12-31-09

   If you would have predicted in January that we would be where we are today, you would have been considered a fool. We are out of the worst recession in 75 years, the stock market has risen 50%, and "real estate" is not the two worst words to say in church. Perhaps by government statistics, we haven't had a V shaped recovery, but I doubt we could have had it any better.

   In the fourth quarter of the year, the selling market in Phoenix continued to be extremely strong. November sales were the 2nd best November in history. I'm guessing that this quarter will turn out to be the best 4th quarter ever. Pending sales have stayed above 10 thousand, inventory, although rising to 40 thousand, has leveled off again and we are heading into what most consider the best season.

   We have continued to see price stabilization all over the valley, which is the first step to appreciation; though I'm convinced we are six months from seeing much of a push higher. You have heard of "beach ball through the python." Well, think of this more like a kielbasa. I've heard of the "second wave of foreclosures," "shadow inventory," etc. I'm not seeing any signs of this. Yes, because of the recession and high unemployment it's naturally going to push more people into foreclosure. However, the number of foreclosure filings in Maricopa County have leveled off and actually started to come down. Nothing goes in a straight line, so it might bump up again in January, but we are certainly past the worst of it. The time it will take to get back to a "normal" amount of foreclosures is anyone's guess. Mine would be 2011.

   I have a few predictions for the New Year. Looking into the first six months of next year, there is much optimism. Christmas retail sales were better than expected, unemployment came down in the last report, but might bump again up, yet surely we are within tenths of a percentage of the highest number. We still have government tax credit for housing extended. I think that the economy will get better, though very slowly, keeping unemployment high for awhile. It probably won't fall below 8% until 2011. The fed will start raising rates in the first quarter, by March most likely, which is good. That will squeeze the spread that the banks have been taking advantage of for the last year. The banks haven't been lending because they borrow for free, then invest in government bonds for a larger spread than they then typically have when bowering costs are normal and they have to lend to consumers. Higher return and less risk? Is it any wonder why banks aren't lending! They will start next year. When the Fed retreats from the mortgage market, as they have said they will do, there will be an uptick in mortgage rates, but to what, 6%? That is still so incredibly cheap historically. I think an improving economy will overcome any rise in borrowing costs that would slow the housing market.

   We have lived through the worst, with a few scares, a lot of education, and much better appreciation all rolled in to one. I'm looking forward to 2010.

   The portfolio stands at $19.4 million. We didn't hit the 20 mil mark, but I'm confident that I'll see continued growth in the coming year.

   I have updated the pictures of the current properties on the website. Thanks again for your trust, investment, and referrals.

   Denny J. Chittick 

   Previous newsletters: