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Open House

Your Questions and Concerns About the Economy; Buying and Selling Your Home in This Struggling Market; Buying Diamonds

Aired February 09, 2008 - 09:30   ET

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

GERRI WILLIS, CNN HOST: CNN's Financial Security Watch is all about looking out for you. So, it's time to answer what's on your mind. We took to the streets to get your comments, your questions and concerns about the economy this election year.
I'm joined again by Lynnette Khalfani Cox, author of "First Home" and Shawn Tully, senior writer at "Fortune" magazine.

Let's get right to the very first question from Mika (ph).

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I have some Apple stock that's done very well for me and it recently plummeted about a third of it's value. I want to know if I should hold on to it and assume that it's going to recover or if I should get on the bandwagon and dump it.

(END VIDEO CLIP)

WILLIS: All right, well this is a great question. That stock has not been doing well lately even though they've got a lot of new products in the marketplace. What do say, Shawn?

SHAWN TULLY, SR. WRITER, FORTUNE: I say dump it. And the reason is...

WILLIS: Oh, that's not (INAUDIBLE) or anything.

TULLY: I know. The reason is because tech stocks are way overpriced and we've seen a big correction in the NASDAQ it's down 20 percent in the last few weeks and it's logical because these companies have very high multiples, meaning that the expectation on future growth and their earnings is absolutely huge and they're not going to be able to get there.

WILLIS: But, you have other categories you like better?

TULLY: Yes, I do. I think there are a lot of beaten down sector that are good buys because you've got to jump in. To make good money, you really have to...

WILLIS: What are those?

TULLY: Well, I like the big banks. Not the Wall Street firms, but the big banks.

WILLIS: The mortgage lenders?

TULLY: No. I like Bank of America, Wachovia, Wells Fargo, they're paying very, very high dividends because their stock -- prices are beaten down so much. And you can get six, seven percent and those dividends are not like an interest on a bond, they go up with inflation and even faster in those cases.

WILLIS: All right, I'm sold. Let's go to the next question from Dominique.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I'm a small business owner, I opened my business right out of college and I wanted to know if there was any government assistance to repay your college loan if you open a small business right after you finish college.

(END VIDEO CLIP)

WILLIS: This is interesting. I mean, this is tricky. You know, what's interesting about her case is that the SBA, the Small Business Administration will actually step in, particularly with women who start small businesses. That might be an avenue. What do you think?

LYNNETTE KHALFANI COX, AUTHOR, YOUR FIRST HOME: That's one avenue for her to pursue. But I think she was asking kind of specifically since I started my own business, is there a government program that will pay off my student loan.

WILLIS: I know, I don't think I've ever heard of that.

COX: I don't think there's anything specifically for that, but one of the things I do talk about in my book, "Zero Debt for College Grads" is the Federal Student Loan Repayment Program, it's administered through OPM, the Office of Personnel Management and they do pay off your student loans for you. The catch is, you got to work for the government, you can't work for yourself, but they'll pay off up to $60,000.

WILLIS: But, you have to be a teacher or something, right?

COX: No, you can work for any federal agency in the country, even quasi-government agencies, for Amtrak, for the Smithsonian Museum...

WILLIS: She can start her small business in her free time, I guess.

Heather, let's hear your question.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Is now the right time, given market conditions, to refinance my mortgage?

(END VIDEO CLIP) WILLIS: That's a great question. I'm going to give this to both of you. Shawn, you start.

TULLY: Yes, absolutely, because interest rates are way down, especially as we're talking about it on conforming mortgages. They dropped substantially. It's a very good time.

COX: I think it's a great time, as well, especially if you've got the decent secret. You know, lenders definitely want to see 680, 700 and above. You know, your FICO score can go up to as much as 850. If you've got, you know, if you're going to be able to have a significant down payment so that you have equity in the house, as well, it's going to be a great time for you to buy, interest rates about five and a half percent for loans under $417,000, about six and a half to six and three quarters for those jumbo mortgages.

WILLIS: You know, is that for folks out there because they are so tight with the lending right now, you've really got to have a great credit score. Let's go to Judy, next.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: What's the best way to pay off credit card debt if you want a house, should you take a home equity line out and pay it off?

(END VIDEO CLIP)

COX: OK, this is one of those tough questions. The quick answer is that if you've gotten into credit card debt because you have an over-spender or shopaholic, you mismanage your finances, no, don't go out there and take out a home equity line because chances are you're just going to run up the credit cards again and you'll have a bigger mortgage.

If, however, you've gotten into problems because of what I call the dreaded D's downsizing, divorce, death in the family, disability or disease, then yes, you can take that home equity line of credit, which is probably about eight percent right now, pay off the higher interest rate credit card debt, which is costing you about 14 percent.

The other key, though, to determine whether or not you should do that is if you've come out of that problem. If you were downsized, for example, and now you have gotten job or you were divorced and you financially recovered, then I think it can be smart thing to do.

WILLIS: All right, well Lynnette, thank you for that. I'm sorry to interrupt you. We got to go.

Still ahead on OPEN HOUSE, buying and selling your home in this struggling market. We'll tell you what you need to know to be successful.

