Federal National Mortgage Association · OTC:FNMA
Federal National Mortgage Association — Fannie Mae — Lehman Brothers Financial Services Conference 2007
27 slides from Federal National Mortgage Association's conference presentation, Sep 11, 2007
Slide 1: Economic, Housing & Mortgage Market Outlook
Economic, Housing & Mortgage Market Outlook David W. Berson Vice President & Chief Economist Lehman Brothers Financial Services Conference September 11, 2007
Slide 2: What You Want to Know
What You Want to Know: z After spurting in Q2, real GDP growth should slow to a modestly below-trend pace for much of the next year. z The Fed is likely to ease later this year, and more in 2008. Long-term rates should edge up a tad. z Home sales should drop further in the second half of 2007, befor
Slide 3: GDP Growth At a Slightly Below-Trend Pace
GDP Growth At a Slightly Below-Trend Pace 8% Trend Growth 3.0 - 3.5% 6% 4% 2% 0% -2% -4% Q1:90 Q1:92 Q1:94 Q1:96 Q1:98 Q1:00 Q1:02 Q1:04 Q1:06 Q1:08 Source: Bureau of Economic Analysis, Fannie Mae forecast History in blue, forecast in red 3
Slide 4: Consumer Sentiment Edging Down Again
Consumer Sentiment Edging Down Again Index 66Q1 = 100 120 110 100 90 80 70 60 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Source: University of Michigan Consumer Sentiment Survey 4
Slide 5: Inflation: Will Core Inflation Fall Further?
Inflation* Will Core Inflation Fall Further? Year-Ago Percent Change 7% History Forecast 6% 5% CPI Core Rate 4% CPI 3% 2% 1% 0% Q1 0 Q1 1 Q1 2 Q1 3 Q1 4 Q1 5 Q1 6 Q1 7 Q1 8 Q1 9 Q1 0 Q1 1 Q1 2 Q1 3 Q1 4 Q1 5 Q1 6 Q1 7 8 :9 :9 :9 :9 :9 :9 :9 :9 :9 :9 :0 :0 :0 :0 :0 :0 :0 :0 :0 Q1 *Consumer Price Inde
Slide 6: Federal Funds Rate Easing Likely
Federal Funds Rate Easing Likely 9% 8% History Forecast 7% 6% 5% 4% 3% 2% 1% 0% Q1:90 Q1:92 Q1:94 Q1:96 Q1:98 Q1:00 Q1:02 Q1:04 Q1:06 Q1:08 Source: Federal Reserve Board, Fannie Mae forecast 6
Slide 7: Long-Term Interest Rates Edging Up Slightly
Long-Term Interest Rates Edging Up Slightly 11% 10% 30-Year FRM History Forecast 9% 8% 7% 6% 5% 10-Year Treasury 4% 3% Q1:90 Q3:91 Q1:93 Q3:94 Q1:96 Q3:97 Q1:99 Q3:00 Q1:02 Q3:03 Q1:05 Q3:06 Q1:08 Source: Freddie Mac, Federal Reserve Board, Fannie Mae forecast 7
Slide 8: Homeownership Rate Edging Downward
Homeownership Rate Edging Downward 70% 69% 68% 67% 66% 65% 64% 63% 62% 80 82 84 86 88 90 92 94 96 98 00 02 04 06 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: Q Q Q Q Q Q Q Q Q Q Q Q Q Q Source: Bureau of the Census 8
Slide 9: New Home Sales May Stabilize in 2008
New Home Sales May Stabilize in 2008 Millions of Units 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: Bureau of the Census, Fannie Mae forecast History in blue, forecast in red 9
Slide 10: New Home Inventories Still High Suggests Weakness in Prices
New Home Inventories Still High Suggests Weakness in Prices Thousands Months 600 10 550 9 Months’ Supply at Current Rate 8 500 (right axis) 7 450 6 400 5 350 4 3 300 2 250 Homes for Sale at End of Month (left axis) 1 200 0 n: 0 n: 6 n: 7 n: 1 J a 992 J a 998 n: 9 n: 3 J a 004 n: 5 n: 6 n: 3 n: 4 J a
Slide 11: Housing Starts Down Again in 2007
Housing Starts Down Again in 2007 Thousands of Units 2,400 Multifamily Single-family 2,100 1,800 1,500 1,200 900 600 300 0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: Bureau of the Census, Fannie Mae forecast History in blue, forecast in red 11
Slide 12: Existing Home Sales May Stabilize in 2008
Existing Home Sales May Stabilize in 2008 Millions of Units 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1983 1986 1989 1992 1995 1998 2001 2004 2007 History in blue, forecast in red Source: National Association of Realtors, Fannie Mae forecast 12
Slide 13: Existing Single-Family Home Inventories Still High
Existing Single-Family Home Inventories Thousands Inventories Still High Months 11 3700 10 9 3200 Months Supply At Current Sales Rate 8 (right axis) 7 2700 6 5 2200 4 3 1700 2 Homes for Sale at End of Month 1 (left axis) 1200 0 07 n: 5 n: 3 n: 1 n: 2 n: 6 n: 9 n: 4 n: 7 n: 0 n: 4 n: 5 n: 8 n: 2 n: 6
Slide 14: Months' Supply of Existing Single Family Homes by MSA
Months’ Supply 0 5 10 15 20 25 30 35 Ventura Austin Santa Clara Washington, DC Seattle Houston San Francisco Dallas May-07 May-06 Denver Sacramento Mont Co., MD Baltimore Santa Barbara NJ - Northern * National * Tucson N. Virginia Minneapolis Santa Cruz NJ - Southern NJ - Central San Diego Massachus
