3-31-06

   As I'm typing this, Mr. Bernanke decided to raise rates again by 1/4 pt. Now the smart traders are betting that he'll take it to 5.00% before taking pause. Despite high oil prices and other commodities, the economy is still driving ahead.

   With the continual increase in short term rates, the yield curve was becoming inverted. This gave some concerns of a recession around the corner. Since the beginning of the year, the yield curve has flattened, perhaps because of Bernanke's statement that he didn't believe we were headed for a recession and that it's not that good of an indicator.

   Besides his statements, the yield curve flattened because the long term rates have begun to rise. That will affect the mortgage rates, which have come up some lately, but are still considered low historically. The risk to a slower real estate market is not from rates, its inventory. We have switched from a sellers market to a buyers market in six months.

   The amount of houses listed for sale on MLS has quadrupled in six months. There is still a strong demand for housing, while there is just more to choose from, so the sell cycle is lengthening. Last summer, my borrowers were turning houses within 60 days, now its' slowed down to a more normal 90 to 120 days. I recently read a number that I thought showed the strength of the valley's real estate market. There are 365 people a day moving to Phoenix Metro area for permanent residence.

   For the first quarter of 2006, I've added $600k of new investor's monies. I have $9.7 million in the portfolio. I have quite a number of people that are planning to make an investment. I'm confident we'll be over $10 million shortly.

   The holidays are always a slower time of year. However, that slowness continued into February this year, where normally it ends soon after the New Year. The activity level has picked up since then, and according to many industry people that I talk too, buyer interest is still strong. The one thing we are not seeing this spring is large price increases. Prices have moderated, though I've not seen any wholesale declines. A steady market would be welcome by nearly everyone this year.

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

   Denny J. Chittick