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Open House
Builder Scale-backs Sign of Housing Slowdown? They're Not Your Grandpa's Modular Homes. "Weekend Project": Pest Control.
Aired April 23, 2005 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: "OPEN HOUSE" is straight ahead.
But first, these stories now in the news.
The former commander of U.S. forces in Iraq is off the hook in the Abu Ghraib prison abuse scandal. An internal Army probe concluded that the allegations against Lieutenant General Ricardo Sanchez and three others were unfounded.
And in the Mega Millions lottery, we know where the winning ticket was sold. You just heard from the store owner who sold the ticket, but we don't know who bought the ticket just yet. The single ticket, worth $205 million, was sold in a supermarket in Port Huron, Michigan. We'll let you know who the winner or winners are as soon as they come forward.
I am Tony Harris in Atlanta.
OPEN HOUSE starts right now.
ANNOUNCER: Today on OPEN HOUSE, a surprising new report. Builders scale way back on new-home construction. Is it a sign of a slowdown?
Then, prefab perfection. Modular homes have come a long way. We take a look at the latest on the market.
And our weekend project, pest control. Rid your house of unwanted critters.
Next on OPEN HOUSE.
GERRI WILLIS, HOST: Hello, and welcome to CNN OPEN HOUSE. I'm Gerri Willis. From buying and selling to renovation and design, we show you how to make your home your best investment.
That investment could soon lose some of its luster if a new report is any indication. For the month of March, new-home construction dropped sharply. Are we seeing signs of a housing market slowdown?
Allan Chernoff takes a look.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Home construction in Ashburn, Virginia, as far as the eye can see. Hundreds of homes are going up. Builders plan thousands more.
STEVEN ALLOY, PRESIDENT, STANLEY MARTIN: If you can get permits and you can get pavement, then you're going to sell houses.
CHERNOFF: Here in Ashburn, 25 miles from Washington, it seems almost inconceivable that housing starts plummeted nearly 18 percent in March, the biggest drop in 14 years. But while the decline came off February's record level, some economists warned the end of the housing boom is near.
DEAN BAKER, CENTER FOR ECONOMIC AND POLICY RESEARCH: An 18 percent falloff is extraordinary. So that could mean the end of the housing boom. Beginning of the end, I should say.
CHERNOFF (on camera): Do you think it is?
BAKER: Well, I've been expecting the end of the housing boom for about two years now.
CHERNOFF: Yet for the past two years, builders have been putting up new frames at a record pace. Now, however, there are some factors that could weigh on housing. Mortgage rates popped above 6 percent last month. The rise in oil prices is hurting consumer confidence. And builders say they're worried about growing speculation, people buying homes and then selling them in a matter of months for a quick profit.
(voice-over): Even the National Association of Home Builders chief economist believes housing has peaked. But he says there will be no crash.
DAVID SEIDERS, NATIONAL ASSOCIATION OF HOME BUILDERS: I do have some pretty modest downslide in my forecasts of home sales and housing starts through the rest of this year, and some further decline in 2006. But the rates are moving up gradually. You will ultimately get a gradual down movement in the housing numbers.
CHERNOFF: Although they've climbed, interest rates remained at historically low levels, and home sales are still strong. But it is possible, as David Seiders predicts, that right now is the turning point for a housing market that has been the economy's lead engine.
Allan Chernoff, CNN, Ashburn, Virginia.
(END VIDEOTAPE)
WILLIS: Well, no doubt there is some uncertainty at the housing market, and that makes it difficult to manage your own mortgage long term.
Joining us now from Livonia, Michigan, to help us out is Bill Emerson, the CEO of Quicken Loans.
Hey, Bill, good to see you.
BILL EMERSON, CEO, QUICKEN LOANS: Hey, Gerri, how are you? It's great to be here.
WILLIS: Listen, I want to start with that housing starts number, because I think there's a lot going on there. Some this week were pointing out that it wasn't too surprising that we had a fall, because the previous month was a 20-year high. They also say the weather was a factor.
Are these just economists trying to cover their tracks, or is this something that people should pay a lot of attention to?
EMERSON: Well, I think, you know, the numbers that you're seeing for housing starts really are economic indicators for the average consumer. I'm not sure how much they really mean, because you're looking kind of at a national average as what's happening around the country.
You know, when you see a drop like that, certainly it's going to indicate that there might be something changing or happening, but you know that the housing starts have been strong the last three months, you're going to have volatility and corrections.
And I think for the average consumer, what you really have to understand is your local market.
WILLIS: Well, it's always important to understand the local market, that's for sure.
But let's talk a little bit now about rates and where they're going. There's been a lot of conversation, a lot of discussion, about rates going much, much higher. But, come on, Bill. People talk about it all the time. It hasn't happened.
EMERSON: Well, you know, I mean, I've been hearing this, we've been talking about it for the past probably 18 months. What's going to happen with interest rates? When are they going up? Obviously, the Fed has been tightening, and they've been raising the short-term interest rate, and we've seen a little bit of a hedge up for the long- term rates, but the last couple of weeks, we actually saw them turn and go the other way again, and they did actually drop a little bit below 6 percent last week.
So long-term interest rates are still very low, and you're starting to get a little conflict between what Alan Greenspan is doing on the short term and what's happening on the long term. So rates are still very, very, very low.
