12-31-06

   The year is coming to a close, and all the financial data that has come out about the 3rd quarter, and which predicts the 4th quarter and next year, are showing signs the Fed is getting what it always wants, a slow soft landing. So steady as she goes ...

   With rates still low, the real estate market has struggled. It's well publicized in the press, though they tend to exaggerate and sensationalize it a bit. The difference between the real estate market and securities markets, is obvious, but one thing that stands out, is that the real estate market isn't nearly as dynamic. You are not going to see huge swings in prices in the short term as you see in one day in the stock market. Yes, prices have come down, in some areas quite a bit, but not 10% a day, week or month. The most I have seen is 15% down in a year!

   The only sure way to say it has hit the bottom is to look back in time. I'll stick my neck out and say we've seen the worst of it in the Phoenix Metro area. One of the biggest indications I'm seeing is the available supply of houses on the market. That has been the Achilles heel of the market, and it is coming down, and pretty dramatically. We've had 1000 houses a week drop in supply through the last few weeks. We are still a long way from what the experts "call" as "normal," but at least we are heading that way now.

   In the 4th quarter I added $800k of new investment money. We stand at $11.9 million in the portfolio. On a more important note, I have completed over $100 million in loans! That is 800 loans in a 5 ½ year time period. Even when I type and read that number it's hard to believe.

   I'm ending the year in good shape. We don't have a single problem loan in the portfolio, though there were a few challenged ones during the year. They are all resolved and paid now. Going into the New Year, there is a sense of "…whew! We are through with 2006." I am feeling very confident and looking forward to 2007!

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

   Denny J. Chittick