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Open House

Best New Cars List Is Out; Number Of Unsold Homes On The Market At Highest Level In Almost Eight Years; Home buying Tips; Find A Good Used Car

Aired March 04, 2006 - 09:29   ET

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

TONY HARRIS, CNN ANCHOR: And good morning, everyone. President Bush is close to wrapping up his visit to Pakistan. Earlier to day, Mr. Bush and Pakistani President Pervez Musharraf discussed the war on terror and other issues of mutual interest. And before leaving Islamabad, President Bush got a crash course -- you see this -- in the sport of cricket. Cricket is similar to the American pastime of baseball, which Mr. Bush is quite familiar with. The president is the former owner of the Texas Rangers.
In Iraq, a mortar exploded in a busy market just outside Baghdad. Earlier this morning, seven people were killed, 15 others hurt. Several other bombings also struck the capital city, killing two other people and wounding several others. Iraq's prime minister says his government will ultimately prevail over the insurgency.

Earlier, U.S. Central Command chief John Abizaid said Iraq needs a more unified national government to send a stern message to terrorists. More than 500 civilians have been killed in sectarian violence since last month's bombing at a mosque.

A judge has ordered the Bush administration to release the names of detainees at Guantanamo Bay. The order follows a Freedom of Information lawsuit filed by the Associated Press. The Pentagon had claimed that releasing the names would put the detainees and their families in danger.

Want to buy a home, want to buy a car? We have some tips up for you next. "OPEN HOUSE" shows you how to get the edge in the housing market, and it starts right now.

GERRI WILLIS, CNN ANCHOR: If you're worried about your home's value dropping, you're not alone. All the latest indications are that the real estate market is definitely softening.

Good morning. I'm Gerri Willis.

Today on OPEN HOUSE, I'll have compelling new insights on the housing market. Your home is the biggest purchase you'll probably ever make, and now the rules are changing.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We kind of bought into what our broker was telling us that he could get for our apartment, and we were mistaken.

(END VIDEO CLIP)

WILLIS: I'll tell you how to navigate through this choppy market.

But first, let's navigate through what's probably your second- biggest purchase, your car.

Just this week, "Consumer Reports" came out with their best new car list. So I went for a ride with David Champion, director of the "Consumer Reports" auto testing center. Boy, did we have a ball. Take a look.

(BEGIN VIDEOTAPE)

DAVID CHAMPION, DIRECTOR, "CONSUMER REPORTS" AUTO TESTING CENTER: These are the top 10 cars that we've tested in all the different categories. They're basically cars that have excelled in our testing here at the "Consumer Reports" test track. They have average or better reliability, as the subscribers of "Consumer Reports" have told us. And also, they've done well in crash tests.

WILLIS: All right, rigorous testing. So let's start with the small sedan category. The winner here is the Honda, and -- Honda Civic. This looks like the old Accord, it's so big.

CHAMPION: Yes, they've really grown up in terms of small cars. And the Civic's got a nice amount of interior room inside. It's got very nice controls, very easy to use. The steering wheel is adjustable for reach and for tilt, so you can get it in exactly the right position. Has very nice handling, good fuel economy.

Some of the downsides, it's still got a little bit of road noise. And this dual dash does take a little bit of getting used to.

WILLIS: Now, the back seat has some room, it's pretty comfortable. But if your kids are older, this may not be the car you want.

CHAMPION: No, the -- you know, once your kids get to probably teenagers, they're probably going to be fighting a little much in the back. But for most people who want a small economy car to get around, this is an ideal choice.

WILLIS: So David, let's check out the luxury cars.

CHAMPION: Let's look at luxury.

WILLIS: Now, this is a ton of fun. I did not expect this. This is an Infiniti.

CHAMPION: This is the Infiniti M-35X, and it really did excel in all our testing. It's an absolutely beautiful car inside.

WILLIS: It is gorgeous.

CHAMPION: It's got wonderful fit and finish, nice amount of interior space. It comes with every single feature that you could ever want.

WILLIS: What's going on up here, David?

CHAMPION: That is the control for the navigation system, but also the heating and also the radio. But whereas some of the luxury manufacturers have put it all into one button and make you go through menus, this does have that, but it also has a manual feature to each of those.