WILLIS: Well, long term, short term, whatever, let's talk about where 30-year fixed rates are going to be by the end of the year. What's your outlook right now for people who, you know, and they're Out there buying a house, they want to know what's going to happen.
EMERSON: Yes, I mean, you know, a lot's going to determine what happens here with the economy. You know, is it picking up? Is it slowing down? But my guess is, Gerri, you're probably going to see 30-year fixed rates in the mid-6s here, potentially approaching 7 percent by the end of the year. I don't think you're going to see any huge spikes, but you will see a gradual trend up, provided that the Fed continues to raise short-term interest rates.
WILLIS: All right.
Well, let's talk a little bit about what you do if rates are rising. How do you manage that mortgage? You've got a lot of good ideas, including evaluating how long you're going to be in the house.
EMERSON: Well, I think, you know, first of all, you have to mask, match your mortgage situation to your personal financial goals. And, you know, if rates are rising, you have to take a look at how long you're going to be in that home. Sometimes how long you're going to be in the home isn't as relevant as how long you're going to be in that mortgage, because, you know, people typically swap out their mortgage now about every five year or so.
So you've got to kind of look at your financial situation and then ask yourself, Am I going to be there for a long time? And do I want to look at a fixed rate, or am I going to be there a shorter amount of time, and do I want to look at more of a hybrid ARM situation?
WILLIS: How do I get the lowest rate? You know, a lot of people out there advertising low, low rates. Where do I go?
EMERSON: Well, I think sometimes finding the lowest rate is a misnomer. I think if you do your due diligence and you talk to some reputable lenders, you're going to find that interest rates are going to be pretty competitive no matter where you go.
So you're going to want to, you know, talk to a reputable lender, find out what your personal goals are, and then match that mortgage program to it. You can get lower rates by paying points, if you want to. It just kind of depends on what you're trying to get done.
But obviously, if you're going to try to find the lowest rate, you're going to be going with some type of adjustable-rate program.
WILLIS: Bill, define "points" for our viewers.
EMERSON: Points are simply money that you pay to reduce your interest rate. For instance, if you're looking for a 6 percent interest rate, and that would be at a zero point rate. If you paid 1 percent of your loan amount, for instance, if you were borrowing $100,000, if you paid $1,000 in additional costs, you could buy your interest rate down typically about one quarter of 1 percent.
WILLIS: All right. The big payoff, the big question, if you're getting a mortgage now, do you lock in right now?
EMERSON: That is the question, and I would tell you, given what's happened in the market right now, Gerri, I think you're better off taking a look at locking than you are taking a look at floating. I mean, I think the propensity for rates to go up is much greater than they are for them to go down. And that way, you're locking in some security. And if for some reason over the next six months or so we see the market shift, you always have the opportunity to look at your situation and refinance to a better program.
WILLIS: Bill Emerson, thanks so much for joining us today. We appreciate your help.
EMERSON: It's my pleasure, Gerri. Have a great day.
WILLIS: Coming up on OPEN HOUSE, if you think prefab homes are simply cheap construction, you won't believe the modular homes now on the market. We're going to take a look.
And our weekend project, pest control. Rid your house of unwanted critters.
But first, your tip of the day.
(BEGIN VIDEO CLIP)
ANNOUNCER: You're ready to buy a house. You know you can afford the monthly mortgage payments, but you don't have the 20 percent for the down payment. Don't worry. There's hope for that dream home yet.
Ask both public and private lenders if they offer programs aimed at lower-income people. Many times, they work in conjunction with Fannie Mae, Freddie Mac, or nonprofit or government agencies. You may be able to get low-interest mortgages with as little as 3 percent down.
Shop around for lenders, and don't be afraid to ask what they can do for you.
That's your tip of the day.
(END VIDEO CLIP)
WILLIS: Prefab housing might make you think of something poorly made, but the truth is, modular homes are often indistinguishable from traditionally built houses.
And as J.J. Ramberg shows us, there's a major perk. They're virtually built overnight.
(BEGIN VIDEOTAPE)
J.J. RAMBERG, CNN CORRESPONDENT (voice-over): Nadine and Jerry Ferrario remember the day they built their house.
JERRY FERRARIO, HOMEOWNER: They delivered the boxes one day, and they put them on the side lot. And then the next day, the crane was here, and they started to put it together. So it's, you know, like watching your kids put an Erector set together.
RAMBERG: From foundation to 2,800-square-foot home took about 48 hours, because the bulk of the construction was done here at this factory.
Victor Dephillips and his company manufacture modular homes, prefab structures built to spec, and then shipped anywhere in the country.
(on camera): So explain to me what this is, because these are four parts to one house, right?
VICTOR DEPHILLIPS, SIGNATURE BUILDING SYSTEMS: Yes, four parts to one house. This is part of a townhouse job that we're building. Actually, it's going to go right across town in Scranton. And what you're seeing is, these are the top two floors, in back of us, and these are the two lower floors.
What will happen is, when it gets to the site, that box and that box will get married together. These two boxes will go on top.
RAMBERG (voice-over): While Dephillips specializes in luxury residences, his portfolio includes one 7,800-square-foot house. He says he still has to fight the notion that modular homes are made with cookie-utter designs and lower standards of quality.
RAMBERG (on camera): I believe there's a sense that a modular home won't be as nice as a stick-built home.
