Darel Ansley

One fallout from the current market is the increase in homes being sold As-Is. Either a builder was unable to finish, or maybe the house went back to the bank in less than perfect condition. Either way, you end up with Sellers who don't want to put more cash into the house, they just want to sell it. While there are many more in other parts of the country, we in Wenatchee and all over Eastern Washington are seeing more and more of these.

These are huge opportunities; you will see homes for $150,000 that with $30,000 worth of work would be worth $250,000. Instant equity!

Even though these are great deals, most people walk away because they think they need to be a contractor with all the money in cash. You think you can't get a loan, because most lenders won't let you finance a house 'As-Is'. But there is a solution; you can simply buy the house as as part of a construction loan. When we do a regular construction loan, we are simply adding materials and labor to bare piece of ground; in this case we are just adding materials and labor to some level of existing structure.

Down payments can vary, but once again, I would suggest seeking out a smaller community bank for this type of program.

There are a lot of negatives in the market, one of these distressed properties can be a happy start with lots of equity for someone.

The subtitle of this message should be the paraphrase of Mark Twain: Bank Liquidity-"The reports of my death have been greatly exaggerated."

The media coverage of the financial and Real Estate news has created a lot of confusion amongst the general public. I have had Realtors tell me that some clients think that all financing for homes has dried up. I have had others shocked when I tell them their client can still get zero down 30 year fixed financing on a home.

I can only speak of what is happening in Washington State and specifically my market area which includes Wenatchee, Leavenworth, Chelan, and Winthrop and the surrounding counties. First a note on bank liquidity; smaller banks which are not publicly traded have not had their stock pummeled, and consequently still have plenty of money to lend. Please remember, banks have to lend money- that is where we get our revenues to pay interest on your CDs and keep the lights on, so we are still moving ahead. Fortunately, we didn't write a bunch of bad loans, so we aren't saddled with a bunch of foreclosures either.

As far as 100% financing or zero down, whatever you want to call it, that still exists for first time homebuyers and Veterans. The program is called HouseKey and is administered by the Washington State Housing Finance Commission. They have done tens of thousands of these loans, and we in our office have done dozens of these every year for at least the last five years.

Now that housing prices have come back down to the affordable range, all we need to remove is the negative news that keeps potential homeowners on the sidelines.

I am not one that likes to make negative predictions, but the recent financial news leads me to conclude that mortgage rates will be going up. For those who are ready to buy or refinance, I believe now is a good time to lock in your interest rate.

If you want the long version, read on:

Normally a drop in the stock market leads to lower mortgage rates. This is because investors get worried about the future returns from their stocks, and decide instead to put part of their money into guaranteed returns of bonds, including Mortgage Backed Securities. With supply and demand, the price of the bonds goes up- which results in lower interest rates.

In the last few days, In order to finance all their new acquisitions and bailout programs, the government has flooded the market with new bond sales; this has resulted in lower prices for the bonds- which means higher interest rates are being paid.

So now that the Government bonds are providing the funding for the stock market, it gets really confusing. A drop in the stock market no longer equates to a drop in interest rates.

So, as I had stated before the bailout, with all the funding that the government is going to need, bond rates are likely to continue up. And, when the stock market hits bottom and turns around and rallies, rates will really go up.

I have often given opinions about the direction of mortgage rates, with the disclaimer that I don't own a crystal ball, but I need to add my second disclaimer: When I got my degree in Finance, we only studied Free Markets, so I am now totally beyond my area of expertise.

For those people who have been looking at homes and are on the fence, I would encourage you to act now and get your mortgage rate locked in, as I think some of today's events will lead to higher rates in the next few weeks, and possibly even today.

The early warning sign was the fact that the stock market rallied on negative news. This morning's payroll report showed a loss of over 150,000 jobs in September. While this is a negative sign for the economy (these people won't be shopping), the stock market went for the reverse psychology and decided that this news would make the FED lower interest rates to try to help the economy.

This is a set-up for Chairman Bernanke, because if he decides not to lower the Federal Funds rate, the speculative run-up from today would have been false, so the market will fall again - with the blame going to Bernanke, not the speculators.

