I'm quite convinced that we have bottomed out, not only in our local real estate market but now in the credit markets, which is what was needed to create the other bottom. This DOES NOT mean that we are going to go racing back to the prior years anytime soon. I also think that we'll be bumping along the bottom for quite some time, perhaps for another year.

   This is a game changing event. One big money house went essentially under; the Fed allows entities like Goldman, Morgan Stanley or Lehman to borrow from the discount window. The Fed is willing to trade investment-grade residential or commercial mortgage-backed securities and corporate debt as collateral against its loans of cash from Treasuries.

   In concert with this, we had the Fed dropping the interest rates by .75%, down to 2.25% and cutting the rate at the discount window. That's 200 basis points in just 60 days. The Libor rate has fallen, nearly cut in half, since December. This will help the reset ARM market, which has been creating a lot of foreclosures.

   The last thing that is a positive, showing perhaps a bottom, is that Fannie Mae and Freddie Mac can lower capital requirements from 30% to 20%, which allows them to buy $200 billion of additional mortgages. This brings their buying opportunity to $2 trillion ability in 2008. This should help to loosen up the mortgage market, which has been in a squeeze for 8 months.

   I had said that I believe in the capital markets, and they need to sort this mess out more so than any of the government plans, bailouts, or programs. I think what we have seen here is the market going through that process. It's painful, a little scary, but it's the best solution.

   The stats in the real estate market here locally have started to show signs of stabilization. The number of homes listed on MLS has leveled out now for several months, around 57,000. The number of houses that are in "pending" status (under contract, not closed) has doubled in the last 60 days. Some of that is seasonal, but no increase would have been devastating. The number of actual closings should be around 4000 for March. Comparing that number to the same month in the last 2 years, it's going to be substantially down, but those numbers are not going to be repeated any time soon, nor were they the norm. It is up 20% from December.

   So much for the "emotional" decision to buy a house. Those of my borrowers that are still trying to fix and flip run in to a negative sentiment every day. Now that we are in what the media calls a recession, you've got more negative things on TV every day. Until we have a turn around in psychology, we are not going to see a big up turn in our real estate market.

   I have added a net $50,000 of new investment money; we have $14.3 million in the portfolio. I had some scheduled money depart for an April 15th bill. This is the smallest amount I've added in one quarter since I began. Perhaps that's a sign of the bottom!

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

   Denny J. Chittick