6-30-05

    As I am typing this, Uncle Al and his gang of financiers are meeting. They are planning to raise interest rates yet again by 1/4%. Despite eight previous increases in the Fed Funds, long term interest rates have not risen, in fact they've fallen. Mr. Greenspan commented on this to congress by saying it was "conundrum." If he can't explain it, I certainly cannot.

   Although, history will say, that as the short term rates go up, the long term rates will rise, mortgage rates will go up in unison, economy slows down. The economy has been doing well even with record high oil prices and a weaker dollar. It is inevitable that we'll start to see a slow down sooner than later.

   You probably have heard a lot in the press about the real estate bubble. On both coasts there have been cases of houses being bid $20k or more over list price. In Florida, condo flipping -buying and selling the same condo for a profit, and it's not even built yet! Neither of these two things are happening here. I'm not saying we are immune from the hot real estate market, but it's not anywhere near some of those dizzy heights as it is on the coasts and in Florida.

   In the 2nd Quarter, I had $500,000 of new investment money added to the portfolio. I now have $7.4 million in the portfolio. There are presently 55 loans, with home values equaling $12.3 million. There are a few less loans then last quarter, yet I have more money in the portfolio. The average loan size has risen quite a bit lately. The competition for the $100k house is intense, and most of my borrowers are moving up the food chain to larger homes, where the margins are better and they can make more money.

   The demand is as strong as ever. I'm able to pick and choose the loans that I want to do. I base it on the marketability of the home and the borrower's history with me. At some point the temperature in the market will cool. It will happen in the hottest markets first. I'm keeping my eye on what is going on all over the country to ensure I am prepared for any changes in our market.

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

   Denny J. Chittick