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Open House

Signs Recent Housing Slump Stabilizing; Top Dollar for Home Depot CEO; Healthy Design

Aired January 06, 2007 - 09:30   ET

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


GERRI WILLIS, HOST: Good morning, and welcome to OPEN HOUSE.
Up ahead, we're going to tell you how to cure that holiday hangover from credit card bills and get rid of that debt for good.

But first, the new year is under way, and no one can say -- well, for sure -- what 2007 holds for homeowners. But there are some signs the recent housing slump could be stabilizing. The median price of a new home rose to more than $250,000, the second highest level on record. And the sale of new homes shot up in November, higher than expected, and enough for some industry analysts to send some positive signals to the market.

But what does all of this mean for you, the homeowner, in 2007?

Jack Otter is with "Best Life" magazine.

Jack, great to see you.

JACK OTTER, DEPUTY EDITOR, "BEST LIFE": Great to see you, Gerri.

WILLIS: Now, I know people are saying this is the turnaround. But come on. I'm a little skeptical here. Can it turn this quickly?

OTTER: No, the real estate market is ill-liquid. It's a slow- moving process. It took a long time to get up to where it is today, and I think it's going to take a bit longer to go down.

WILLIS: I know a lot of people out there have questions, "What do I do in this kind of market?" Let's work through some scenarios.

Let's say you wanted to sell your house this year, but you're waiting because you're worried about the market. Is this the time to make up the difference by doing an addition, you know, really reinvesting in that house you own?

OTTER: Absolutely not. If you want that new kitchen because you want a new kitchen, and you plan to be there for a while, great idea. Enjoy it. That's a great place to put your money.

But if you're just thinking you're trying to increase the return, the sales price, absolutely not. Even in the best of times, rarely does a renovation fully pay for itself in a resale. But especially when the market is looking a little bit dodgy.

I think the best bet, if somebody plans to move in the near term, put that house on the market. Maybe with a slightly higher price that you think it will actually get if you have a little time to wait for that best offer to come along.

WILLIS: Well, and it could be a long time. We don't know at this point. People are still asking questions about that.

I know, though, that in a lot of second home markets, in particular, vacation homes could be the first to start falling. Isn't now an opportunity to start looking at those diving home prices?

OTTER: Absolutely. If you're a buyer, now is not a bad time to be looking. Interest rates have actually come down over the past six months. And frankly, that's why I think that you've seen this uptick in sales.

It's very simple. Even though the prices of houses, as you just mentioned, have gone up, the actual cost to the buyer has gone down, because people don't look at the sticker price. They look at the monthly cost of carrying a mortgage.

WILLIS: But the only problem with that is, you know, houses are still expensive. They haven't come down that much. So if you're looking in the broader market, may not just vacation homes, but elsewhere, you still may have a hard time getting in.

OTTER: Oh, absolutely. They are pricey. But again, since it's the monthly cost that most people look at and not the overall price, historically now is not a bad time to be locking in a 30-year mortgage and buying real estate.

WILLIS: Locking in a 30-year mortgage always a good thing to do. And, of course, we're always talking about mortgages on this show. And some of the toxic mortgages out there, I think this is going to a tough year for people who got some of those adjustable rate mortgages out there.

Do you see that as well?

OTTER: Oh, no question about it. But again, because the interest rates have been coming down over the past six months, I mean, it's the advice you've been giving for a long time. Take this moment, lock that 30-year mortgage in. Sure, it's going to cost you a little bit more now, but once that ARM starts ticking up, as you know, it's just a killer.

WILLIS: Jack, thank you.

While you worry about paying for your home, one executive at Home Depot is making a fortune form homeowners. Just look at Robert Nardelli ousted after earning a quarter of a billion -- yes, billion dollars -- in total compensation in just six years.

Lisa Sylvester has the story.

(BEGIN VIDEOTAPE) LISA SYLVESTER, CNN CORRESPONDENT (voice over): Home Depot began the year by cleaning house. CEO Robert Nardelli parted ways with the company under a mutual agreement.

The chief executive has been under fire from shareholders. The stock price is now lower than the day Nardelli walked in the door, despite the fact he collected more than $150 million in six years, with an annual bonus of $3 million. Like a new breed of CEOs, Nardelli's compensation package was virtually guaranteed and includes a platinum parachute of another $210 million.

RICHARD FERLAUTO, AFSCME: He came in with a huge package that was guaranteed, and now he's leaving with even a bigger package that's guaranteed. And in between, shareholders get very little return.

SYLVESTER: Congressman Barney Frank heads the House Financial Services Committee. He's pushing for legislation that would allow stockholders to vote on corporate compensation packages like Robert Nardelli's.

REP. BARNEY FRANK (D), MASSACHUSETTS: It is excessive, particularly given the fact that they were firing him.

