Freddie Mac was largely insulated from any major issues associated with
"We had a solid quarter, earning $2 billion with no significant impact to our earnings or balance sheet from the recent banking industry disruption," CEO Michael DeVito said. He acknowledged, however, that the event did adversely affect multifamily construction to some extent.
"The risk of credit tightening remains elevated," he noted.
Freddie's earnings were slightly improved on a consecutive-quarter basis but the numbers for the fiscal period were lower than a year ago. Freddie Mac had
The general directional trends in those comparable quarter differences were in line with
Freddie bought $59 billion in new single-family loans during the quarter, $51 billion of which were purchase mortgages. In comparison, it acquired $75 billion the previous quarter, $63 billion of which were loans made to home buyers. A year earlier, Freddie brought in $207 billion in new single-family loans, $114 billion of which were purchase mortgages.
The U.S. mortgage market is likely to be challenged by higher rates that restrain new business so long as inflation remains elevated but there will still be a need for Freddie Mac's programs, DeVito said.
"Even with higher rates, there are millions of mortgage-ready potential homebuyers who could afford a loan near the median home price. There are still reasons to refinance. There are still homeowners with higher interest rates, who could benefit from refinancing and there is still much work to do to create a more equitable housing market," he said.
So far, relatively strong employment has sustained interest in a housing market where supply has fallen short, and that in turn looks like it will continue to limit the softening in valuations, DeVito noted.
"The country still has a deficit of millions of homes. Factor in migration to more affordable markets, fewer delinquencies to constrained supply, and you can see why house prices have remained elevated, even after some moderation," said DeVito.
Freddie Mac is forecasting that single-family housing values will drop 2.9% over the next 12 months. During the 12 months after that, they will likely fall another 1.3%.
"Most U.S. homeowners have the capacity to weather this decline," DeVito said. "They have collectively accumulated roughly $12 trillion in additional equity since 2019."
Meanwhile, the serious delinquency rate in the single-family market continued to fall, decreasing to 0.62% from 0.66% the previous quarter and 0.92% during the same period a year ago.
However, the multifamily delinquency rate rose slightly to 0.13% from 0.12% on a consecutive-quarter basis and 0.08% a year earlier.
"This increase was primarily driven by an increase in delinquent loans in our senior housing and small balance loan portfolios," Chief Financial Officer Chris Lown said during the earnings call.
