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Open House

Homebuyers May Get Decreasing Prices And Incentives; Eminent Domain Being Used To Seize Homes; Leaky Window Fixes

Aired November 12, 2005 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BETTY NGUYEN, CNN ANCHOR: New developments out of Jordan this morning, where officials are now confirming Wednesday's hotel bombings in Amman, or Amman, were the work of al Qaeda of Iraq. Fifty-seven people were killed, another 90 injured, in the trio of blasts. The al Qaeda cell is headed by wanted militant Abu Musab al-Zarqawi, and he is a Jordanian native with a $25 million bounty on his head. We'll continue to follow this story.
U.N. Secretary-General Kofi Annan is offering to help the Iraqi people. Annan is in Baghdad this morning, where he plans to have a town hall-style meeting with Iraqi officials.

OPEN HOUSE begins right now.

GERRI WILLIS, CNN ANCHOR: How about cash for closing costs? Maybe a golf membership? Or maybe even your own swimming pool? Talk about incentives, and all you have to do is buy a new house.

Good morning, I'm Gerri Willis.

Buyers, the pendulum is swinging in your favor when it comes to prices. In fact, some sellers are offering juicy incentives to get your attention.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): After years of home sellers ruling the real estate markets, finally homebuyers in some cities are in luck.

RON PHIPPS, PHIPPS REALTY: We've gone from a true seller's market, where the seller really was able to dictate terms in price, to a market of parity, to right now, a buyer-sympathetic market, in which the buyers have more influence.

WILLIS: Ron Phipps is a real estate agent in Providence, Rhode Island. He's seeing the first slowdown in seven years. So Phipps is offering incentives to entice buyers.

PHIPPS: The buyer of this particular house can, if he or she chooses, enjoy the benefit of this car for two years. The builder is going to include that as part of the enticement.

The house we were in earlier, we have an incentive to the agent. Above and beyond their compensation, we've offered a trip for two to Europe. WILLIS: The trend is popping up in slowing markets around the country. Perks can include free landscaping, renovations, and new appliances. In Phoenix, for example, the number of homes on the market has climbed from 5,400 to 17,000 in the last three months, driving prices down 20 percent across the board.

In Virginia, Realtors are running out of signs that say "Price Reduced."

In San Diego and New York, Realtors are cutting their commissions to lower buyers' closing costs. But it's not happening everywhere.

DAVID LEREAH, NATIONAL ASSOCIATION OF REALTORS: You need a perfect storm. You're going to need job losses in that local area. You're going to need mortgage rates to go above 8 percent in order for some of these things to start happening. That's not in anyone's projections. The fundamentals in these local markets are still pretty good.

WILLIS: Still, it's happening for Ron Phipps. His next plan, offering 30 days of free groceries and spa packages to lure buyers into his many homes for sale.

(END VIDEOTAPE)

WILLIS: I wouldn't mind some spa packages.

If you want to jump into this market, what's the best strategy for you?

Well, here with a closer look is Brad Inman. He's editor and publisher of "Inman News," which provides news and information on the real estate industry. Great to see you, Brad.

BRAD INMAN, EDITOR AND PUBLISHER, "INMAN NEWS": Great to see you, Gerri.

WILLIS: Is it that easy?

INMAN: Well, I'm not sure it's gone that far, but, you know, the binge that home sellers have been on for 10 years, getting anything they want, has changed, and buyers are finally in the driver's seat.

WILLIS: You know, the good news here, I think, is, all those bad habits we got into during the seller's market, you know, no contingencies, rushing through the process, that's over now.

INMAN: Yes, and I think the arrogance of the Realtor, the arrogance of the home seller, buy as is, overpriced -- hopefully those days are gone, and we're seeing buyers that can negotiate a much better deal than they did just six months ago.

WILLIS: One thing you say is, don't rush.

INMAN: Yes, I always say that to buyers, no matter what the market. You're going -- you're going to, you know, being, you know, told, buy now, multiple offers, get in, buy as is, no home inspection. That is not the way to buy a house.

But more than anything right now, there's plenty of inventory, so you can be patient. If that one house that you want, you can't get, there's plenty of more out after it. Whereas in the old days, six months ago, the listing inventory was so sparse that, you know, you had to buy, you had to jump.

WILLIS: I think the hard part, though, is knowing whether your market has turned, because, look, all real estate is local, right?