DEPHILLIPS: It's not true. It's the same product. It's the same materials. We do it in a manufacturing facility. And maybe there's some stigma out there about that, but there really shouldn't be. I'll give you the example I give to everyone who gives me a problem with modular. I say, Look, if you drive a Mercedes-Benz, and next year, when you go to buy your new one, I'm going to have six guys show up in underall -- in overalls and build it in your driveway.
RAMBERG: How much customization can you actually get in a modular home?
DEPHILLIPS: Most of what you see on our floor here has been built to the customer plan, a consumer plan.
RAMBERG (voice-over): Modular builders hawk speed and cost control and consistency. But architects warn that the process does come with limitations.
JUD WILKINSON, ARCHITECT: Modular construction is compromised when it has to deal with idiosyncrasy of any kind, levels, openings, angles, curves -- anything that's not three-dimensionally square and level and straight. It -- modular construction loses a little bit of its cost effectiveness, and also becomes less likely to be made perfect when it's done.
RAMBERG: Though many builders agree, under the right circumstances, modular homes can be virtually indistinguishable from their traditionally built cousins.
J.J. Ramberg, CNN, New York.
(END VIDEOTAPE)
WILLIS: Forty-eight hours to build that huge home.
Well, if you're interested in prefab, there are plenty of things you need to know before picking out your dream house.
Joining me now from Boston, the author of "Modular Home," Andy Gianino.
Andy, welcome.
ANDY GIANINO, AUTHOR, "THE MODULAR HOME": Thank you.
WILLIS: So, Andy, OK, 48 hours, that huge house. I can't get over that. How can it possibly be as good as a regular stick-built home?
GIANINO: Well, the fact is that modular homes, by being built on an assembly line in a factory, take advantages of the manufacturing process. As everyone knows, assembly lines work by having materials fed to stations, with different skilled people doing the exact tasks required. So if you're building a floor, you have guys that are really good at floors. You're assembling, installing windows, you have people that are really good installing windows.
If you're starting with the same material, as Mr. Philips was mentioning, and you're assembling them on an assembly line, you really do get superior quality.
WILLIS: Unbelievable. Well, let's talk a little bit about how you get started if you're interested in this. You say step number one, secure the financing.
GIANINO: Well, you should be doing several things at the same time. Financing is critical, because, of course, you have to pay for the home. But you also have to have land to put it on. So you'd have to find a building lot. You could do that in any of the conventional ways, starting with a Realtor.
After you have the land, and -- or you at least have a possibility in mind, and you have the money in place, then you need to have a dealer who's going to help you design the home and get it built with the manufacturer that he works with.
WILLIS: Andy, how do you find a dealer?
GIANINO: Well, there's a couple of ways you can go about it, but the best way, as in many cases, for finding professional people is through recommendations. But the National Association of Home Builders has a list, and so does the Modular Building Systems Association in Pennsylvania.
WILLIS: All right. Sounds like a good start.
Let's go over some of the pros and cons of actually having one of these modular homes built. On the pro side, it sounds like you can really get a deal. The cost may be as much as 15 percent less. You say superior quality. What other reasons would I choose a modular home?
GIANINO: Speed, of course. If you're talking about building a home that's anywhere from 600 square feet for an inlaw addition, or 5,000 square foot, two-story Colonial, and you're building that at the factory in one week, and then you're delivering it to your site and completing it in a mere few additional weeks, well, speed is a real big advantage.
WILLIS: Yes, no kidding. And, of course, you said before, the high quality, another big advantage.
Let's talk about some of the cons. Are there downsides to this? I think we mentioned before that maybe they're difficult for complex construction, if you want to do something special, it can be (INAUDIBLE) tough.
GIANINO: Well, you can't always build some of the contemporary designs that you see out there. I mean, if you have roofs going in multiple directions, and you have lots of bumpouts, then it's not going to fit so easily into a modular framework. So you can't build all the contemporary designs that you might want to.
WILLIS: What about if I want to change that design?
GIANINO: Changes, as long as they're able to be built within the modular framework, are very easily and readily done. Most manufacturers these days welcome custom designs.
WILLIS: And do all towns accept modular homes? Are there requirements in some areas that would force you to build a stick- construction house?
GIANINO: Not really, because the issue is, does it comply with the state building codes? And modular homes, by definition, have to comply to the state building codes. Local towns can have certain requirements that apply to both the conventional builders and the modular builders, but they're not discriminated against just because they're built as a modular.
WILLIS: All right, well, that's good to know. It seems to me that the modular homes are actually gaining in strength. I hear about a lot of builders out there who are changing over from stick construction to modular building. Do you think this is a force that's really going to take over the construction industry?
GIANINO: Well, in places where you're building wood-framed homes, which is a good part of country, I think you'll see more and more of it, primarily because there's a shortage of skilled labor. And whenever there's a shortage of any labor or materials, you're going to go (INAUDIBLE) anyplace that can give you an advantage. And modular construction, by being built in a factory with assembly-line workers, really helps partly solve the shortage of skilled labor.
WILLIS: And what about delivery permits? I think getting these things delivered to your site has got to be a lot of work.
GIANINO: Well, the manufacturers usually are good about taking care of that. Because the loads are usually oversized, then there -- you can't just deliver down the road without prior approval from the states and the federal government. But those permits are obtained by the manufacturers, and the dealer doesn't really worry about it, and the consumer certainly doesn't worry about it.