WILLIS: Now, one thing I like about this is, you can start it with just the touch of a button.

CHAMPION: Yes, this is one of the new features, and it does it all automatically for you. The key doesn't have to be in the ignition as long as you have the key on your person as soon as you get into the car. It recognizes that you're here.

WILLIS: How do I turn it off?

CHAMPION: Just press the button again.

WILLIS: OK.

CHAMPION: There we go.

WILLIS: All right, let's see the truck. You've picked an interesting truck, as well.

Now, I don't think this looks like a truck. I think this looks like another luxury car.

CHAMPION: This is the Honda Ridgeline. And it's sort of a new generation of pickup trucks. At one time, pickup trucks were purely used for commercial purposes, and -- but now they have sort of morphed into sort of family vehicles, people have found how useful they are.

WILLIS: And look at the finishes in this. This, you know, this is not like your dad's truck.

CHAMPION: No.

WILLIS: This is very, very different. Everything is finished beautifully in here. It's really nice. And there's a back seat.

CHAMPION: It's got a reasonable towing capacity. It's got a...

WILLIS: Let's take a look.

CHAMPION: It's got a pretty good-size bed.

WILLIS: You could put a lot in there.

CHAMPION: Yes.

WILLIS: But you say that it's got other features. CHAMPION: One of the interesting features is, the tailgate comes down like this, so it makes it very easy to load. But the other nice feature is, if we close it, there's a little release under here...

WILLIS: Oh, nice.

CHAMPION: ... and it swings. Once that swings open, now, in the bed of the truck, you got a huge lockable trunk that is sealed from the environment, so anything you put in here will stay dry, it will stay safe.

WILLIS: Out of the cars we saw, I liked the Infiniti. So I asked David Champion if we could take it out for a spin to find out how they test it.

So David, other than driving as fast as you can around racetracks, how do you test these cars? How do you make sure that they are as good as they can be?

CHAMPION: Well, we test the car from one to the other.

Ready?

WILLIS: I guess.

Oh, my goodness.

CHAMPION: We start with acceleration, brakes, emergency handling position. Note all the big safety aspects of the car. And those are most heavily weighted in our score. We think that the consumer should have a safe car to drive.

And then we go into the more the convenience factors.

WILLIS: So let's talk about some of the driving tests you do. I mean, maneuverability test, there's a sort of just a speed test. How does that let people know that the car they're getting is really a quality car?

CHAMPION: Well, all the emergency handling tests really focus on, if you get into an emergency situation, how well that car is going to perform. If you're coming down a freeway and you get off an exit ramp, and as you're coming off, you realize, Whoa, that's a pretty tight exit ramp, how well that car can avoid an accident.

Because really, the best way of protecting somebody is not to get in a crash in the first place. So all those factors go into what would we call accident avoidance.

WILLIS: Including the maneuverability test, where you're driving around the cones. Now, you've kind of strategically placed those so that people would really sort of experience something they might even in a suburban neighborhood, right?

CHAMPION: Yes, it's -- it almost simulates you going down a sort of -- an urban street. Kid on a bicycle comes out, you swerve quickly to avoid the kid on the bicycle. There's this car coming the other way, so you sort of swerve back into your original lane. And really looking at how well the car grips, and how easy it is to control and get through that maneuver.

WILLIS: You know, it's funny, driving a car around when you're test driving it at a dealership, you might not take it over 35 or 40 miles an hour. You have no idea. But out on this race course, you can tell the differences in cars. It's very clear.

CHAMPION: That's what we try and do. We try and give the consumer at least the cars that we think would be the better choices.

(END VIDEOTAPE)

WILLIS: Now, that was a ton of fun.

Now that you know the ins and outs of the new models, later on OPEN HOUSE, I'll have the secrets of buying a used car without getting taken for a ride.

And next, it's back to real estate. We keep hearing we're moving into a buyer's market. I'll show you how to make that work for you.

But first, your "Tip of the Day."

(BEGIN VIDEO CLIP)

WILLIS (voice-over): Having trouble selling your home? Your asking price may be too high.

When setting the price, base it on recent sale prices of comparable homes in your neighborhood.

Reevaluate the condition of your home. Painting the exterior and the interior of the home will often add thousands to a home's sale price.