SYLVESTER: Other CEOs that have had a lucrative exit include Pfizer's former CEO, Hank McKinnell. He received $200 million.

Former Fannie Mae CEO Franklin Raines will receive a $1.5 million pension every year for life, plus stocks. He was forced out for irregular company accounting.

Critics say these jumbo compensation packages are down right obscene when stacked against the wages of the average employee.

BOB WOODHOUSE, AMERICANS UNITED: In the first two hours and two minutes of the first work day of the year, the CEOs at large companies in America, those with a billion dollars in revenue or more, will have already made more than a minimum wage worker will make for an entire year.

SYLVESTER: Shareholder groups are also pushing for more transparency. Many executive compensation packages are kept a secret. For example, Home Depot has named a new CEO but will not reveal his take-home pay.

(END VIDEOTAPE)

SYLVESTER: Runaway executive pay is an issue that should receive more attention now that Democrats are in control of Congress. They are concerned not only because of this disparity between the CEOs at the top and the average worker, but also because of the impact it has on workers' pensions -- Gerri.

WILLIS: Well, Lisa, I don't think anybody thinks that shoppers at Home Depot are going to pay more or less because of this whole Nardelli problem. But, gosh, at the end of the day, you've got to say, what do these companies think about their role in society, and how do consumers walking through their doors every day, how are they going to respond to this? You have got to think at some point people are going to be shopping with their feet and may make other decisions.

SYLVESTER: A $200 million payoff, essentially, to be shown the door is exorbitant, by any measure. But in this case, when you think about those workers, the cashiers, the folks who are helping you in the aisles, in the plumbing aisle, it jus t-- you just know that those salaries that they are making, it's nowhere near what Robert Nardelli was making. In fact, there was that quote that we heard, Nardelli is essentially making in the first two hours of his work day essentially what the workers are going to be making the entire year.

And people see this, and they say there's something wrong with this -- Gerri.

WILLIS: It's just obscene.

Lisa, thank you for that report.

There's lot more ahead today on OPEN HOUSE. Why a new way of living in the suburbs could be a healthier way of living.

We'll tell you all about it.

And the new year unfortunately means a whole new round of bills. You'll learn how to tackle all of that holiday credit card debt when OPEN HOUSE comes right back.

(COMMERCIAL BREAK)

WILLIS: Well, it's almost a week since New Year's, and some folks have already given up on their New Year's resolutions to live a healthier lifestyle. But if you live in one community, you might not even need to make a resolution.

CNN's Dr. Sanjay Gupta tells us about a place that makes healthy living part of the design.

(BEGIN VIDEOTAPE)

ANNOUNCER: "Leave It To Beaver."

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT (voice-over): If we all lived in TV land, kids would walk to school on quiet streets and play in the front yard. But suburban sprawl has replaced many traditional neighborhoods and sidewalks, kids playing outside where even people can be difficult to find in the 'burbs.

It's a disturbing trend that's challenging growth and development expert Catharine Ross to rethink the way communities are built.

CATHERINE ROSS, GEORGIA INST. OF TECHNOLOGY: We are a nation of auto drivers. And so you get in your car, and you drive home, and you're kind of home. Nothing happens in between. And too often, not much happens on either end. GUPTA: According to the Surgeon General, those changes in our communities are playing a key role in America's sedentary lifestyle. Americans say one of the main reasons they don't exercise is the lack of a place to do so, such as sidewalks or parks.

TOM GLEASON, STAPLETON, INC.: If you build a community right, if you make it possible for people to walk and to be very active, they're going to take advantage of that.

GUPTA: Just 15 minutes south of Denver, Colorado -- a new smart community is creating a lifestyle that's healthier for kids and adults on land that used to be Stapleton Airport. It's one of a growing number of similar developments across the country.

GLEASON: The sidewalks out here at Stapleton are broad sidewalks. So it's a very conducive place to walk, to take your children in the stroller, to walk your dog, that kind of thing.

GUPTA: Gleason says young families are moving to Stapleton to take advantage of what's being called a new urbanism.

ALTARA WU, STAPLETON RESIDENT: We moved here because all of our friends were already here. It's tons of kids. You can walk everywhere. Lots to do. And it just makes it easier. You don't have to hop in the car and pack them up.

GUPTA: Stapleton is based on old-style neighborhoods with big front porches and homes within walking distances to shopping and restaurants.

ROSS: I think a neighborhood could help you stay healthy by allowing you -- provide access to places where you can engage in physical activity.

CRAIG WU, STAPLETON RESIDENT: You know, that's the thing if can you integrate it into your life, then it becomes much easier, much more just of a lifestyle change.

GUPTA: So it may not be just like the Beav's neighborhood, but these smart communities could be a step in the right direction in fighting obesity.

Dr. Sanjay Gupta, CNN, reporting.