INMAN: Well, nationwide, listings are up some 25 percent, and that's nationwide. But in the heat, you know, hysterical markets, the two coasts, Texas, Florida, some other areas, you're seeing inventory up 50 or 60 percent, even double from a year ago.

WILLIS: Wow.

INMAN: And what that means, there's a lot of choices. In fact, buyers, to find out where their market's at, should really spend some time asking their Realtor, how thick is that MLS book now? How many listings do you have today from a year ago? And you're going to find out there's a lot more.

WILLIS: It's all about supply. Is there anything else...

INMAN: Supply-demand...

WILLIS: ... I should be looking at?

INMAN: ... you know, before, we had little inventory, and we had lots of buyers. Now we have fewer buyers because of higher interest rates, and we have fewer -- and we have a lot more listings.

WILLIS: You know, Brad, though, it seems like every time you talk to a real estate agent, and you say, wow, I'm looking for the deal, and they say, well, prices have dropped in the next town over, on the next block, or in the next neighborhood, but not where you're looking.

How do you gain that leverage? How do you negotiate hard with these people, who are really experts? This is all they do.

INMAN: Well, one, play a little harder to get, and you'll find the Realtors will call you back. And you'll hear from them. And that's one indicator right away.

But I think the most important thing is to recognize there is a lot of inventory, not to rush into any one particular deal. And also, you know, what happened before is, buyers were said, you know, Make a decision now, do it overnight. And those days are gone.

WILLIS: You know, I think there's a flip side to this story too, which is, most Americans own their own home already, and they're really worried about where prices are going. What is your crystal ball telling you?

INMAN: Well, you know, we're hearing -- look, Boston, for example, the market forecast yesterday, three percent decline in prices next year. That's a very overheated market. So that's kind of a worst-case scenario.

But I think the problem we have is expectations in relationship to that. People are expecting 10 or 15 percent rates of appreciation, and when they hear flat prices or a 3 percent decline, that's kind of staggering. So high-end markets, you know, we could see 5 to 10 percent decline in prices.

WILLIS: Wow.

INMAN: The high-end market probably gets hit the worst. Condominiums have historically have gotten hit hard. But it's hard to predict that. I think the important thing is that we're seeing a shift in the market, and it's moving more in the buyer's favor.

WILLIS: Well, and it gives you leverage. A lot of people have been using kind of risky mortgages, really, to get into houses over the last couple of years. What would you tell people who are getting in the market now?

INMAN: Well, what we saw before is, you know, you could fog a mirror, you could get a mortgage. And now we're seeing a lot more cautious lenders. You know, Alan Greenspan has been telling the lenders to, you know, cool it a little bit. So there's not as much liquidity.

So it's a little harder to qualify, and there are a little higher rates. So go get pre-approved, get pre-qualified when you get into the marketplace, so you're positioned to make a good deal...

WILLIS: Right.

INMAN: ... when you start negotiating with that seller.

WILLIS: You've got say, now is the right time for a 30-year fixed, not something fancy-schmancy, where you're going to get that low, low rate.

INMAN: Well, a five- or 10-year adjustable. It depends on how long you plan to stay in that house. Locking in a good interest rate now, though, does make sense. And when you go out there, there's a lot of inventory, and you're going to make a pretty good deal.

WILLIS: Brad, thanks for stopping by. We appreciate it.

INMAN: Thank you, Gerri.

WILLIS: Homeowners, get ready to be outraged. Even if you weren't directly in the path of this summer's hurricanes, your wallet is going to get hit. This week, insurance executives are warning of big rate hikes in homeowners' insurance, all across the country, to pay for the cleanup.

To make matters worse, they say price hikes could spill over into other types of insurance. That's right. Premiums for auto and even health insurance could go higher.

And it's not like you haven't seen this before. Homeowners' insurance premiums more than doubled in the last 10 years, and that's before this year's hurricanes.

Coming up on OPEN HOUSE, imagine getting forced out of your home so developers can build a mall or a Wal-Mart. Could your neighborhood be next?

And later, it's almost time for window shopping. Not that kind. We're talking about windows for your home. We've got inexpensive alternatives for window replacement.

That's ahead on OPEN HOUSE.

But first, your "Tip of the Day".

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Closing costs down, title fees appraisal fees, document preparation fees. Sealing the deal on your home can really add up.