WILLIS: All right. Well, the book is called "The Modular Home." Our guest, Andy Gianino. Thanks so much for being with us today.
GIANINO: Thank you.
WILLIS: Coming up on OPEN HOUSE, our weekend project, it's pest control. Creepy-crawly critters, you don't want them, neither do we. We have some tips on keeping them out.
That's next on OPEN HOUSE.
(COMMERCIAL BREAK)
(BEGIN VIDEOTAPE)
WILLIS: Welcome back to OPEN HOUSE, and weekend project.
We're taking a look for pests, those critters in your house that drive you crazy.
Here to help us track them down is Dan Brady.
Dan, welcome.
DAN BRADY: Thank you.
WILLIS: Now, tell me what's on tap today.
BRADY: Well, first of all, the three things you want to eliminate on the exterior of the house is, you want to eliminate food, shelter, and water for the rodents and insects.
WILLIS: OK.
BRADY: Once you eliminate those things, it's less likely you'll have any invasion.
WILLIS (voice-over): Excess debris, leaves, and moisture are breeding grounds for insects. So make sure to clean your gutters, if you don't want bugs to set up shop.
Next step, getting rid of rodents.
(on camera): Is that the trap?
BRADY: That, that...
WILLIS: That's so cool. BRADY: That's actually a rodent-bait station, of course, that fits right into the landscape.
WILLIS: So are you going to open this up? We're going to touch this thing, right?
BRADY: Well, we can touch it. I won't open it up. But what I can do is show you that...
WILLIS: It's just plastic.
BRADY: It's just plastic.
WILLIS: (INAUDIBLE).
BRADY: That's all it is, it's just plastic.
WILLIS: This is plastic. It looks like a stone, but in fact...
BRADY: Exactly.
WILLIS: ... you've got -- somehow, you've got food in here, and the rats...
BRADY: The -- the...
WILLIS: ... can go in...
BRADY: There's a bait in...
WILLIS: ... but they can't get out.
BRADY: ... and they can -- they go in, on either end here, they feed and they leave, and they go off and expire.
WILLIS: Oh, they die somewhere else.
BRADY: They die somewhere else, right.
WILLIS: So they're not dead in here.
BRADY: Right, they're not dead in here.
Now, the other thing is, this is -- it's childproof, it's tamper proof. You need a lock to get into here to maintain the...
WILLIS: So the kids won't get in trouble.
BRADY: ... (INAUDIBLE) -- Exactly.
WILLIS (voice-over): Come summertime, you want to hang out at the pool, as long as no mosquitoes are hanging out with you.
(on camera): This is a wonderful tool for not using pesticides to get rid of... BRADY: Absolutely. Again, this attracts mosquitoes. So you put it away from the area you want to be, and the mosquitoes are attracted to this unit from the CO2. The CO2 is emitted through here. The mosquitoes go up inside the chamber here, where they're caught and trapped into a bag, and they can't get out.
WILLIS: No pesticides.
BRADY: No pest...
WILLIS: The only thing this little machine is putting out is CO2, which is what our own bodies...
BRADY: Absolutely.
WILLIS: ... put out, right?
BRADY: Absolutely. The same exact material.
WILLIS (voice-over): Other places to watch out for, the garage and basement. Make sure all doors and windows are securely shut when warm weather hits. When you're ready to head inside, go straight to the kitchen. It's a hot spot for creepy crawlers, especially the pantry. Grain insects tend to breed in rice and cereal containers.
BRADY: Through our monitors, actually, you can put down. Now, for instance, there's an insect monitor in here. This is a sticky trap that we put out in critical areas. And if you happen to see an insect on here, then you know you have...
WILLIS: A problem.
BRADY: You have a problem.
WILLIS: And so is this dangerous in any way?
BRADY: There's no...
WILLIS: I mean, if the kids got ahold of it...
BRADY: The only way-
WILLIS: ... would it be a problem?
BRADY: ... it's dangerous, they might get their finger stuck on the glue or something like that. But there's no insecticides on here whatsoever.
WILLIS: That's handy.
BRADY: Yes. So it's basically, it's a monitor to let you know if there are any situations with insects. Again, the main thing is, if you do find an infestation, the way to get rid of it is, you have to get rid of the product itself.
WILLIS: So Dan, tell me, how much does it cost to pest-proof the average home?
BRADY: It's probably less than a couple hundred dollars. Again, depending on how significant the damage is to the structure or foundation even. But in general, I mean, unless you have major repairs, you're probably looking at less than a couple hundred dollars to take care of little incidentals like screens and things like that.
(END VIDEOTAPE)
WILLIS: OK, one other bug to watch out for, termites. The annual cost of damage and treatment for these wood-destroying bugs is a whopping $5 billion worldwide.
Coming up, a look at next week's show.
But first, the mortgage snapshot.
(COMMERCIAL BREAK)
WILLIS: Coming up next week on OPEN HOUSE, if you're interested in buying property, a real estate partnership may be the way to go. We'll show you how they work.
Then, before the next open house, you'll learn to be your own home detective. We show you what to look for.
And our weekend project, liven up your lawn. We have tips on beautifying your yard.
Plus, we want to hear from you. Send us your comments, your questions, to openhouse@cnn.com.
Thanks for watching OPEN HOUSE. We'll see you here next Saturday.
Coming up, "DOLANS UNSCRIPTED."