The other big factor poised to raise rates is the likelihood that Congress will likely approve the bailout today.

As I had posted previously, here in Wenatchee with lots of available homes under $200,000 and many more under the FHA limit of $323,750, and with interest rates currently around 6.0% now is a good time for buyers to get into a home they can afford.

Just to clear the air on some FHA rumors- First Time Homebuyers and Veterans can still do 100% financing- (not all down payment assistance money has gone away), and most other people still only need 3% down (3.5% is not yet in effect).

So if people are ready, now is a good time to close the deal and get into that new home for a great monthly payment.

Now I know I am not as smart as FED Chief Ben Bernanke and all his advisors, but I have to voice my opinion that this $700Billion bailout is a bad deal for the economy and the country.

First, it will result in a raising of interest rates and a slowing of the economy. This is because the Government will need to finance this plan by issuing more debt (Treasury Bonds, Notes and Bills). Half of these are already owned by Foreign investors, with China and the Oil-producing countries near the top of the list (the others are Great Britain,Japan, Brazil and the unknown people with Carribean bank accounts). In order to bring in $700 Billion in cash, the government will have to issue a ton of debt. The Foreign investors are going to think that our country is run by poor financial managers, and in order to entice them to buy up this debt, we will have to offer more attractive (higher) interest rates to get them to buy.You always demand a higher return as investments get riskier. Already, these investors can buy a German note that pays 1.88% more than we offer. If I was a foreign investor, I would think that the German note is looking like a better deal. So if you want me to buy your US debt, I want to be paid a higher interest rate.

So if the current 10 year US Treasury Note pays 3.88%, and the investors say,"I'm not going to buy up $700 Billion unless you pay 5.88%" Guess what, 30 year mortgage rates would now be over 8%. What does that do for the economy?

Hey, our huge foreign-financed deficit was a big concern to me even without this bailout plan.

The second reason I am against the plan is that it rewards greed and removes risk from our supposedly free-market economy. There are executives from Enron who created these same type of derivatives who had to spend 6 years in the Federal Penitentiary; and the taxpayers are supposed to bail out this latest set of clowns?

These are the people who started the subprime meltdown. It began with the hedgefunds, and then soon all of Wall Street was wanting to rake in Billions from Real Estate by soliciting mortgage companies to sell them loans under terms that were doomed to fail. These loan terms allowed people to buy homes way over what they could afford. The bad loans weren't pushed on these Wall Street firms, they were the ones who paid the mortgage brokers to go find the people to buy houses with little chance of repaying. They then defrauded their shareholders by listing these new Mortgage Backed Securities as Assets on their books.

If Bear Stearns, CitiCorp, Wamu or any of these others made bad financial choices, they should suffer the consequences. I didn't see them running to congress 2 years ago offering to pay the taxpayers their record Billions of dollars of earnings!

So let some banks fail; the consumer will be protected by the FDIC. Some people argue that if we let some big firms fall, there won't be any money to lend. Here is a clue-if banks don't lend money they go out of business, so the remaining banks will be lending. Second clue- somewhere out there in this great big world is $700 Billion that the Government was about to borrow; the world financial markets are all liquid, and that same money is available to lend to any American business or individual who has a good home, business or idea to invest in. Let the free markets flow - the money will go to the people who are likely to pay it back. There may be some unemployment on Wall Street, but what have those highly paid experts done with your 401-K over the last 5 years anyway? They need to find new careers.

Meanwhile with all the fear being spread by the media and the Government, consumers are like deer in headlights; a terrorist attack wouldn't have been this effective at shutting down commerce. Here in our market of Wenatchee, we have great homes available for under $200,000 , strong employment, and with all the media panic, the public doesn't realize that a First Time Homebuyer or a Veteran can still buy these homes with 0 down (and it doesn't end in October), plus anyone else can pick up these well-priced home with just 3% down with FHA financing. Let's get this thing settled so we can get on with getting people into the houses that they want and can afford.