But you can curb those costs. Get a good-faith estimate. All lenders are required to give you an estimate of your closing costs within three days after you apply for a loan. While it's no guarantee, it will give you an idea of how much you'll be expected to shell out.

Question all the fees. Make sure you know what each item is, and whether it's required. And don't be afraid to ask for reasonable cost breaks. You may be able to negotiate a better price on some items.

So get an estimate, and always ask questions.

That's your "Tip of the Day".

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WILLIS: Is your town plotting to take away your house? It's not as crazy as it sounds. Local governments all over the country are using eminent domain to seize homes. The good news? Congress is stepping in.

J.J. Ramberg takes a look.

(BEGIN VIDEOTAPE)

SUZETTE KELO, HOMEOWNER: It's worth fighting for. I'm not interested in leaving, at all.

J.J. RAMBERG, CNN CORRESPONDENT (voice-over): Suzette Kelo is one of six holdouts in New London, Connecticut, and she's just the kind of homeowner many in Congress are trying to help. The House voted 376 to 38 last week to discourage local governments from forcing homeowners and small business owners to give up their property for commercial use. The bill would withhold all federal funds for two years to any local governments that do so.

REP. BOB GOODLATTE (R), VIRGINIA: That's a very severe sanction, and the intent is to make it absolutely clear that we think that that policy is contrary to the Constitution and contrary to good government public policy to protect private property rights.

RAMBERG: Congress's move stems out of Kelo's recent loss before the Supreme Court. The justices apparently expanded the government's power of so-called eminent domain. They gave a green light to New London to seize her house and close to a hundred others, so that the city could transfer their properties to private developers to build offices, hotels, condos, even an aquarium.

It's a departure, because traditionally, the government only seizes private land for public projects like roads, schools, and hospitals. But New London officials argued this private development would benefit its residents just as much.

TOM LONDREGAN, CITY ATTORNEY, NEW LONDON, CONNECTICUT: This case was never about the taking of property from one person and giving it to another. This case was not some type of a land grab. This case was about the city of New London, its six square miles, and its economic survival.

RAMBERG: The Supreme Court agreed. Justice John Paul Stevens wrote, "The city has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including, but by no means limited to, new jobs and increased tax revenue."

In a dissenting opinion, Justice Sandra Day O'Connor wrote, "Nothing is to prevent the state from replacing anything Motel 6 with a Ritz-Carlton, any home with a shopping mall, any farm with a factory."

But now, if the Senate follows the House's lead, there may be limits after all.

And for Suzette Kelo, the fight goes on. Though demolition was scheduled to start this fall, the city of New London is adhering to a call from Connecticut's governor for a moratorium while more legislation is decided.

For OPEN HOUSE, I'm J.J. Ramberg, CNN.

(END VIDEOTAPE)

WILLIS: So what happens if your town wants to take your home? Scott Bullock argued the case for Suzette Kelo before the Supreme Court. He's a senior attorney with the Institute for Justice. It's a group that defends homeowners against eminent domain seizure.

Welcome, good to see you.

SCOTT BULLOCK, SENIOR ATTORNEY, INSTITUTE FOR JUSTICE: Thanks. Good to be with you.

WILLIS: I got to tell you, this is a homeowner's worst nightmare. Who is most at risk for having their home seized?

BULLOCK: Well, typically, the people who are most at risk are working-class folks or middle-class folks who happen to live in neighborhoods, oftentimes with nice views, either of the water or of some other type of natural geography, and also neighborhoods that are close to interstates and to highway systems. Those are the areas that are sought and desired by developers.

And unfortunately, too many cities are willing to take people's land...

WILLIS: Right.

BULLOCK: ... and give it to those private developers.

WILLIS: So the property that I'd like to buy is also the property the government would like to buy. That's good to hear.

So what's the process? How do I know that the government has decided that my neighborhood is the one targeted to go?

BULLOCK: Well, typically, the government engages in what's known as a development plan, or a redevelopment plan, first. And they talk a lot about how they want to revitalize the community and have more economic development, things that most people are in favor of.

WILLIS: Right.

BULLOCK: The last thing they're going to talk about is the possibility of using eminent domain. And that's why it's very important for homeowners and small business owners to stay informed. And once they hear of something like a redevelopment...

WILLIS: Right.

BULLOCK: ... area, or that their property has been declared blighted, they have to be very aware of that, and make their neighbors very aware of that as well. Because that is oftentimes...