But first, a look at the day's headlines.
Have a great weekend.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired April 23, 2005 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: "OPEN HOUSE" is straight ahead.
But first, these stories now in the news.
The former commander of U.S. forces in Iraq is off the hook in the Abu Ghraib prison abuse scandal. An internal Army probe concluded that the allegations against Lieutenant General Ricardo Sanchez and three others were unfounded.
And in the Mega Millions lottery, we know where the winning ticket was sold. You just heard from the store owner who sold the ticket, but we don't know who bought the ticket just yet. The single ticket, worth $205 million, was sold in a supermarket in Port Huron, Michigan. We'll let you know who the winner or winners are as soon as they come forward.
I am Tony Harris in Atlanta.
OPEN HOUSE starts right now.
ANNOUNCER: Today on OPEN HOUSE, a surprising new report. Builders scale way back on new-home construction. Is it a sign of a slowdown?
Then, prefab perfection. Modular homes have come a long way. We take a look at the latest on the market.
And our weekend project, pest control. Rid your house of unwanted critters.
Next on OPEN HOUSE.
GERRI WILLIS, HOST: Hello, and welcome to CNN OPEN HOUSE. I'm Gerri Willis. From buying and selling to renovation and design, we show you how to make your home your best investment.
That investment could soon lose some of its luster if a new report is any indication. For the month of March, new-home construction dropped sharply. Are we seeing signs of a housing market slowdown?
Allan Chernoff takes a look.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Home construction in Ashburn, Virginia, as far as the eye can see. Hundreds of homes are going up. Builders plan thousands more.
STEVEN ALLOY, PRESIDENT, STANLEY MARTIN: If you can get permits and you can get pavement, then you're going to sell houses.
CHERNOFF: Here in Ashburn, 25 miles from Washington, it seems almost inconceivable that housing starts plummeted nearly 18 percent in March, the biggest drop in 14 years. But while the decline came off February's record level, some economists warned the end of the housing boom is near.
DEAN BAKER, CENTER FOR ECONOMIC AND POLICY RESEARCH: An 18 percent falloff is extraordinary. So that could mean the end of the housing boom. Beginning of the end, I should say.
CHERNOFF (on camera): Do you think it is?
BAKER: Well, I've been expecting the end of the housing boom for about two years now.
CHERNOFF: Yet for the past two years, builders have been putting up new frames at a record pace. Now, however, there are some factors that could weigh on housing. Mortgage rates popped above 6 percent last month. The rise in oil prices is hurting consumer confidence. And builders say they're worried about growing speculation, people buying homes and then selling them in a matter of months for a quick profit.
(voice-over): Even the National Association of Home Builders chief economist believes housing has peaked. But he says there will be no crash.
DAVID SEIDERS, NATIONAL ASSOCIATION OF HOME BUILDERS: I do have some pretty modest downslide in my forecasts of home sales and housing starts through the rest of this year, and some further decline in 2006. But the rates are moving up gradually. You will ultimately get a gradual down movement in the housing numbers.
CHERNOFF: Although they've climbed, interest rates remained at historically low levels, and home sales are still strong. But it is possible, as David Seiders predicts, that right now is the turning point for a housing market that has been the economy's lead engine.
Allan Chernoff, CNN, Ashburn, Virginia.
(END VIDEOTAPE)
WILLIS: Well, no doubt there is some uncertainty at the housing market, and that makes it difficult to manage your own mortgage long term.
Joining us now from Livonia, Michigan, to help us out is Bill Emerson, the CEO of Quicken Loans.
Hey, Bill, good to see you.
BILL EMERSON, CEO, QUICKEN LOANS: Hey, Gerri, how are you? It's great to be here.
WILLIS: Listen, I want to start with that housing starts number, because I think there's a lot going on there. Some this week were pointing out that it wasn't too surprising that we had a fall, because the previous month was a 20-year high. They also say the weather was a factor.
Are these just economists trying to cover their tracks, or is this something that people should pay a lot of attention to?
EMERSON: Well, I think, you know, the numbers that you're seeing for housing starts really are economic indicators for the average consumer. I'm not sure how much they really mean, because you're looking kind of at a national average as what's happening around the country.
You know, when you see a drop like that, certainly it's going to indicate that there might be something changing or happening, but you know that the housing starts have been strong the last three months, you're going to have volatility and corrections.
And I think for the average consumer, what you really have to understand is your local market.
WILLIS: Well, it's always important to understand the local market, that's for sure.
But let's talk a little bit now about rates and where they're going. There's been a lot of conversation, a lot of discussion, about rates going much, much higher. But, come on, Bill. People talk about it all the time. It hasn't happened.
EMERSON: Well, you know, I mean, I've been hearing this, we've been talking about it for the past probably 18 months. What's going to happen with interest rates? When are they going up? Obviously, the Fed has been tightening, and they've been raising the short-term interest rate, and we've seen a little bit of a hedge up for the long- term rates, but the last couple of weeks, we actually saw them turn and go the other way again, and they did actually drop a little bit below 6 percent last week.
So long-term interest rates are still very low, and you're starting to get a little conflict between what Alan Greenspan is doing on the short term and what's happening on the long term. So rates are still very, very, very low.
WILLIS: Well, long term, short term, whatever, let's talk about where 30-year fixed rates are going to be by the end of the year. What's your outlook right now for people who, you know, and they're Out there buying a house, they want to know what's going to happen.