And market your home wisely. In addition to newspapers and the Internet, your local Multiple Listing Service is the most effective method for getting your house listed with local realty agents.

I'm Gerri Willis, and that's your "Tip of the Day."

(COMMERCIAL BREAK)

WILLIS: The housing boom is over. You've heard it, you've read about it. You've probably talked about it. And now, the numbers seem to confirm it.

Let's look at existing homes. Those are the homes on the market that have already been lived in. Sales in January slowed to the lowest pace in almost two years. New homes, the ones about to be built, are also off. A survey of home builders shows a big jump in cancellations for new homeowners. And the number of unsold homes on the market is at its highest level in almost eight years.

So what should you be doing about it? We met one homeowner who's asking himself just that.

(BEGIN VIDEOTAPE)

JASON ISBELL, HOME SELLER: In New York standards, you know, there's a great big windows, very tall ceilings, great floors.

WILLIS (voice-over): Jason Isbell didn't think he'd have any trouble selling his Manhattan apartment. His broker told him it would go in a flash, fast enough to convince Isbell to put a down payment on a second apartment, one big enough to fit his growing family, before selling his old place.

ISBELL: We kind of bought into what our broker was telling us that he could get for our apartment. And we were mistaken.

WILLIS: Last May, Isbell's broker priced the apartment to sell at $795,000, more than twice what Jason paid for it only three years ago.

JASON: We thought it was out of control. We thought it was crazy. But we thought that maybe we could get around maybe $750 for it, which would still be mind-blowing, amazing, if that could have happened.

WILLIS: Isbell put the place on the market, but found no bidders. Months went by. He switched brokers, lowered the price twice, but still nothing.

Across the country, many sellers are going through similar experiences. Sales of existing homes slowed for the fifth straight month in January, and analysts see the weakening trend persisting into spring.

DEAN BAKER, CENTER FOR ECONOMIC POLICY RESEARCH: I don't necessarily expect that we'll see a huge fall in prices in the spring. But I think that nationwide, we're probably looking at a fall on the order of 25 to 30 percent in home prices, and more than that in the peak bubble areas.

WILLIS: We are clearly seeing an unwinding of the recent boom in housing prices, but some analysts see only a gradual move lower.

DAVID LEREAH, NATIONAL ASSOCIATION OF REALTORS: I'm looking for a 6 percent drop in home sales. That may sound like a lot, but it will end up being the third-best year ever in the housing industries.

WILLIS: One thing's for certain. What had been a seller's market has now shifted decidedly in favor of the buyer.

BAKER: If someone is thinking of selling their home now, I would look to try to do that, and, you know, if that means perhaps accepting 5 percent, than you -- less than you were banking on, it's better to do that today than to hold onto it and take a risk. Maybe you'll get 10 or 15 percent less next year.

WILLIS: For Jason Isbell, holding tight was not an option. After seven months of showing his place, he accepted a bid at $550,000. That's 30 percent less than his original asking price.

JASON: We were beyond thrilled. It was like a huge burden being lifted.

(END VIDEOTAPE)

WILLIS: In many places, it's now a buyer's market. So how does that affect you?

Here's Sid Davis. He's author of "The Survival Guide for Buying a Home."

So Sid, let's talk about this topic. You know, sellers out there really nervous. They don't know what to do. What do these numbers mean for them?

SID DAVIS, AUTHOR, "A SURVIVAL GUIDE FOR BUYING A HOME": Well, it means is the seller, that there's more homes coming on the market, and as these properties build up inventory, it's going to take longer to sell.

WILLIS: You bet.

DAVIS: And, of course, the bigger the inventory, prices start to drop. It's classic supply and demand.

WILLIS: Classic supply and demand, you say, but surely, there are things sellers can do out there to move their houses.

DAVIS: Well, in this kind of market, it means that the lower 30 percent, the junk homes and that, is not going to -- are not going to sell. They're going to languish on the market. But the upper 70 percent, to sell, you're going to need to do several things.

Number one, you're going to have to fix up your home, make it nice and enticing to a buyer. You might also have to give concessions. By concessions, I mean you may have to offer a buyer to pay closing costs, or you may offer to throw in the fridge or the washer and dryer, something else. You may have to ask them to -- if they want to buy your home, you'll replace the carpet. Other concessions to entice a buyer.