WILLIS: OK, Scott.

BULLOCK: ... the first step...

WILLIS: I'm going to...

BULLOCK: ... in eminent domain.

WILLIS: ... interrupt you here. There's actually a lot of time, usually, if you're paying attention and reading your paper, for you to get involved and become an activist to prevent this from happening, right?

BULLOCK: That's absolutely right. And the good news about eminent domain, even though it's a very bad Supreme Court decision, is that citizens throughout the country have rallied, have gotten the information to their fellow citizens, and have defeated a number of these projects, even before it got to litigation.

WILLIS: Right.

BULLOCK: And I think that trend's going to continue.

WILLIS: So the success stories out there, where people have actually been successful, what was the key? What did they do right?

BULLOCK: Well, the key to it is raising public awareness, because most people, as polls have shown in the wake of the Kelo decision, are very opposed to the use of eminent domain to take land from one private owner, hand it over to another private owner. Most people think that that's, frankly, un-American. So the public will support attempts to stop eminent domain abuse.

The challenge, and why it's so important to raise public awareness of this, are, typically powerful people are on the other side of this, city officials and developers and large businesses who want these projects to go forward. But if you can get the support of the public, and let the political figures know that you're going to hold them accountable...

WILLIS: Right.

BULLOCK: ... oftentimes these projects...

WILLIS: Yes, let me...

BULLOCK: ... can be stopped.

WILLIS: ... let me interrupt you here. So it's important not to be shy here, right? I think you need to give some tactile suggestions for people who are fighting this. What do I do? Do I get a petition? Do I make posters?

BULLOCK: You frankly have...

WILLIS: Give me some clues.

BULLOCK: ... you frankly have to raise hell. You have to show up at city council meetings, and you have to tell them what is going on. You have to tell them that this has to stop. You have to have rallies. You have to write op-educates. You have to do many things that a lot of people, frankly, don't have the time for in people's busy lives, and maybe have not done in the past.

But that's the only way that...

WILLIS: OK.

BULLOCK: ... citizens are able to stop this.

But the good news is, if you're -- if you persevere, and you are effective in getting the word out about this, oftentimes these projects can be defeated.

WILLIS: All right. Quickly, we don't have a lot of time left. But tell me, if you do get that letter from the government, what should you do? If you're being told, hey, your house is going to get knocked down, do you have any recourse?

BULLOCK: Absolutely. One of the first things people should do is visit a Web site that we put together called CastleCoalition.org, O-R- G. And that provides a lot of grassroots, how-to information on how to stop these projects, to get the tools that people need to fight eminent domain abuse in their communities.

WILLIS: All right. Well, Scott Bullock, thanks for your time today.

I want to mention one more time that Web site, CastleCoalition.org. It's got lot of great suggestions for you if you're in this situation.

Next, leaky windows can wreak havoc on your home heating costs. We've got some easy and low-cost solutions.

Here are the mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: Welcome back to OPEN HOUSE.

It sounds simple enough, keep the cold air out, the warm air in, but leaky windows can make it impossible.

Joining me now to talk about low-cost solutions to your window problems is Matthew Dean from the Association for Energy Affordability. Good to see you again.

MATTHEW DEAN, ASSOCIATION FOR ENERGY AFFORDABILITY: Thanks for having us.

WILLIS: Now, we've got a problem here with this window. I can put my hand up here and feel the air leaking through. It's blowing on my hand, Matthew.

DEAN: Oh, yes, definitely, yes. What we've got going on right now is, downstairs we have the blower door operating, depressurizing the home. We have the fan in the door sucking air out of the home. And what that does is, it exaggerates any air leaks that we've got.

WILLIS: Well, it sure did here. What about other tests?

DEAN: Well, we've got the little powder puff here, so you can kind of blow that here, and you can see the air blowing the powder...

WILLIS: Wow.

DEAN: ... straight up.

WILLIS: Yes. That's a problem.

DEAN: That's right. So you can tell that the window is leaking. Then...

WILLIS: Now, how do we tell the difference between the window leaking, and there being a leak in the seal around the window?

DEAN: We use the same test. We go down where the window is meeting the frame and blow it.

WILLIS: Wow.

DEAN: And you can see...

WILLIS: I can really see that, Matthew.

DEAN: Yes, the powder is coming...