EMERSON: Yes, I mean, you know, a lot's going to determine what happens here with the economy. You know, is it picking up? Is it slowing down? But my guess is, Gerri, you're probably going to see 30-year fixed rates in the mid-6s here, potentially approaching 7 percent by the end of the year. I don't think you're going to see any huge spikes, but you will see a gradual trend up, provided that the Fed continues to raise short-term interest rates.
WILLIS: All right.
Well, let's talk a little bit about what you do if rates are rising. How do you manage that mortgage? You've got a lot of good ideas, including evaluating how long you're going to be in the house.
EMERSON: Well, I think, you know, first of all, you have to mask, match your mortgage situation to your personal financial goals. And, you know, if rates are rising, you have to take a look at how long you're going to be in that home. Sometimes how long you're going to be in the home isn't as relevant as how long you're going to be in that mortgage, because, you know, people typically swap out their mortgage now about every five year or so.
So you've got to kind of look at your financial situation and then ask yourself, Am I going to be there for a long time? And do I want to look at a fixed rate, or am I going to be there a shorter amount of time, and do I want to look at more of a hybrid ARM situation?
WILLIS: How do I get the lowest rate? You know, a lot of people out there advertising low, low rates. Where do I go?
EMERSON: Well, I think sometimes finding the lowest rate is a misnomer. I think if you do your due diligence and you talk to some reputable lenders, you're going to find that interest rates are going to be pretty competitive no matter where you go.
So you're going to want to, you know, talk to a reputable lender, find out what your personal goals are, and then match that mortgage program to it. You can get lower rates by paying points, if you want to. It just kind of depends on what you're trying to get done.
But obviously, if you're going to try to find the lowest rate, you're going to be going with some type of adjustable-rate program.
WILLIS: Bill, define "points" for our viewers.
EMERSON: Points are simply money that you pay to reduce your interest rate. For instance, if you're looking for a 6 percent interest rate, and that would be at a zero point rate. If you paid 1 percent of your loan amount, for instance, if you were borrowing $100,000, if you paid $1,000 in additional costs, you could buy your interest rate down typically about one quarter of 1 percent.
WILLIS: All right. The big payoff, the big question, if you're getting a mortgage now, do you lock in right now?
EMERSON: That is the question, and I would tell you, given what's happened in the market right now, Gerri, I think you're better off taking a look at locking than you are taking a look at floating. I mean, I think the propensity for rates to go up is much greater than they are for them to go down. And that way, you're locking in some security. And if for some reason over the next six months or so we see the market shift, you always have the opportunity to look at your situation and refinance to a better program.
WILLIS: Bill Emerson, thanks so much for joining us today. We appreciate your help.
EMERSON: It's my pleasure, Gerri. Have a great day.
WILLIS: Coming up on OPEN HOUSE, if you think prefab homes are simply cheap construction, you won't believe the modular homes now on the market. We're going to take a look.
And our weekend project, pest control. Rid your house of unwanted critters.
But first, your tip of the day.
(BEGIN VIDEO CLIP)
ANNOUNCER: You're ready to buy a house. You know you can afford the monthly mortgage payments, but you don't have the 20 percent for the down payment. Don't worry. There's hope for that dream home yet.
Ask both public and private lenders if they offer programs aimed at lower-income people. Many times, they work in conjunction with Fannie Mae, Freddie Mac, or nonprofit or government agencies. You may be able to get low-interest mortgages with as little as 3 percent down.
Shop around for lenders, and don't be afraid to ask what they can do for you.
That's your tip of the day.
(END VIDEO CLIP)
WILLIS: Prefab housing might make you think of something poorly made, but the truth is, modular homes are often indistinguishable from traditionally built houses.
And as J.J. Ramberg shows us, there's a major perk. They're virtually built overnight.
(BEGIN VIDEOTAPE)
J.J. RAMBERG, CNN CORRESPONDENT (voice-over): Nadine and Jerry Ferrario remember the day they built their house.
JERRY FERRARIO, HOMEOWNER: They delivered the boxes one day, and they put them on the side lot. And then the next day, the crane was here, and they started to put it together. So it's, you know, like watching your kids put an Erector set together.
RAMBERG: From foundation to 2,800-square-foot home took about 48 hours, because the bulk of the construction was done here at this factory.
Victor Dephillips and his company manufacture modular homes, prefab structures built to spec, and then shipped anywhere in the country.
(on camera): So explain to me what this is, because these are four parts to one house, right?
VICTOR DEPHILLIPS, SIGNATURE BUILDING SYSTEMS: Yes, four parts to one house. This is part of a townhouse job that we're building. Actually, it's going to go right across town in Scranton. And what you're seeing is, these are the top two floors, in back of us, and these are the two lower floors.
What will happen is, when it gets to the site, that box and that box will get married together. These two boxes will go on top.
RAMBERG (voice-over): While Dephillips specializes in luxury residences, his portfolio includes one 7,800-square-foot house. He says he still has to fight the notion that modular homes are made with cookie-utter designs and lower standards of quality.
RAMBERG (on camera): I believe there's a sense that a modular home won't be as nice as a stick-built home.
