Looking Back at Q1 '10

The first quarter of 2010 brought a steady, and perhaps surprising, drumbeat of positive news in the MB RE market.

We saw fast sales, people getting their asking prices, multiple offers – hallmarks of days that seemed long past. Throughout the next week or so, we'll be bringing out more data on MB sales in March and the whole of the first quarter.

Looking outside our little hamlet, though, this was not the way RE sales were going everywhere else in America.

Depending where you look, prices are flat, sales pace is flat or down year-over-year, and there has been a lot of hand-wringing about what kinds of worse results might await the market as 2010 unfolds.

The housing recovery nationally seems fragile with high unemployment, the imminent end of home buyer tax breaks, fear of another wave of foreclosures and the inevitable rise of mortgage interest rates. It was just 10 days ago that the national government issued its newest plan to postpone price discovery on toxic MBS assets keep homeowners in their homes. (See MBC's "More Foreclosure Prevention.")

Seems like some kind of parallel universe, doesn't it?

What MB saw in the first quarter did seem to be more typical of higher-end housing markets in several parts of the U.S., as reported by CNBC and others last week. Money quote:

"People are not as uptight as they were a year ago," says [mortgage lending company exec Steve] Habetz. "It seems as if they are more comfortable in thinking the high end housing market is not collapsing. Home values have stabilized and it's been a matter of following the leader. One person sees others buy or sell and they join in. That's been happening."

The market's not collapsing (anymore)? That feeds confidence, which feeds activity, which reinforces the original confidence – wherever it got started – and a cycle is under way.

Last month, in our post asking local RE agents about the state of the market (see "Front-Line Views of the Rally"), we saw 3 factors that seemed most significant in driving the recent burst of activity:

1) Sellers pricing more realistically
2) Low inventory
3) Low interest rates/fear of higher rates

A few weeks later, we still see low inventory and smarter pricing, but interest rates seem to have begun their feared upward creep.

Calculated Risk noted this Monday, warning that a drop in refinancings is to be expected now:

With the yield on the Ten Year Treasury increasing to 4%, and the end of the Fed MBS purchase program last week, mortgage rates will probably rise and refinance activity will fall sharply.

Rates aren't the only issue, of course. If all other factors remain more or less as they are, higher rates will crimp prices, but need not tank the market.

So bring on the 2nd & 3rd quarters already, let's see what's in store.