Federal National Mortgage Association (PNK:FNMA) Q1 2024 Earnings Call Transcript

In addition to DUS, our primary multifamily risk sharing model, we completed one multifamily credit risk transfer in the first quarter through our multifamily CIRT program. This transferred a portion of the credit risk on $11.5 billion of unpaid principal balance at the time of the transactions. Lastly, I’ll touch on our current economic outlook. There is a significant amount of uncertainty related to the Federal Reserve’s next steps on interest rates. While our economists currently expect two rate cuts from the Fed later this year, further persistence in inflation poses the possibility of zero cuts in 2024. Home prices continue to be strong and our current forecast is that, home prices will rise 4.8% in 2024, up 1.6 percentage points from last quarter’s projection.

We believe affordability challenges, the lock-in effect, and a low inventory of homes available for sale will likely persist this year. We expect single-family mortgage originations to grow from $1.5 trillion in 2023 to approximately $1.8 trillion in 2024. Purchases are likely to continue to dominate the market given the rate environment and we estimate they will make up over 75% of single-family mortgage originations this year. 2024 multifamily market origination volumes are estimated to be between $300 billion to $340 billion, up from an estimated $265 billion in volume for 2023, but down from $480 billion in 2022. We believe that with continued high interest rates, elevated new supply completions, and higher than average vacancy rates, multifamily sales activity will remain subdued in the near term, which could result in additional declines in multifamily property values over the short term.

Over the longer term, however, we expect sales and valuations will improve due to expected improvements in multifamily housing market fundamentals stemming from positive demographic trends and ongoing job growth. We expect rent growth to remain below historical averages in the 1% to 1.5% range in 2024 as a result of elevated new construction completions and many renters dealing with higher levels of consumer debt. Our expectations are based on many assumptions, and our actual results could differ materially from our current expectations. I invite you to visit fanniemae.com, where you’ll find a financial supplement with today’s filing that provides additional insights into our business. Thank you so much for joining us today.

Operator: Thank you everyone. That concludes today’s call. You may disconnect.

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