Then, if you're ready to propose this Valentine's Day, but you don't have the ring yet, you're in trouble, but we can help you find one that won't disappoint her or bust your budget, but first your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: If you watch our program every week and we sure you hope, you know we make sure you have the very latest info on the housing market and what it means to you and your home. Lately though, it's been a tough run, but now some are saying that buying a home is the best way to secure your future.

(BEGIN VIDEOTAPE)

ANNOUNCER: If you purchase one of the millions of homes that will be sold this year, the National Association of Realtors wants you to know you're making a good move.

WILLIS (voice-over): A new ad campaign from a real estate trade group, encouraging Americans to buy homes. Making the claim a home is the key to building long-term wealth. But, is now a good time to tell consumers to buy? Housing analyst Nick Retsinas say it's OK if you're buying for the long-term. But, be wary of buying just for profit.

NIC RETSINAS, HARVARD JOINT CTR FOR HOUSING STUDIES: If they're buying a home because they think it's a way to maximize their wealth and make some kind of real estate play on the investment, this is probably not a good time.

WILLIS: One thing is for sure, home prices have dropped over the last year, according to industry groups. Countless homeowners are upside-down in their home, owing more than their houses are worth.

BRUCE MARKS, NEIGHBORHOOD ASST. CORP OF AMERICA: To put this ad now out there implying that you can generate wealth in a reasonable timeframe is a lie, because there's no economist out there that says that prices are going up.

WILLIS: A spokesman for the National Association of Realtors told us in a voicemail: "We do stand by our ads. The existing data clearly show that over the long-term owning a home is one of the best ways to build wealth."

RETSINAS: Over the long run, it is an important source of wealth creation; however, we're not in the middle of long run right now, we're in a period where most people, as we look through 2008, see a continued decline in prices.

WILLIS: While there are some goods reasons to invest in homes, right now...

ANNOUNCER: Interest rates are low and buyer opportunities have never been better.

WILLIS: Home buyers should be careful to know they're getting a good deal. And know that they can hang on for the long-term.

(END VIDEOTAPE) WILLIS: So, in this rollercoaster of a market, if you're trying to buy or sell, how do you know if your real estate agent is really work for you? Pam Liebman is the CEO of The Corcoran Group, a real estate firm, and she's joining us right now.

Pam, great to see you again.

PAM LIEBMAN, CEO, THE CORCORAN GROUP: Thank you.

WILLIS: All right, what are the insiders saying about the market, right now? We've got you here, we're going to ask you the question. What do the insiders think?

LIEBMAN: Well, the insiders are saying it's a great time to buy and it's a tough time to sell. So be smart on both sides of the equation.

WILLIS: Yeah, well that makes a lot of sense. Let's talk about getting the best agent, because I think that is a tough thing for folks to do. What do you ask these people when you're interviewing them and how many folks do you talk to?

LIEBMAN: Absolutely, I think it's important to talk to a couple because you really need someone that you feel comfortable with. This is not the easiest time we've ever seen to sell a house and you need an expert that is going to add something to the equation.

So when you meet someone, you say to them: What are you going to add. What value do you bring to the process? Have you done this before? How long have you done it? What is your track record? And what's your advice, why are you going to make my home sell when so many other people are having such a hard time?

WILLIS: Now, you want some advice, I would assume if you're in the market out there, about how to position that house best for sale. You want some real specifics, right?

LIEBMAN: Yes, you want to know what a buyer is going to think when they walk into your home and a broker needs to tell you how to look through the eyes of a buyer.

WILLIS: You know, I think an interesting thing that's going on right now is that some agents trying to get business are saying, oh, I'll sell your house for this amount over the average and they're really bidding up prices that they can't deliver on?

LIEBMAN: You have to really be real. I mean, don't get caught up in the hype and in a broker that's trying to just land a listing and increase their own visibility and portfolio on your back. So, if someone says to you, I can get you this price, ask them how, what else got that price? What are the comparables? And be real for the market, don't price it too high. If anything, when you price it too low, you get a higher price.

WILLIS: Well, I think a lot of people out there are just -- they don't want to give up what they think are supposed to be their gains in the market. One other interesting thing you say here, the Web is critical to marketing your house, how so?

LIEBMAN: Very critical, 80 percent of buyers right now start their search on the Web. So, when they go and look at your home on the Web, they're seeing lots of other houses out there your pictures better look really pretty and your price better look really competitive or you know what, they're going to click right by it.

WILLIS: Yeah exactly. OK, incentives. A lot of people are giving away cars, you name it, I mean they're adding all kinds of sweeteners to deals. What's the right thing to do?

LIEBMAN: The right thing to do is pick the right broker, price your house right and make it look good. Nobody ever really sold your house above another because they got a trip to Disney World.

WILLIS: OK, that's a tough equation, though to figure out. Pam, I know a lot of people are thinking: Do I sell right now, do I wait until Spring? Is it going to get better? Is it going to get worse?