(END VIDEOTAPE)

WILLIS: Andres Duany is an architect in Miami, and he is one of the founders of this new movement called New urbanism.

Good to see you again, Andreas.

ANDRES DUANY, ARCHITECT, NEW URBANISM DESIGNER: Hi.

WILLIS: You know, you say that it's not just healthy living here. It's also -- this kind of design makes people happier.

How does that work?

DUANY: Well, I think a great deal has to do with the psychological freedom of getting -- of getting around on your own two feet. You know, something like half of Americans don't have access -- don't drive.

Kids under 16 or 17 certainly don't. Many people are too poor to have their cars. Some senior citizens stop -- stop driving at about age 70, and so forth.

WILLIS: Right.

DUANY: And the ability to get to your daily -- to your ordinary daily needs is a great psychological liberation.

WILLIS: And, of course, Andres, some of us just want to drive less for lots of reasons, not the least of which is that gas has been so expensive. These communities have an environmental benefit, too, right?

DUANY: Well, they certainly do. And if you realize that most of the carbon loading of the atmosphere is not, you know, from buildings, and so forth, but, in fact, from -- from driving around that's caused by cars, there's an indirect connection between driving around and the unhealthy air and the unhealthy water.

WILLIS: Tell me...

DUANY: Also...

WILLIS: Go right ahead.

DUANY: Well, these communities also are more impact. You know, they -- things are closer to each other, and so you occupy less land, which means you pollute less water. Fewer aquifers are damaged and so forth.

WILLIS: So obviously these are compact communities. You can walk around.

What are the other elements that define New urbanism communities?

DUANY: Well, they're compact, they're connected. You can get to places directly, such as from house to store or house to jobs. They're also -- they're diverse. You know, they serve people of different age groups, different incomes. They're commercial and retail components.

So between these three, between compactness, walkability and diversity, you have the New Urbanist community, which, by the way, is the same as smart growth.

WILLIS: You know, they look a lot like something from the beginning of the last century, you know, very old-fashioned in some ways. Tell me, do you think this idea is really going to catch on in a big way? Certainly, there are some examples of New urbanism communities, but they're not everywhere, not by a long shot.

DUANY: Well, no, they're not everywhere. They're not everywhere.

Also, they look a certain way because those communities at the turn of the century, you know, a century ago, were actually created when not everyone had automobiles. You know, the widespread ownership of automobiles. So there's a sense to returning to those -- those times when cars weren't quite so widespread.

But also, they're not like the old ones. That's why it's not called the old urbanism. It's called the new urbanism. And they have all the modern amenities.

For, example, if do have a car, you can park it conveniently. Obviously they have infrastructure, they have Internet infrastructure. They have a lot of live-work units. A lot of people are working at home and so forth.

So, what they do is they combine the best of the old and the best of the new.

WILLIS: Andres Duany, thank you for taking us on a tour of new urbanism. We appreciate it.

DUANY: You're welcome.

WILLIS: Still ahead, how to deal with the holiday hangover. Not that hangover. We're talking about all the big bills from your gift- giving. We have a plan to pay it all off.

That's coming up next on OPEN HOUSE.

(COMMERCIAL BREAK)

WILLIS: The holidays may be over, but holiday bills often last well into the new year.

Howard Dvorkin is the founder of Consolidated Credit Counseling Services.

OK, Howard. You say job number one, put way those credit cards if you've got a lot of debt.

HOWARD DVORKIN, CONSOLIDATED CREDIT COUNSELING SERVICES: Absolutely. You've got to stop using the credit cards in order to get out of debt. If you start paying down on some and keep charging up on others, you're not going to get anywhere. So it's very important. Start paying with cash. If you can't afford it, don't buy it.

WILLIS: Pay down the balances. Pay down the balances, you say. But also, figure out what you owe.

How it is possible that people don't know how much credit card debt they have?

DVORKIN: Most people that call our offices at Consolidated Credit Counseling Services are significantly understated in the amount that they owe.

WILLIS: What do you mean? That they don't know or they don't understand?

DVORKIN: They don't know. They don't know.

You have to understand that most people carry balances anywhere between four and eight credit cards. And as such, it's very difficult for us to add up four to eight credit cards and the balances.

WILLIS: Yes.

DVORKIN: So it's unfortunate that most people don't know.

The starting point is, sit down at your kitchen table. Spread out your bills. Add them up.

Go on and put it on a piece of paper. Figure out who you know, what you owe them, and how much interest you're paying. And that's how you get out of debt.

WILLIS: So how do I avoid getting back in the red once I really establish myself paying off this debt?

DVORKIN: Well, most people that go through our program at Consolidated Credit Counseling, because they educate themselves while in our debt management program, are able to go through and not get into the same problem. The reality is they have to go through and, A, stop using the credit cards and live off cash. B, make sure that if they do use credit cards -- and we're in a society that credit cards are a necessity to some point.

