You couldn't beat the last week of April for happy real estate news. While 2004 was supposed to be a year of modest home sales and somewhat higher interest rates, what we're seeing this year -- so far -- is stunningly upbeat in many areas of the country.

• In March, existing home sales were running at the second highest levels since records were first kept in the 1960s. Existing-home sales increased 5.7 percent to a seasonally adjusted annual rate of 6.48 million units in March, up 12.7 percent according to the National Association of Realtors.

• "New-home sales posted an all-time record in March, buoyed largely by the second lowest interest rates since 1956 and a strengthening national economy," according to the National Association of Home Builders.

• The latest rate for 11th District Cost of Funds Index -- an index used by many ARM borrowers -- dropped to 1.815 percent. The lowest level since July, 1981 was announced in February, a meager 1.811 percent. In effect, this significant index is trolling near the historic bottom.

Right now, the Washington, D.C. metro area represents one of the hottest markets in the U.S. Why? Some 60,000 new jobs have been created in the past year. If you can draw breath with any regularity you can find employment in the Capital region -- and then you can try to find a house.

The housing part is not so easy. A townhouse development not far from here opened with units priced around $385,000. A few weeks later they were available for $525,000.

This is all great and everyone loves a party. But are we looking at data which represents performance from a period that's no longer relevant?

Consider home sales. If they closed in March then the likelihood is that loan rates were locked in 30 to 45 days earlier -- that would be in January and February. At the end of April, says Freddie Mac, typical mortgage rates for 30-year, fixed-rate financing reached 6.01 percent with .7 points, low by historic measures but as much as .43 percent higher than the rates seen during the first two months of the year.

The questions to ask are:

• Have we suspended the laws of economics?

• Is there no sting from OPEC's soaring gasoline prices?

• Can massive federal deficits continue without impacting mortgage rates?

• Even though mortgage rates remain low by long-term standards, will today's above-the-bottom rates reduce home sales? What if rates continue to rise?

• Employment nationwide increased by 308,000 jobs in March, but shouldn't we count the 1.4 million "persons not in the labor force" not listed in the unemployment figures?

• Can we continue our vast payment imbalances with other countries and not suffer any consequences?

As an income-earning homeowner in the Washington metro area I am elated by local real estate trends, I pray fervently and regularly that they will continue and I look forward to home prices here which one day rival those in San Francisco -- but I am also wary.

What's happening in Washington is not necessarily happening elsewhere. With jobs, for example, Detroit (down almost 21,000 jobs), Boston (more than 30,000) and Los Angeles (2,000 approx.) have all seen employment declines during the past year.

Homes sales and prices are a by-product of many factors including local job growth, economic expansion, rising incomes and tolerable mortgage rates. The Washington metro area now has it all in real estate terms -- but for how much longer no one case say.

For more articles by Peter G. Miller, please press here.

Published: May 4, 2004

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .