NATIONAL HOME VALUES FALL IN FOURTH QUARTER

First Consecutive Quarters of Decline Since 1982

McLean, VA – Freddie Mac (NYSE: FRE) announced today that its Conventional Mortgage Home Price Index (CMHPI) Classic Series registered a 0.5 percent drop in U.S. home values during the fourth quarter of 2007 on an annualized basis, up from a revised third quarter 2007 annualized rate of -1.5 percent and the first consecutive quarters of decline since 1982. Over the year ending with the fourth quarter, home values appreciated 0.3 percent on average, down from the 6.2 percent growth over the same period a year earlier.

The CMHPI Classic Series includes data from both home purchase transactions and mortgage refinancings based on appraisals. Freddie Mac also produces a CMHPI Purchase-Only Series, which indicates that home sales prices fell 9.3 percent nationally during the fourth quarter on an annualized basis; the last time a larger drop was recorded was during the third quarter of 1972. Over the four quarters ending in December 2007, home sales prices fell an average of 0.9 percent in the CMHPI Purchase-Only Series.

"The financial market turmoil that started in the third quarter continued into the fourth, making it harder to get mortgage financing for a home purchase or refinance and foreclosures continued to rise, putting additional stress on the inventory of homes for sale," said Frank Nothaft, Freddie Mac vice president and chief economist. "Reporting on their survey of commercial bank lending practices, the Federal Reserve noted that 64 percent of reporting banks had seen a large reduction in the demand for home purchase mortgages in the last three months of the year, which is consistent with the weakness in home prices we are seeing now. More than 50 percent of banks reported tightening their lending standards on prime mortgage loans for home purchases and none eased standards.

"To be sure there are still many homes being bought and sold in the U.S., with 5.01 million one-family homes (excluding condos) sold in the fourth quarter on an annualized basis, roughly the rate we saw in 1997. But the buyers are in the driver's seat today and they are demanding both price reductions and seller concessions to make a deal."

"The decline in home values occurred in every region in the U.S. according to the CMHPI Purchase-only measure and only four states posted gains in home values during the fourth quarter: Maine, North Dakota, South Dakota, and West Virginia. The Pacific region fell the most at a 17.2 percent annualized rate, led by declines in home values in California of nearly 25 percent on an annualized basis. Over the past twelve months, home values declined 4.2 percent in the Pacific region. In contrast, a robust energy industry in the oil-patch states fueled a 3.2 percent annual gain in house prices in the West South Central region," added Amy Crews Cutts, Freddie Mac's Deputy Chief Economist.

Based on the CMHPI Classic Series, the East South Central states led growth in home values with an annualized appreciation rate of 3.5 percent during the fourth quarter, followed by the West South Central states, which showed a smaller gain of 3.1 percent. The West North Central states came next, with a growth rate of 3.0 percent. The East North Central states experienced a price growth of 2.8 percent while the Middle Atlantic region saw a positive growth rate of 1.5 percent. This was followed by a 1.2 percent rate of growth in the New England region and a drop of 0.1 percent in the Mountain states. The South Atlantic states saw a drop in average values of 0.6 percent and the Pacific region saw home values slip 8.1 percent.

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

East South Central Division (AL, KY, MS, TN): increased 0.9 percent (3.5 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values increased 4.2 percent, and during the last five years, home values increased 31.5 percent.
West South Central Division (AR, LA, OK, TX): increased 0.8 percent (3.1 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values increased 4.6 percent, and during the last five years, home values increased 30.1 percent.
West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 0.7 percent (3.0 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values increased 1.5 percent; over the last five years, home values increased 27.5 percent.
East North Central Division (IL, IN, MI, OH, WI): increased 0.7 percent (2.8 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values increased 0.2 percent, and during the last five years, home values increased 21.3 percent.
Middle Atlantic Division (NJ, NY, PA): increased 0.4 percent (1.5 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values increased 1.1 percent, and during the last five years, home values increased 56.6 percent.
New England Division (CT, MA, ME, NH, RI, VT): increased 0.3 percent (1.2 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values decreased 0.9 percent, and during the last five years, home values increased 37.9 percent.
Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 0.0 percent (-0.1 percent, annualized) in the fourth quarter of 2007. In the last 12 months, home values increased 1.9 percent; during the last five years, home values increased 52.4 percent.
South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): decreased 0.2 percent (-0.6 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values decreased 0.3 percent, and during the last five years, home values increased 56.9 percent.
Pacific Division (AK, CA, HI, OR, WA): decreased 2.1 percent (-8.1 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values decreased 3.0 percent, and during the last five years, home values have increased 69.7 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 more than 34 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 fourth quarter of 2007 and purchased by Freddie Mac and Fannie Mae by January 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 index series can be found on Freddie Mac's web site, www.freddiemac.com/finance/cmhpi/.

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.

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

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.

Information from this document may be used with proper attribution. Alteration of this document is strictly prohibited. © 2008 by Freddie Mac.

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