Fannie Mae's sales of real estate owned dropped 14% in the fourth quarter from the previous quarter, as demand for foreclosed properties weakened.

"Between higher pricing in some markets and somewhat higher interest rates, we have seen demand for REO properties soften a bit. In addition, we are seeing less interest from institutional buyers," said Fannie chief executive Timothy Mayopoulos on a conference call with reporters Friday.

The government-sponsored enterprise sold 32,208 REO properties in the fourth quarter, compared to 37,353 in the third quarter.

For the full year, Fannie acquired 144,384 REO properties and sold 146,821. It ended 2013 with an inventory of 103,229 single-family homes.

In 2012, the secondary marketer acquired 187,341 REO properties, sold 187,341 and ended the year with an inventory of 105,666 homes.

Fannie still has a large inventory of homes to sell this year. The GSE recently rolled out incentives to get owner-occupants to buy its REO. The cash incentives reduce closing costs.

REO acquisitions are expected to decline in 2014 due to lower delinquency rates and the "slower pace of completed foreclosures," Fannie says in its fourth-quarter financial report.

Meanwhile, rising house prices reduced Fannie's credit losses on REO sales last year. "We received net proceeds from our single-family REO sales equal to 67% of the loans' unpaid principal balance in 2013, compared to 59% in 2012," the company says.

Fannie estimates house prices rose 8.8% in 2013, but the rate of increase will be lower in 2014. "We started to see home appreciation moderate toward the end of the year," Mayopoulos told reporters Friday,

The GSE ended 2013 with 419,900 seriously delinquent loans on its books, down 27% from a year earlier.

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