DEPHILLIPS: It's not true. It's the same product. It's the same materials. We do it in a manufacturing facility. And maybe there's some stigma out there about that, but there really shouldn't be. I'll give you the example I give to everyone who gives me a problem with modular. I say, Look, if you drive a Mercedes-Benz, and next year, when you go to buy your new one, I'm going to have six guys show up in underall -- in overalls and build it in your driveway.
RAMBERG: How much customization can you actually get in a modular home?
DEPHILLIPS: Most of what you see on our floor here has been built to the customer plan, a consumer plan.
RAMBERG (voice-over): Modular builders hawk speed and cost control and consistency. But architects warn that the process does come with limitations.
JUD WILKINSON, ARCHITECT: Modular construction is compromised when it has to deal with idiosyncrasy of any kind, levels, openings, angles, curves -- anything that's not three-dimensionally square and level and straight. It -- modular construction loses a little bit of its cost effectiveness, and also becomes less likely to be made perfect when it's done.
RAMBERG: Though many builders agree, under the right circumstances, modular homes can be virtually indistinguishable from their traditionally built cousins.
J.J. Ramberg, CNN, New York.
(END VIDEOTAPE)
WILLIS: Forty-eight hours to build that huge home.
Well, if you're interested in prefab, there are plenty of things you need to know before picking out your dream house.
Joining me now from Boston, the author of "Modular Home," Andy Gianino.
Andy, welcome.
ANDY GIANINO, AUTHOR, "THE MODULAR HOME": Thank you.
WILLIS: So, Andy, OK, 48 hours, that huge house. I can't get over that. How can it possibly be as good as a regular stick-built home?
GIANINO: Well, the fact is that modular homes, by being built on an assembly line in a factory, take advantages of the manufacturing process. As everyone knows, assembly lines work by having materials fed to stations, with different skilled people doing the exact tasks required. So if you're building a floor, you have guys that are really good at floors. You're assembling, installing windows, you have people that are really good installing windows.
If you're starting with the same material, as Mr. Philips was mentioning, and you're assembling them on an assembly line, you really do get superior quality.
WILLIS: Unbelievable. Well, let's talk a little bit about how you get started if you're interested in this. You say step number one, secure the financing.
GIANINO: Well, you should be doing several things at the same time. Financing is critical, because, of course, you have to pay for the home. But you also have to have land to put it on. So you'd have to find a building lot. You could do that in any of the conventional ways, starting with a Realtor.
After you have the land, and -- or you at least have a possibility in mind, and you have the money in place, then you need to have a dealer who's going to help you design the home and get it built with the manufacturer that he works with.
WILLIS: Andy, how do you find a dealer?
GIANINO: Well, there's a couple of ways you can go about it, but the best way, as in many cases, for finding professional people is through recommendations. But the National Association of Home Builders has a list, and so does the Modular Building Systems Association in Pennsylvania.
WILLIS: All right. Sounds like a good start.
Let's go over some of the pros and cons of actually having one of these modular homes built. On the pro side, it sounds like you can really get a deal. The cost may be as much as 15 percent less. You say superior quality. What other reasons would I choose a modular home?
GIANINO: Speed, of course. If you're talking about building a home that's anywhere from 600 square feet for an inlaw addition, or 5,000 square foot, two-story Colonial, and you're building that at the factory in one week, and then you're delivering it to your site and completing it in a mere few additional weeks, well, speed is a real big advantage.
WILLIS: Yes, no kidding. And, of course, you said before, the high quality, another big advantage.
Let's talk about some of the cons. Are there downsides to this? I think we mentioned before that maybe they're difficult for complex construction, if you want to do something special, it can be (INAUDIBLE) tough.
GIANINO: Well, you can't always build some of the contemporary designs that you see out there. I mean, if you have roofs going in multiple directions, and you have lots of bumpouts, then it's not going to fit so easily into a modular framework. So you can't build all the contemporary designs that you might want to.
WILLIS: What about if I want to change that design?
GIANINO: Changes, as long as they're able to be built within the modular framework, are very easily and readily done. Most manufacturers these days welcome custom designs.
WILLIS: And do all towns accept modular homes? Are there requirements in some areas that would force you to build a stick- construction house?
GIANINO: Not really, because the issue is, does it comply with the state building codes? And modular homes, by definition, have to comply to the state building codes. Local towns can have certain requirements that apply to both the conventional builders and the modular builders, but they're not discriminated against just because they're built as a modular.
WILLIS: All right, well, that's good to know. It seems to me that the modular homes are actually gaining in strength. I hear about a lot of builders out there who are changing over from stick construction to modular building. Do you think this is a force that's really going to take over the construction industry?
GIANINO: Well, in places where you're building wood-framed homes, which is a good part of country, I think you'll see more and more of it, primarily because there's a shortage of skilled labor. And whenever there's a shortage of any labor or materials, you're going to go (INAUDIBLE) anyplace that can give you an advantage. And modular construction, by being built in a factory with assembly-line workers, really helps partly solve the shortage of skilled labor.
WILLIS: And what about delivery permits? I think getting these things delivered to your site has got to be a lot of work.
GIANINO: Well, the manufacturers usually are good about taking care of that. Because the loads are usually oversized, then there -- you can't just deliver down the road without prior approval from the states and the federal government. But those permits are obtained by the manufacturers, and the dealer doesn't really worry about it, and the consumer certainly doesn't worry about it.
WILLIS: All right. Well, the book is called "The Modular Home." Our guest, Andy Gianino. Thanks so much for being with us today.