Slide 15: Months' Supply of Existing Condos by MSA
Months’ Supply 0 5 10 15 20 25 30 35 40 45 50 San Francisco Seattle Santa Clara May-07 May-06 Washington, DC Mont Co., MD Baltimore N. Virginia Tucson Sacramento Santa Barbara Dallas Santa Cruz Denver Arizona Los Angeles Phoenix Massachusetts Source: Local Realtor Boards, national data from National
Slide 16: Investor Share Falling But Still High
Investor Share Falling But Still High 20% 18% 16% Investor & Second Home 14% 12% 10% Investor & Second Home 8% 6% 4% Investor Investor 2% 0% 2 Se 4 Se 9 Se 0 Se 1 Se 4 Se 5 Se 6 7 Se 3 Se 5 Se 6 Se 7 Se 8 Se 2 Se 3 92 93 94 95 99 96 97 98 00 01 04 05 06 02 03 -9 -9 -0 -0 -0 -0 -0 -0 -9 -9 -9 -9 -9 -
Slide 17: Home Price Gains Negative for the First Time Since 1991
Home Price Gains Negative for the First Time Since 1991 Year-Ago Percent Change 20% 15% 10% Case-Shiller House Price Index 5% 0% -5% Q1:88 Q1:89 Q1:90 Q1:91 Q1:92 Q1:93 Q1:94 Q1:95 Q1:96 Q1:97 Q1:98 Q1:99 Q1:00 Q1:01 Q1:02 Q1:03 Q1:04 Q1:05 Q1:06 Q1:07 Source: S&P, Fiserv, and MacroMarkets LLC 17
Slide 18: Single Family Five-Year Annualized House Price Growth
Canada Mexico Single Family – Five-Year Annualized House Price Growth 2002 Q2 – 2007 Q2 Source: Fannie Mae Below 0% 0% - 5% 5% - 10% 10% - 15% Above 15% 18
Slide 19: Single Family One-Year House Price Growth
Canada Mexico Single Family – One-Year House Price Growth 2006 Q2 – 2007 Q2 Source: Fannie Mae Below 0% 0% - 5% 5% - 10% 10% - 15% Above 15% 19
Slide 20: MBA Purchase Index
MBA Purchase Index Increasing Multiple Loan Applications? 600 Index, 16-Mar-90 =100, SA August 31 550 500 450 400 350 300 250 200 150 100 50 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja
Slide 21: MBA Refinance Index Stable
MBA Refinance Index Stable Index, 16-Mar-90 =100, SA 10,000 9,000 8,000 7,000 6,000 August 31 5,000 4,000 3,000 2,000 1,000 0 Ja 0 Ja 1 Ja 5 Ja 6 Ja 7 Ja 8 Ja 9 Ja 0 Ja 1 Ja 2 Ja 3 07 Ja 2 Ja 3 Ja 4 Ja 4 Ja 5 Ja 6 9 9 9 9 9 9 9 0 0 0 0 9 9 9 0 0 0 n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n
Slide 22: ARM Share of Mortgage Applications
ARM Share of Mortgage Applications* Percent 40 35 30 25 20 15 10 August 31 5 0 Ja 0 Ja 91 Ja 2 Ja 3 Ja 94 Ja 5 Ja 6 Ja 97 Ja 8 Ja 9 Ja 00 Ja 1 Ja 2 Ja 03 Ja 4 Ja 5 Ja 06 07 9 9 9 9 9 9 9 0 0 0 0 n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- Ja *By number of loans Source: Mortgage Bankers’ As
Slide 23: Conforming Subprime Loans Scheduled to Reset in 2007
1 Estimated Distribution of Conforming Subprime Loans Outstanding Scheduled to Reset in 2007 Payment History = No Late Payments in Past 12 Months $40 CLTV>97% $35 90%<CLTV<=97% $30 80%<CLTV<=90% $25 CLTV<=80% $Billions $20 $15 $10 $5 $0 >=700 >=660-<700 >=620-<660 >=580-<620 <580 Original FICO Score
Slide 24: Mortgage Originations Down This Year and Next
Mortgage Originations Down This Year and Next Billions of Dollars 4,000 Refis 3,500 Purchase 3,000 2,500 2,000 1,500 1,000 500 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: HUD, Fannie Mae estimates (1998 forward), Fannie Mae forecast History in blue, forecast in red 24
Slide 25: Mortgage Debt Outstanding Slowing Sharply
Mortgage Debt Outstanding Slowing Sharply Year/Year Percent Change 16% 14% 12% 10% 8% 6% 4% 2% 0% Q 6 Q 7 08 Q 4 Q 5 Q 0 Q 2 Q 3 Q 5 Q 6 Q 8 Q 9 Q 1 Q 2 Q 3 Q 1 Q 4 Q 7 Q 0 0 0 0 0 0 9 9 9 9 9 9 0 9 9 9 9 0 0 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: 1: Q Source: Federal Reserve Board, F
Slide 26: Things to Take Away
Things to Take Away: z Economic activity slightly z Odds of an economic below trend through the rest of downturn are around one- the year. third. z Fed likely to ease this year z Long-term rates should edge and next. up a tad. z Housing activity down again in z Regional home price 2007. weakness sho
Slide 27: Opinions, analyses, estimates, forecasts and other views disclaimer
Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economics & Mortgage Market Analysis (EMMA) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, and are subject to change without notice. Although the EMM
Fannie Mae — Lehman Brothers Financial Services Conference 2007 on 6ix