I've even had buyers offer Hawaii vacations, or...

WILLIS: Wow.

DAVIS: ... one seller even offered to leave his BMW in the garage if the buyer would buy the house.

WILLIS: Well, Sid, we're clearly not in that situation in most of the country...

DAVIS: No, you're not.

WILLIS: ... at this point. The problem is, knowing, when you are in that situation, what's the best way for a seller to figure out the health of their market?

DAVIS: Contact a friendly Realtor that you know, and ask them what the average days on market. In other words, the longer the days on market go, that means the more homes are on the market, the slower it takes to sell them. That's a good one.

Also, the list price, the sale price as a percentage. In other words, if 98 percent is the average for area, and all of a sudden it goes to 96 percent, you know the homes are selling for less than list price.

Those two indicators are the best way to tell the health of your local market.

WILLIS: All right, so let's say you're getting the numbers. They don't look good. Should you wait to sell your home? Maybe you'd be better to sell it this fall, maybe the middle of the summer. Should people postpone their decision to sell?

DAVIS: Well, it depends on the local market. If the market is dropping, then the longer you wait, the less money you'll get, the longer it'll take. On the other hand, you may want to hold onto it till times are better, if you're not under a lot of pressure.

But there's always people out there that have to sell quickly. They get transferred, they can't keep -- make the payments, or whatever. Those are the people that's going to dump their homes on the market. They're going to be going on for a discount, and it's going to...

WILLIS: All right.

DAVIS: ... lower the rest of them.

WILLIS: And that brings up opportunity in this marketplace. There are so many, particularly young people, who really wanted to get into this market. They want to buy. This is their opportunity. What special strategies do you have for them?

DAVIS: Well, this is great for a buyer. That means they can go in and have a bigger choice of homes. They don't have to take an interest-only or a variable-rate loan to get into a home. They don't have to jump at the first home they get, or they see, because if they don't, tomorrow, another one comes on the market. It'll be $10,000 more.

This is great for them. They can get their ducks lined up in a row, get preapproved for the loan. They can maybe go a fixed rate loan that's better in their interest, rather...

WILLIS: OK.

DAVIS: ... rather than interest-only. And they can choose. They can take time to choose their dream home rather than grab the first home that comes along.

WILLIS: Well, Sid Davis, great advice, as always. Thanks for joining us today.

DAVIS: It's been my pleasure.

WILLIS: Next week on our buying and selling series, we're going on the road with a tale of two cities. We'll take you to Las Vegas and Detroit. One city exploded during the boom, and the other never took off. Find out what's happening in both of those markets right now, and what that means for homeowners across the country.

And next on OPEN HOUSE, don't fall for the sales pitch. I'll have the secrets of buying a used car and getting the best deal.

Here are the mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: Talk about a bad deal. Buying a new car means that when you drive it off the lot, it loses as much as 20 percent of its value, like that. What's the solution?

Well, you can buy a second-hand car, a used car, what they call preowned. But how do you do that and get a great deal?

Let's go find out.

Joining me now is Bob Ford, author of "What Car Dealers Won't Tell You."

Bob, good to see you.

BOB FORD, AUTHOR, "WHAT CAR DEALERS WON'T TELL YOU": Hi, good to see you, Gerri.

WILLIS: You say it's a great idea to buy second-hand these days. Why?

FORD: Because you, you're buying a car that, especially if it's a two-year old car that looks like a brand-new car, but you save the depreciation, which can be from 15 to 20 percent a year. You are going to pay less sales tax on it. You're going to have -- the insurance is going to be a little bit lower. And, you know, it's a car that, in today's market, a two-year-old car like a brand-new car anyway.

WILLIS: And you have these certified programs. These companies are actually kind of looking after these cars, too, right?

FORD: A certified program is very good, because it says, I can buy a car, and up to 100,000 miles, the factory's going to stand behind it. However, read the paperwork on it, because there are different certification programs.

WILLIS: All right. You know, we're standing here on a lot, but we would never come to a lot without doing our research first, right?

FORD: Absolutely. Take a look at some of the things that you need to know before you come to negotiate.

WILLIS: Speaking of negotiating, you are not doing your job as a consumer unless you lowball your salesman first, right? You can't come in and say, Hey, I think I'll pay sticker.

