HOME PRICES UP SHARPLY IN SECOND QUARTER

Second Quarter Appreciation Up 15.0 Percent On An Annualized Basis

McLean, VA – Freddie Mac (NYSE: FRE) announced today that its quarterly national Conventional Mortgage Home Price Index (CMHPI) rose 15.0 percent in the second quarter on an annualized basis, up from a revised first quarter 2005 annualized rate of 10.5 percent and a fourth quarter 2004 annualized rate of 9.8 percent.

“The steady decline of fixed mortgage rates during the second quarter helped to propel home sales higher and drive up house prices,” said Frank Nothaft, Freddie Mac vice president and chief economist. “According to the Primary Mortgage Market Survey^SM the weekly average rate for 30-year fixed rate mortgages fell from a high of 6.04% the week of March 31st to a low of 5.53% the week of June 30th. Home sales in the second quarter soared to an annualized record level of 7.62 million units.”

The Conventional Mortgage Home Price Index (CMHPI) continues to show strong growth primarily along the coasts – areas where populations are growing rapidly, jobs growth is strong and land scarcity is pushing up the cost of housing.

“Home sales and housing starts are still expected to set a new record this year,” said Nothaft. “The devastating effects of Hurricane Katrina will likely drive up costs of construction materials once the rebuilding effort gets underway and may slow deliveries of new homes in other areas of the country as resources are reallocated to Louisiana, Mississippi and other areas affected by the storm.”

“It is too soon to know the full impact on the economy from the storm. Home sales in areas not affected by hurricane Katrina should remain strong and support continued home-price appreciation, especially since interest rates have fallen in recent weeks. Prior experience in Florida shows that home prices in hurricane disaster areas fall temporarily and then recover. We hope that will be the case here.” added Nothaft.

Nationally, home values increased 13.2 percent on an annual basis, from the second quarter of 2004 through the second quarter of 2005. For the ninth consecutive quarter, the Pacific states led the nation in annual house-price appreciation, growing at a rate of 21.1 percent. And once again the South Atlantic states were second, with a growth rate of 17.3 percent, followed – again – by the Middle Atlantic states, which grew at a slightly slower pace of 15.8 percent for the year. The Mountain states came next with growth at an annual appreciation rate of 15.4 percent.

The New England states followed the Mountain states with an annual home-price growth rate of 13.7 percent. After the New England states came the West North Central states, which experienced an increase of 7.9 percent. The East North Central states saw an increase of 7.0 percent. Finally, the East South Central states had gains of 6.8 percent and the West South Central states again had the slowest annual appreciation of 5.1 percent annually.

This quarter’s release of the CMHPI is the first to use the new metro area definitions based on the 2000 Census and expands CMHPI coverage to 379 MSAs.

“We are excited by the addition of more than 200 metro areas in the CMHPI metro area series,” noted Amy Crews Cutts, Freddie Mac deputy chief economist. “We can now see more clearly the impact of localized job losses or job gains on smaller communities with the wider coverage. Most of the job losses have come from the manufacturing sector while employment gains have occurred consistently in construction, and home price trends have mirrored the employment trends. Four metro areas are showing losses in home values year over year, but no state is currently showing either quarterly or annual decreases in average home values.

“Over the past 12 months ended in June 2005, homes in the Gulfport-Biloxi, MS, area gained 4.1 percent in value. Homes in Mobile, AL and New Orleans gained value at a slightly faster rate, at 6.3 and 7.4 percent, respectively. We have no way at the moment to know the extent of the damage or how long it will take to rebuild and repair damaged homes in these areas. We may see stronger growth in home prices in nearby cities such as Baton Rouge as some people relocate there and commute to their jobs once factories and plants are up and running again.”

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

Pacific Division (AK, CA, HI, OR, WA): increased 5.2 percent (22.4 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 21.1 percent, and during the last five years, home values have increased 87.5 percent.

South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): increased 4.4 percent (18.9 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 17.3 percent, and during the last five years, home values increased 62.5 percent

Middle Atlantic Division (NJ, NY, PA): increased 3.8 percent (16.1 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 15.8 percent, and during the last five years, home values increased 72.2 percent.

Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 5.6 percent (24.3 percent, annualized) in the second quarter of 2005. In the last 12 months, home values increased 15.4 percent, and during the last five years, home values increased 45.0 percent.

New England Division (CT, MA, ME, NH, RI, VT): increased 3.0 percent (12.5 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 13.7 percent, and during the last five years, home values increased 74.0 percent.

West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 2.5 percent (10.2 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 7.9 percent, and during the last five years, home values increased 39.8 percent.

East North Central Division (IL, IN, MI, OH, WI): increased 1.7 percent (7.2 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 7.0 percent, and during the last five years, home values increased 31.3 percent.

East South Central Division (AL, KY, MS, TN): increased 2.1 percent (8.6 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 6.8 percent, and during the last five years, home values increased 26.9 percent.

West South Central Division (AR, LA, OK, TX): increased 2.3 percent (9.3 percent, annualized) in the second quarter of 2005. Over the last 12 months, home values increased 5.1 percent, and during the last five years, home values increased 26.1 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 29.0 million records in the repeat-transactions database used to construct the 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 second quarter of 2005 and purchased by Freddie Mac and Fannie Mae by July 31, 2005.

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 390 metropolitan statistical areas (MSAs) and metropolitan divisions can be found on Freddie Mac’s web site, www.freddiemac.com/finance/cmhpi/.

Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders. By supplying lenders with the money to make mortgages and packaging the mortgages into marketable securities, Freddie Mac sustains a stable mortgage credit system and reduces the mortgage rates paid by homebuyers. Over the years, Freddie Mac has made home possible for one in six homebuyers in America.

Conventional Mortgage Home Price Index

Q2 2005 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
Q1 2005-Q2 2005
3.0

3.8

4.4

2.1

2.3

2.5

1.7

5.6

5.2

3.6

Annualized
Quarterly Change
Q1 2005-Q2 2005
12.5

16.1

18.9

8.6

9.3

10.2

7.2

24.3

22.4

15.0

Annual Change
Q2 2004-Q2 2005
13.7

15.8

17.3

6.8

5.1

7.9

7.0

15.4

21.1

13.2

5-Year Change
Q2 2000-Q2 2005
74.0

72.2

62.5

26.9

26.1

39.8

31.3

45.0

87.5

52.6

Annualized
5-Year Change
Q2 2000-Q2 2005
11.7

11.5

10.2

4.9

4.8

6.9

5.6

7.7

13.4

8.8

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.

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