National Home-Value Drop Accelerates in Third Quarter

For Immediate Release

December 01, 2008
Contact: corprel@freddiemac.com
or (703) 903-3933

Home Values In Every Region, Led By Losses In Pacific State

McLean, VA – Freddie Mac (NYSE: FRE) announced today that its Conventional Mortgage Home Price Index (CMHPI) Purchase-Only Series registered a 7.3 percent annualized decline in U.S. house prices during the third quarter of 2008, following a downward revised 0.9 percent annualized drop in the second quarter. Over the four quarters ending with the third quarter of 2008, home sales prices fell an average of 7.2 percent in the CMHPI Purchase-Only Series – the largest annual fall in values over the 39-year history of the series.

“The disruptions in the credit markets during the latter part of the third quarter have likely weakened housing demand and contributed to further declines in house prices,” said Frank Nothaft, Freddie Mac vice president and chief economist. “With the unemployment rate having risen to 6.5 percent in October, there will likely be further weakening in housing demand, which could push the market bottom in home sales and housing starts out at least until middle to late next year and result in further declines in house prices. Our November forecast has the CMHPI purchase-only index declining 4.3 percent over the course of 2009.

“For the first time in the CMHPI series we saw every region of the nation experience declining home values over the quarter. There is significant variation in the degree of the declines, ranging from a very small 0.1 percent annualized drop in values in the West South Central region to a 20 percent annualized loss in home values in Pacific states. Some areas have been fortunate not to feel the full sting of the credit crunch or the foreclosure storm, but unfortunately they are no longer immune from the effects of falling home values.”

The CMHPI Purchase-Only Series excludes all refinancings in its calculation. Freddie Mac also produces a CMHPI Classic Series that includes data from both home purchase transactions and mortgage refinancings, with the latter values based on appraisals. Generally, because appraisals are backwards looking through the use of recent comparable property transactions, the Classic Series will lag changes in the Purchase-Only series when the market reaches a peak or trough turning point. The CMHPI Classic Series indicated that home values fell 11.9 percent nationally during the third quarter on an annualized basis, the steepest quarterly decline since the index began in 1970. Over the year ending with the third quarter, home values depreciated 5.6 percent on average in the Classic Series, the sharpest annual drop in this index over the 39 years spanned by the series.

Seventeen states registered modest price gains over the past year, and five states had increases in the third quarter, according to the CMHPI Classic Series. Annual price gains of 2 to 4 percent occurred in Alabama, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, and Texas, which have benefited from stronger local economies led in part by the petroleum, natural gas and ethanol industries. Annual drops of more than 14 percent occurred in Arizona, California, Florida and Nevada, which have borne the brunt of the housing market woes.

The Conventional Mortgage Home Price Index (Purchase-Only) Series shows the following regional performances:

West South Central Division (AR, LA, OK, TX): dipped 0.03 percent (–0.1 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values increased 0.5 percent, and during the last five years, home values increased 25.9 percent.
Middle Atlantic Division (NJ, NY, PA): decreased 0.1 percent (–0.3 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values decreased 2.2 percent, and during the last five years, home values increased 33.4 percent.
West North Central Division (IA, KS, MN, MO, ND, NE, SD): decreased 0.5 percent (–1.8 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values decreased 2.6 percent; over the last five years, home values increased 12.7 percent.
East South Central Division (AL, KY, MS, TN): fell 1.1 percent (–4.2 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values decreased 1.3 percent, and during the last five years, home values increased 23.6 percent.
New England Division (CT, MA, ME, NH, RI, VT): dropped 1.1 percent (–4.2 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values decreased 5.1 percent, and during the last five years, home values increased 13.9 percent.
East North Central Division (IL, IN, MI, OH, WI): decreased 1.2 percent (–4.6 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values decreased 3.9 percent, and during the last five years, home values increased 5.7 percent.
South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): fell 2.1 percent (–8.1 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values decreased 6.8 percent, and during the last five years, home values increased 27.6 percent.
Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): declined 2.3 percent (–8.9 percent, annualized) in the third quarter of 2008. In the last 12 months, home values decreased 7.6 percent; during the last five years, home values increased 33.1 percent.
Pacific Division (AK, CA, HI, OR, WA): decreased 5.4 percent (–19.9 percent, annualized) in the third quarter of 2008. Over the last 12 months, home values decreased 20.2 percent, and during the last five years, home values have increased 18.0 percent.

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 second 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 more than 36.6 million records in the repeat-transactions database used to construct the classic 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 third quarter of 2008 and purchased by Freddie Mac and Fannie Mae by October 31, 2008.

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 392 metropolitan statistical areas (MSAs) and metropolitan divisions under the classic series of the CMHPI are available and the purchase-transaction only series is available for the nation and nine Census divisions. All of the CMHPI series can be found on Freddie Mac’s web site, www.freddiemac.com/finance/cmhpi/.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Purchase-Only Transactions Series*
Q3 2008 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 Q2 2008-Q3 2008	-1.1	-0.1	-2.1	-1.1	0.0	-0.5	-1.2	-2.3	-5.4	-1.9

Annualized Quarterly Change Q2 2008-Q3 2008	-4.2	-0.3	-8.1	-4.2	-0.1	-1.8	-4.6	-8.9	-19.9	-7.3

Annual Change Q3 2007-Q3 2008	-5.1	-2.2	-6.8	-1.3	0.5	-2.6	-3.9	-7.6	-20.2	-7.2

5-Year Change Q3 2003-Q3 2008	13.9	33.4	27.6	23.6	25.9	12.7	5.7	33.1	18.0	20.5

Annualized 5-Year Change Q3 2003-Q3 2008	2.6	5.9	5.0	4.3	4.7	2.4	1.1	5.9	3.4	3.8

Notes: *These indices rely on data from only home-purchase transactions.

Classic CMHPI Series
Q3 2008 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 Q2 2008-Q3 2008	-2.8	-1.9	-2.6	-0.4	0.2	-1.6	-3.0	-3.3	-7.5	-3.1

Annualized Quarterly Change Q2 2008-Q3 2008	-10.6	-7.5	-10.0	-1.8	0.7	-6.3	-11.5	-12.5	-26.6	-11.9

Annual Change Q3 2007-Q3 2008	-4.2	-2.4	-5.3	1.7	2.4	-1.1	-2.7	-5.2	-17.0	-5.6

5-Year Change Q3 2003-Q3 2008	23.0	42.2	40.3	28.4	28.7	19.9	13.2	39.1	32.7	29.6

Annualized 5-Year Change Q3 2003-Q3 2008	4.2	7.3	7.0	5.1	5.2	3.7	2.5	6.8	5.8	5.3

Send comments and questions to chief_economist@freddiemac.com. These data are available at www.freddiemac.com/news/finance/

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.

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