LIEBMAN: I always say a house is not a stock, don't treat it like one. Don't treat it like an investment. Why are you selling your house? Did you want to move a warmer climate? Do the kids want to change schools? Make the decision about what's right for you. Sharpshooting a market doesn't always work. But, I will say this, Spring, by far, the best time in this country to sell a house.

WILLIS: Well Pam, thanks for your excellent advice. Appreciate that.

Still ahead, Valentine's Day is around the corner, we'll show you how to find a ring that she will love and that you can afford.

But first, just days away from their primary, here's a bunch of great stuff to do in Washington, D.C., most of it costing you little to nothing in this week's "Local Lowdown."

(BEGIN VIDEO CLIP)

WILLIS (voice over): Washington, D.C., land of the free, literally. At the national archives, you'll be able to research your family history and take a look at the Declaration of Independence for absolutely no cost. Spend nothing watching money turn out at the Bureau of Engraving and Printing.

If you want to watch the justices battle it out over today's hot button issues, stop by the Supreme Court, all sessions are open to the public, and the most popular attraction in D.C., White House tours. Don't expect to catch a glimpse of the president or first lady, but tell Barney I say "hi."

That's your local lowdown.

(END VIDEO CLIP)

(COMMERCIAL BREAK) WILLIS: The Diamond Information Center estimates that 10 percent of the 3.3 million couples that get engaged each year, they do it on Valentine's Day. So, if you're thinking of popping the question or hoping someone else does on February 14, we'll tell you how to pick the ring you want and more importantly, well, maybe the ring you can afford. Carley Roney is editor in chief of tying theknot.com and she's joining us.

Good to see you.

CARLEY RONEY, EDITOR-IN-CHIEF THEKNOT.COM: Hello, thanks for having me.

WILLIS: It's crazy, we've got like really expensive -- this is the most expensive segment we have ever done on OPEN HOUSE I think.

RONEY: Well, and problem is that you can't actually buy a ring for much less. I mean, they have that two month's salary guideline and you know, actually because it's created by the industry, it's a pretty good place to start.

WILLIS: Wow, you know, for guys who are earning say the $25,000 as the typical 25-year-old does, that could be tough. But, we've some interesting ideas, right. Now different women want different kinds of style.

RONEY: This is the hardest part about shopping for a ring for your fiance to be which is, pays attention, does she wear mostly platinum or mostly gold. Take a look at the rings her friends have. And you know what, she's probably even dropping you hints. See if there are any magazines lying around. And you want to do a lot of research. And these days the girls are really getting their way in there and you can go online, you can look at all the styles, like on TheKnot, we have a database with so many pictures so you really know what you're seeing before you go into the store.

WILLIS: It's a good place to go. But, you say this month two's salary maybe not the case.

RONEY: Well, you want to sort of start there, OK so that's $50,000 that means about $8,000, that's your salary, I'm saying that's about $8,000. You know, you can go -- that's like $5,000 to $8,000, but at least - guys have no idea where to start. And at least you're in there, say you want to spend five, you have to know what's actually most important to her, too.

WILLIS: OK, let's talk about carets, so for one caret I'd spend about what?

RONEY: One caret you'd spend about, you know, $5,000, to $8,000 depending on the quality. So, the great thing about shopping for shopping for rings is that, you know, you have to know what's important, is the size important or is the quality important. So, $15,000 will buy you a two caret with decent quality or a one and a quarter caret that's amazing quality. So, figure out what's important, and 60 percent of the women we surveyed said size was more important to them than quality.

WILLIS: Size matters. What ever happened to Cubic Zirconium? OK, let's talk color, cut and clarity, that's what these experts always talk about with diamonds.

RONEY: That is true. These are the four C's, you need to know them. The cut, that's obvious, what shape is that stone. And the clarity is the other one you really want to pay attention to. How many of the, they call it, inclusions, how many little spots are there and when you go to look at the diamond, never buy them in the setting. You're buying it loose and you look through this little viewfinder and you can see how it is, you know, what the little dots look like inside of it and that's the clarity of it.

WILLIS: So, you buy the stone and then you get the setting you want?

RONEY: Yes.

WILLIS: I never knew that.

RONEY: Separately. Buy them loose. And that's one of the scams you have to avoid. Don't ever buy it in the settings. You can't really see what the stone is.

WILLIS: Because you might have a -- some kind of sort of inclusion in it.

All right, so let's talk about some of these styles. Let's start with this one. I'm just going wear these.

RONEY: You go for it. These are some of the hot trends right now. This is a white gold band, it's from White Flash and it has a very high setting. If you can see on the side here, see how high that is set up? And that's one of the styles that's popular right now. Very antiquey (ph) and feel with pave diamonds and that's about a, just over a on caret diamond, there.

WILLIS: How much would that go for?

RONEY: And this is about $6,000.

WILLIS: To see the other rings we discuss and much more, log onto cnn.com/openhouse. And you can hear much more about the impact of this week's news on your money on YOUR MONEY with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN.

As always, we thank you for spending part of your Saturday with us. OPEN HOUSE will be back next week right here on CNN and you can catch us on HEADLINE NEWS every Saturday and Sunday at 3:30 p.m. Eastern time.

Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.

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