FORD: Well, if you got a lot of money, you can do that, I suppose. But basically, you want to come in and -- it -- they expect you to negotiate. So come in for a number that you think is a little bit over their wholesale. They got to make a profit. You don't want to -- they're not doing social work.

WILLIS: Right, exactly.

FORD: But certainly are free to come in a with a number that's well below what they're asking.

(CROSSTALK)

WILLIS: Aren't they trying to get me to twist in the wind a little bit too.

FORD: They might. They might. And depending -- I say, Hey, you know, tomorrow this car may not be here. Today the price of this car is $1,995. Tomorrow, it might be 21 or something. You know, the -- or I'll give you a discount today, but none tomorrow.

So there's a lot of effort to get you to settle on a car right now, because this car, this beautiful red car, may not be here tomorrow. And you love red. It goes with your eyes, right?

WILLIS: How do you...

FORD: They're good actors.

WILLIS: ... combat that? I mean, yes, they're good actors. But, you know, when they're putting the pressure on you and saying, Well, I don't know, what's, what's the...

FORD: There are hundreds of these...

WILLIS: ... good negotiating tack?

FORD: ... of these cars up and down the street here. You don't have to buy this car. You can buy -- you can go through the next dealership, the next dealership, and the next dealership.

WILLIS: Should I be prepared to walk away in a negotiation if I'm not getting what I want?

FORD: Absolutely, be prepared to walk away. Make a deal. Say, Here's my card. Call me if you want to do it.

WILLIS: Let's talk about inspecting the car. So what's the key question to push with them?

FORD: The key question is, Can I have this car for an hour to take it my mechanic and have it inspected?

WILLIS: And they should let you do that, right?

FORD: If they don't want to let you do it, say, Thank you much, sayonara, I'm out of here.

WILLIS: Leave. What's the biggest mistake people make?

FORD: They fall in love with the car. They give away their negotiating position. They say, I love this car. Or your wife comes in and says, Oh, I want this car. And you're dead.

WILLIS: I want the red one.

(CROSSTALK)

FORD: You can't, you can't negotiate. You're dead, right?

WILLIS: So Bob, the most important things to keep in mind when you're out there, you're buying that second-hand car?

FORD: First of all, do your research. Understand, you know, the prices on the cars and what you're looking at. Also, when you come on the lot, and you decide on the car, be sure that car doesn't have factory warranty on it, that you're going to take it off to a mechanic and have it inspected.

Don't fall in love with the car and give away your negotiating position. Always let the salesman know that you can walk to the lot next door and look at a car there, that you're flexible.

WILLIS: So everything's negotiable.

(CROSSTALK)

WILLIS: And make sure you negotiate, right, Bob?

FORD: Right, absolutely.

WILLIS: Bob, thanks so much for being with us.

FORD: My pleasure.

WILLIS: Stay with us. OPEN HOUSE is right back with my tips on using the Web to get the best price on your car.

We'll be right back.

(COMMERCIAL BREAK)

WILLIS: OK, so you're convinced you want to buy used. Don't head to the sales lot first. Instead, fire up your computer. Online, you can get the information you need to hold your dealer's feet to the fire.

Start with Edmunds.com and Kbb.com. Now, that's the old Kelly Blue Book online. At those sites, you can check out cost of ownership, including maintenance.

Now, if you're buying used, you'll definitely want to find out a car's history of accidents. So grab what they call the VIN number from the dashboard. Plug the VIN number into the search engine at Carfacts.com. On that site, you can get a complete rundown on the car, even finding out whether the car was damaged in Hurricane Katrina flooding. The $25 fee is well worth it.

One more thing. If you're trying to figure which used makes and models are most reliable, check out ConsumerReports.org. They independently rate car performance.

We want to hear from you. Send us your comments, your questions to openhouse@cnn.com. You'll find more on today's guests and topics on our Web site, cnnmoney.com/openhouse.

Thanks for watching OPEN HOUSE. I'm off to Las Vegas to check out the real estate market there. Whatever happens in Vegas, stays in Vegas. But as you know, we here on OPEN HOUSE will bring you a full report.

I'll see you here next week.

The day's stop stories are next on "CNN SATURDAY."

Have a great weekend.

(COMMERCIAL BREAK)

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