY, MS, TN):  increased 1.4 percent (5.7 percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased eight percent, and during the last five years, home values increased 28.0 percent.
New England Division (CT, MA, ME, NH, RI, VT):  increased 1.3 percent (5.2 percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased 8.9 percent, and during the last five years, home values increased 69.3 percent.
East North Central Division (IL, IN, MI, OH, WI):  increased 0.7 percent (three percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased 5.7 percent, and during the last five years, home values increased 30.3 percent.
West North Central Division (IA, KS, MN, MO, ND, NE, SD):  increased 0.6 percent (2.5 percent, annualized) in the first quarter of 2006. Over the last 12 months, home values increased 6.3 percent; over the last five years, home values increased 37.7 percent.

Jointly developed by Freddie Mac and Fannie Mae and first published by Freddie Mac starting in 1994, the Conventional Mortgage Home Price Index features indexes for the nine Census divisions as well as a national index. The national index is the average of the nine divisional indexes weighted by the distribution of one-unit detached, single-family structures in each Census division.
 
Unlike other home price indexes based on mean or median values of homes sold during a given period, the Conventional Mortgage Home Price Index is constructed, using regression techniques, from observations of actual sales prices or appraised values of the same homes over time. The street addresses of properties that serve as collateral for mortgages funded by the two secondary mortgage market firms are first processed using software certified by the United States Postal Service to create a uniform address format and are then matched to identify consecutive transactions on the same property. There are currently 31.2 million records in the repeat-transactions database used to construct the Conventional Mortgage Home Price Index – this database includes transactions on one-unit detached and single-family townhome properties serving as collateral on loans originated through the first quarter of 2006 and purchased by Freddie Mac and Fannie Mae by April 30, 2006.

Freddie Mac publishes the Conventional Mortgage Home Price Index each quarter. Index values and growth rates for the nation as a whole as well as for the nine Census divisions, the 50 states and the District of Columbia, and 390 metropolitan statistical areas (MSAs) and metropolitan divisions can be found on Freddie Mac’s web site, www.freddiemac.com/finance/cmhpi/.

Conventional Mortgage Home Price Index
Q1 2006 Release
All Entries Are Percent Changes	New England	Middle Atlantic	South Atlantic	East South Central	West South Central	West North Central	East North Central	Mountain	Pacific	The United States
Quarterly Change Q1 2005-Q1 2006	1.3	2.4	3.0	1.4	2.1	0.6	0.7	2.2	3.2	2.1
Annualized Quarterly Change Q4 2005-Q1 2006	5.2	9.8	12.7	5.7	8.6	2.5	3.0	9.0	13.3	8.7
Annual Change Q1 2005-Q1 2006	8.9	14.2	17.9	8.0	8.2	6.3	5.7	17.7	18.2	12.7
5-Year Change Q1 2001-Q1 2006	69.3	77.5	72.1	28.0	27.9	37.7	30.3	54.3	97.0	57.0
Annualized 5-Year Change Q1 2001-Q1 2006	11.1	12.2	11.5	5.1	5.0	6.6	5.4	9.1	14.5	9.4

Send comments and questions to chief_economist@freddiemac.com

Although Freddie Mac attempts to provide reliable, useful information in this document, Freddie Mac does not guarantee that the information is accurate, current or suitable for any particular purpose. Estimates contained in this document are those of Freddie Mac currently and are subject to change without notice.

© 2006 by Freddie Mac. Information from this document may be used with proper attribution. Alteration of this document is strictly prohibited.

###