WILLIS: That's right.

DVORKIN: But, when the bill comes in, you've got to make sure that you're going to pay it off.

WILLIS: I want you to give us a couple of signal, signs, really, that your credit cards are a problem that really need attending.

DVORKIN: Well, there's some very clear signals when people have trouble.

One is, if they can only make the minimum payment, then they need to go through and re-evaluate themselves. If they're taking one credit card -- taking cash advances from one credit card to make the minimum payment on another credit card, that's not high finance. That's going to -- that's going to put you in the -- in the -- in the hole.

WILLIS: Right. Hey, Howard, how about this idea. Is there a certain proportion of your income beyond which you shouldn't be paying on credit cards? How much, in fact, is too much of your usual budget, monthly budget, to pay on credit cards?

DVORKIN: Ten to 15 percent of your -- of your take home pay, after taxes, should go towards credit cards. Anything more than that there is a problem. And you've got to understand that people put off doctor's appointments and dentist appointments just to get off -- just because they don't have the cash to pay for it. And you've got to be concerned with those also.

WILLIS: Howard, great points. Great advice. Thank you so much for joining us today.

DVORKIN: Thank you very much.

WILLIS: As always, if you have an idea for a "Weekend Project," send us an e-mail to openhouse@cnn.com. And you can watch past weekend projects on our Web site, cnn.com/openhouse.

Stick around. We'll show you how some buildings are going green in the new year when OPEN HOUSE comes right back.

(COMMERCIAL BREAK)

WILLIS: It seems like the environment is on everyone's mind these days. But there are some people who think about it, and they'll want to actually take action.

CNN's Jacqui Jeras found two Atlanta schools that are leading the way.

(BEGIN VIDEOTAPE)

JACQUI JERAS, CNN METEOROLOGIST (voice over): At the Math and Science Center at Emory University in Atlanta, the building itself is teaching a lesson. It's a certified green building, designed to save energy and the Earth.

JEN FABRICK, EMORY UNIVERSITY ARCHITECT: What makes it different is that, once you walk in, you're immediately exposed to the outdoor environment.

JERAS: Jen Fabrick is an Emory University architect.

FABRICK: We have benches in the building that are recycled seatbelts. We have recycling stations throughout the buildings. But even these lights that have solar reflectors are an energy-efficient way to reflect lighting from the main piece up here on to the reflector and down. Rather than hanging tons of lights in the area.

JERAS: Other obvious distinctions include the marmoleum floors made up of sawdust and linseed oil turpentine, the aluminum can artwork and the men's restroom, where waterless urinals have been installed. But other more significant factors aren't always visible in green buildings.

The top floor of the Whitehead Biomedical (ph) building where huge fans pull in fresh outdoor air. The first green building in the southeast also has a couple of robots that clean up the rat cages so that no one is exposed to the litter.

FABRICK: The other thing we hope we're doing with these buildings is improving the quality of life for students by natural day-lighting in classroom spaces.

ART FRAZIER, SPELMAN COLLEGE ARCHITECT: We have a pretty aggressive schedule for this project. We'll be opening the building in the summer of 2008.

JERAS: Other educational institutions are catching on. Architect Art Frazier worked at Emory during the green upstart, and now he's employed down the road at Spelman College constructing a 300- bed green dorm.

FRAZIER: The parking underneath it will keep us from disturbing more land than we normally would. It will be about 20 percent more efficient than a normal building.

JERAS: College president Dr. Beverly Tatum says Spelman is the historically black college to earn the green designation. And she's proud to lead the way.

DR. BEVERLY TATUM, SPELMAN COLLEGE PRESIDENT: If you're in the business of education, you're planning for the future. And so it seems to me that we have to think about the future in all aspects.

Certainly, the African-American community has been very negatively impacted by environmental contaminants which are often concentrated in low-income communities. And so I think helping our students to raise their consciousness about the environment is an important part of the educational experience.

JERAS: While some builders are reluctant to plan a green building due to added construction costs, those that do say it only takes about five to 10 years to start saving on energy.

Jacqui Jeras, CNN, Atlanta.

(END VIDEOTAPE)

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

As always, we thank you for spending part of your weekend with us. OPEN HOUSE will be back next week right here on CNN. And you can also catch us on "Headline News" every Saturday and Sunday at 5:30 p.m. Eastern Time.

And make sure you don't miss a very special hour of OPEN HOUSE, "Mortgage Meltdown." You'll learn why there's been a sharp rise in the foreclosure rates in the United States and how to make sure it doesn't happen to you and your family.

That's today, 2:00 p.m. Eastern, and tomorrow, 4:00 p.m. Eastern, right here on CNN.

Don't go anywhere. Your top stories are next on the "CNN NEWSROOM."

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