GIANINO: Thank you.
WILLIS: Coming up on OPEN HOUSE, our weekend project, it's pest control. Creepy-crawly critters, you don't want them, neither do we. We have some tips on keeping them out.
That's next on OPEN HOUSE.
(COMMERCIAL BREAK)
(BEGIN VIDEOTAPE)
WILLIS: Welcome back to OPEN HOUSE, and weekend project.
We're taking a look for pests, those critters in your house that drive you crazy.
Here to help us track them down is Dan Brady.
Dan, welcome.
DAN BRADY: Thank you.
WILLIS: Now, tell me what's on tap today.
BRADY: Well, first of all, the three things you want to eliminate on the exterior of the house is, you want to eliminate food, shelter, and water for the rodents and insects.
WILLIS: OK.
BRADY: Once you eliminate those things, it's less likely you'll have any invasion.
WILLIS (voice-over): Excess debris, leaves, and moisture are breeding grounds for insects. So make sure to clean your gutters, if you don't want bugs to set up shop.
Next step, getting rid of rodents.
(on camera): Is that the trap?
BRADY: That, that...
WILLIS: That's so cool. BRADY: That's actually a rodent-bait station, of course, that fits right into the landscape.
WILLIS: So are you going to open this up? We're going to touch this thing, right?
BRADY: Well, we can touch it. I won't open it up. But what I can do is show you that...
WILLIS: It's just plastic.
BRADY: It's just plastic.
WILLIS: (INAUDIBLE).
BRADY: That's all it is, it's just plastic.
WILLIS: This is plastic. It looks like a stone, but in fact...
BRADY: Exactly.
WILLIS: ... you've got -- somehow, you've got food in here, and the rats...
BRADY: The -- the...
WILLIS: ... can go in...
BRADY: There's a bait in...
WILLIS: ... but they can't get out.
BRADY: ... and they can -- they go in, on either end here, they feed and they leave, and they go off and expire.
WILLIS: Oh, they die somewhere else.
BRADY: They die somewhere else, right.
WILLIS: So they're not dead in here.
BRADY: Right, they're not dead in here.
Now, the other thing is, this is -- it's childproof, it's tamper proof. You need a lock to get into here to maintain the...
WILLIS: So the kids won't get in trouble.
BRADY: ... (INAUDIBLE) -- Exactly.
WILLIS (voice-over): Come summertime, you want to hang out at the pool, as long as no mosquitoes are hanging out with you.
(on camera): This is a wonderful tool for not using pesticides to get rid of... BRADY: Absolutely. Again, this attracts mosquitoes. So you put it away from the area you want to be, and the mosquitoes are attracted to this unit from the CO2. The CO2 is emitted through here. The mosquitoes go up inside the chamber here, where they're caught and trapped into a bag, and they can't get out.
WILLIS: No pesticides.
BRADY: No pest...
WILLIS: The only thing this little machine is putting out is CO2, which is what our own bodies...
BRADY: Absolutely.
WILLIS: ... put out, right?
BRADY: Absolutely. The same exact material.
WILLIS (voice-over): Other places to watch out for, the garage and basement. Make sure all doors and windows are securely shut when warm weather hits. When you're ready to head inside, go straight to the kitchen. It's a hot spot for creepy crawlers, especially the pantry. Grain insects tend to breed in rice and cereal containers.
BRADY: Through our monitors, actually, you can put down. Now, for instance, there's an insect monitor in here. This is a sticky trap that we put out in critical areas. And if you happen to see an insect on here, then you know you have...
WILLIS: A problem.
BRADY: You have a problem.
WILLIS: And so is this dangerous in any way?
BRADY: There's no...
WILLIS: I mean, if the kids got ahold of it...
BRADY: The only way-
WILLIS: ... would it be a problem?
BRADY: ... it's dangerous, they might get their finger stuck on the glue or something like that. But there's no insecticides on here whatsoever.
WILLIS: That's handy.
BRADY: Yes. So it's basically, it's a monitor to let you know if there are any situations with insects. Again, the main thing is, if you do find an infestation, the way to get rid of it is, you have to get rid of the product itself.
WILLIS: So Dan, tell me, how much does it cost to pest-proof the average home?
BRADY: It's probably less than a couple hundred dollars. Again, depending on how significant the damage is to the structure or foundation even. But in general, I mean, unless you have major repairs, you're probably looking at less than a couple hundred dollars to take care of little incidentals like screens and things like that.
(END VIDEOTAPE)
WILLIS: OK, one other bug to watch out for, termites. The annual cost of damage and treatment for these wood-destroying bugs is a whopping $5 billion worldwide.
Coming up, a look at next week's show.
But first, the mortgage snapshot.
(COMMERCIAL BREAK)
WILLIS: Coming up next week on OPEN HOUSE, if you're interested in buying property, a real estate partnership may be the way to go. We'll show you how they work.
Then, before the next open house, you'll learn to be your own home detective. We show you what to look for.
And our weekend project, liven up your lawn. We have tips on beautifying your yard.
Plus, we want to hear from you. Send us your comments, your questions, to openhouse@cnn.com.
Thanks for watching OPEN HOUSE. We'll see you here next Saturday.
Coming up, "DOLANS UNSCRIPTED."
But first, a look at the day's headlines.
Have a great weekend.
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