WILLIS: Unbelievable.

DEAN: ... back.

WILLIS: What's the proper technique here?

DEAN: Well, right now, what Ramon is demonstrating is applying a white caulk around the seal of the window. And what you want to do is supply a thin beading, just like that.

WILLIS: So this is not hard, right?

DEAN: No. I mean, your local hardware guy should be able to demonstrate it. You can pick up these supplies there. It comes in a white caulking like this, or a clear caulk.

WILLIS: This is really easy, I got to tell you.

DEAN: The only important thing to do is, before you do that, you want to prepare the surface. You want to get a putty knife, clean out any loose caulk that you might have there, any debris, any paint chips.

WILLIS: And then you take your finger and do this, right?

DEAN: You can go along like that if you like, yes.

WILLIS: Awesome.

I've got some weather stripping here. It's sticky on the inside here, obviously. But where am I using it, as opposed to the caulk?

DEAN: Well, the caulking would go down here with the window sill, with the frame. The weather stripping is going to go along where the window -- like, the interior parts of the window.

WILLIS: And can you show me how you'd install this?

DEAN: Yes, you just go along the window, just like this, kind of -- well, this thing's kind of in the way.

WILLIS: And that underneath part is stick.

DEAN: Right, so it would stick down here. So you kind of just go along like that.

WILLIS: This is not an expensive solution.

DEAN: No, this is probably 99 cents. You could probably get one window done, two windows done, with this.

WILLIS: And you're going to save a lot on your energy bills.

If I'm going to caulk, weather strip my entire house, what kind of bill am I looking for?

DEAN: For a single-family home, probably $25 for all the materials.

WILLIS: Now, that is really, really cheap compared to, say, buying new windows.

DEAN: That's right.

WILLIS: That's an expensive proposition.

DEAN: Yes, windows can run $300 to $500, even $1,000. And, I mean, the payback time once they're replacing all of the windows in your home is probably going to 20 years. If you do get windows installed, you want to make sure they're Energy Star rated, at least double pane, with the argon gas in the gap between the panes, that kind of thing.

WILLIS: Let's go over what we've learned today.

DEAN: OK. WILLIS: We talked about caulking, which is something you definitely want to do.

DEAN: Right.

WILLIS: And when you get ready to caulk, you say do a couple of things, right?

DEAN: Yes, you're going to want to clean the area, prepare it. You also want to wear gloves. That stuff can get really sticky. And then you'd want to do some weather stripping. That too, there's not much prep for that, probably the same thing. You want to clean the area, get rid of the old weather stripping, if there's any left.

WILLIS: Just rip it right out.

DEAN: That's right.

WILLIS: You're only really going to go in and right away and replace windows if they're broken, if they're won't open, if they're major, major problems. DEAN: Right, exactly. And...

WILLIS: But typically, rule of thumb that you gave us, it's going to take 20 years to get the payoff if you actually replace every window of your home.

DEAN: Right.

WILLIS: Matthew, thanks so much for your help today.

DEAN: Thank you.

WILLIS: I really appreciate it.

DEAN: Well, thanks.

WILLIS: Coming up, my tips on how to get help for your windows.

OPEN HOUSE will be right back.

(COMMERCIAL BREAK)

WILLIS: Let's face it, if you want to get those energy bills down this winter, you may need to do more than just caulk and weather strip.

One smart move now, give your home an energy audit. Check out the Web site of the Residential Energy Services Network. Now, this not- for-profit can hook you up with the accredited local contractors who can tell you how to keep your home warm this winter.

Another info source, the Web site for your local utility.

Now, are you convinced you need to buy new windows? Check out EfficientWindows.org, where you can find out exactly how much money new windows can save you. They even have a primer on different kinds of windows, and there are a ton of them.

And finally, did you hear the story about the man who is suing Home Depot? Paramedics had to come to the rescue of Bob Dougherty. He was glued to a toilet seat at a Home Depot in Colorado. He's now suing for pain and suffering. Proves what I have always said; it really is hard to get a man out of a hardware store.

We want to hear from you. Send us your comments, your questions to OPENHOUSE@CNN.com. And for links to today's Web sites, log onto our site, cnnmoney.com/openhouse.

Thanks for watching OPEN HOUSE. We'll see you here next Saturday. Stay with CNN. The day's top stories are up next, and have a great weekend.

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