Yahoo Finance Federal National Mortgage Association (PNK:FNMA) Q4 2023 Earnings Call Transcript
Federal National Mortgage Association (PNK:FNMA) Q4 2023 Earnings Call Transcript February 15, 2024
Federal National Mortgage Association isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to the Fannie Mae Fourth Quarter and Full-Year 2023 Financial Results Conference Call. At this time, I will now turn it over to your host Pete Bakel, Fannie Mae's Director of External Communications.
Pete Bakel: Hello, and thank you all for joining today's conference call to discuss Fannie Mae's fourth quarter and full-year 2023 financial results. Please note this call includes forward-looking statements, including statements about Fannie Mae's expectations related to economic and housing market conditions, the future performance of the company's book of business, and the company's business plans and their impact. Future events may turn out to be very different from these statements. The risk factors and forward-looking statements sections in the company's 2023 Form 10-K filed today describe factors that may lead to different results. A recording of this call may be posted on the company's website. We ask that you do not record this call for public broadcast and that you do not publish any full transcript. I'd now like to turn the call over to Fannie Mae, Chief Executive Officer, Priscilla Almodovar; and Fannie Mae Chief Financial Officer Chryssa C. Halley.
Priscilla Almodovar: Welcome and thank you for joining us today. I'll begin by spending a few minutes on the economic environment, and then we'll turn to our financial admission performance for 2023. After that, our Chief Financial Officer, Chryssa Halley, will discuss our full-year and fourth quarter results in more detail. Let me begin with the economic environment. The economy held up much stronger in 2023 than we anticipated at the outset of the year. GDP grew at an annual rate of 3.1%; inflation came in at 3.2%, down from 7.1% in 2022, in part due to the 100 basis points increase in the Fed funds rate last year. This increase in rates had a direct effect on housing, our business, and the people we serve. 30-year mortgage rates reached a 23-year high of nearly 8% in October 2023, an average 6.8% over the full-year, that was up 1.5 percentage points from the prior year.
The housing market is much different than it was just a few years ago. Back then, borrowers were able to access financing at historically low mortgage rates. Many of these borrowers sat tight in their homes, thanks to the low rates they locked in during 2020 and 2021. This lock in effect contributed to fewer homes available for sale. Despite this backdrop, home ownership is still in demand by many consumers and supply has not kept pace. One outcome of this is that home prices in 2023 were more resilient than expected. Single-family home prices increased by an estimated 7.1%. You will hear these higher home prices as a theme in our annual results. In addition, overall single-family mortgage originations remained low at $1.5 trillion, a 37% decline year-on-year.
The multifamily sector also faced challenges. Property values declined, and the market saw significant new units in some areas, while in other areas supply continued to be constrained. At a national level, 2023 rent growth fell and we expect that it turned negative in the fourth quarter. Even so, affordability continues to remain a challenge for renters in many parts of the country. Overall, multifamily mortgage originations declined substantially year-on-year to an estimated range of $255 billion to $275 billion, compared to $480 billion in 2022. Turning to our financial results, we reported $17.4 billion in net income in 2023, compared to $12.9 billion of net income in 2022; $3.9 billion of this was attributable to the fourth quarter. The strength in home prices throughout the year had a direct impact on our earnings, largely due to the release of credit reserves that reflected higher actual and forecasted home prices.
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