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Open House

The State of the Housing Market; Gas Thieves; How to Prepare and Protect Your Home This Hurricane Season; Kids and Money; The Foreclosure Business

Aired June 07, 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: Hello, I'm Gerri Willis and this is OPEN HOUSE, the show that saves you money.
Just when you think we're turning a corner, another setback in the mortgage meltdown. More than a million American homes are now in foreclosure, that according to the Mortgage Bankers Association. In the first three months of 2008, just under 450,000 homeowners began the foreclosure process.

Now, we spent a lot of time talking about the mortgage meltdown on this program, and we want to spend some time talking about the state of housing in this country, the value of homes in your area.

Brad Inman of "Inman News" joins me now from Berkeley, California.

Great to see you again, Brad.

BRAD INMAN, INMAN NEWS: Likewise, Gerri.

WILLIS: All right, so every time we talk it seems to me that you are very negative on the housing market. You see no reason for optimism, but I'm hearing now that there may be a little glimmer for you.

INMAN: You're right, Gerri. I've been a bear since really 2005. I didn't like the wacko mortgages and the subprime, but what I see going on now is the rule of law is returning to real estate, which is really the first step that has to be taken to restore confidence by consumers in the lending community. And there's a couple of steps I like.

We can't dismiss this incredible foreclosure and the human damage being done here, but the fact is it looks like listings are finally stabilizing and we have some line in sight to how many foreclosures are coming. And you're also seeing the rule of law return. You know, we had extreme lending, we had extreme underwriting, extreme price depreciation, now we're seeing prices come down radically and we're getting to know what that bottom is.

We're seeing buyers return, we're seeing community banks reenter the mortgage lending business. Wouldn't that be fantastic, instead of making a loan through an 800 line, where you actually know the banker that's making you the loan? So, I see some things returning, rule of law is returning, stability, rationality, and that's the first step. The other thing I see is ground up, first-time buyers. First- time buyers will rebuild this market. And once they have confidence again that they can buy a home with a safe mortgage and prices are more affordable, then we'll see the rest of the market return.

WILLIS: Well Brad, on that topic of first-time home buyers, we know that the FHA, the Federal Housing Administration, government agency, really getting involved here making more than 90 percent of loans to first-time buyers. Is this going to be the saving grace of the market now that we've got community bankers and the FHA involved?

INMAN: I think it is a good thing. You know, we had mortgage brokers who can get a license with a simple test out there giving advice on the biggest investment of people's lives. FHA has been making mortgages since The Depression. They know what they are doing in partnership with local lenders. I think that's a good sign. It's not going to cover the whole market demand. We are not going to get back to the crazy days, but we shouldn't. We need a stable housing market that has some certainly.

WILLIS: I have a quick question for you we absolutely have to get to. The Department of Justice and realtors have come to an agreement that it will allow discount brokers to use the multiple listings services. This is the big tool that all realtors use to sell houses. Is this a breakthrough for consumers in any way?

INMAN: Absolutely. But, you know, the Internet, despite the pressure by the National Association of Realtors, figured out a way in firms and other people to get listings up. So, despite the National Association of Realtors, listings have been liberated. But this is the final chapter, the DOJ came after the National Association of Realtors and said, enough, stop, and they finally reached an agreement.

So, we're going to make -- you know, it's going to provide some certainty that consumers can get access to every piece of information they need to make a smart decision, and transparency is key, here. One of the reasons we had the really, depression, in the housing market is the lack of transparency. On the mortgage front, the real estate transaction front, and we need transparency to make this market work and give consumers all the information they deserve.

WILLIS: Brad, great information. Thanks for your help today. We really appreciate it.

INMAN: Thank you, Gerri.

WILLIS: Gas, you know this, it's expensive these days. You would expect that from gas stations to be higher, right? What you might not expect is that reports of gas from other places, like homes and businesses, well, that's up, too.

Here's CNN's Chris Lawrence.

(BEGIN VIDEOTAPE) CHRIS LAWRENCE, CNN CORRESPONDENT (voice over): If you think you're getting robbed at the gas pump, you may be right, but not just there. Police say thieves are siphoning gas like it's the 1970s and using the Internet to share their tips. Consumers are fighting back, buying up gas caps with locks, so now the thieves have started drilling holes directly into the fuel line.

SGT. WALT REID, KERN COUNTY SHERIFF'S DEPT: Not only do you lose your fuel, but you have to repair your gas tank.

LAWRENCE: Kern County Sergeant Walt Reid says it's even worse for California's farmers who use thousands of gallons of diesel fuel. This surveillance video shows one thief as he taps into a farmer's supply. Another drives off with the hose attached, which snaps the line and spills fuel everywhere.

PETE BELLUOMINI, BAKERSFIELD AREA FARMER: That's probably part of the frustration. You know, it's like, you know, if I can just catch that guy, boy, what would I do?

LAWRENCE: Farmer Pete Belluomini says an organized gang of thieves just took 900 gallons from his tanks.

BELLUOMINI: Flip the switch, it sucks the diesel out into their storage tank in their van...

LAWRENCE: One night's work cost him four grand.

(on camera): Can you afford to keep getting hit like this?

BELLUOMINI: No. We don't recoup that, it just comes out of our bottom line.

LAWRENCE (voice over): Over the past few months, thieves have stolen more than a quarter of a million dollars in fuel in this one county alone.

(on camera): Where do you think these thieves are reselling all of this diesel?

REID: Well, who is going to use diesel fuel? Truck drivers.

LAWRENCE (voice over): Right now, they are paying top dollar at legitimate truck stops. Several truckers told us there's a black market where stolen gas is sold at a discount.

REID: It's going to cost him $500 to fill up and he can fill up for $200, what's he going to do?

LAWRENCE: Farmers are asking themselves the same question, wondering if fuel thieves will drive them right out of business.

Chris Lawrence, CNN, Bakersfield, California.

(END VIDEOTAPE)

WILLIS: It's crazy.

All right, up next, one week into hurricane season, and as tornadoes seem to strike every week, how to prepare and protect your home.

Then we are talking kids and money. How to make sure that summer ends with money saved. Wouldn't that be nice?

And why some folks are making out quite well in the mortgage meltdown. OPEN HOUSE will be right back.

(COMMERCIAL BREAK)

WILLIS: Virtually all hurricane forecasters agree this season is expected to be above average, but are folks paying attention and are they well prepared? Well, maybe not as much as they should be.

Here's CNN's John Zarrella.

(BEGIN VIDEOTAPE)

JOHN ZARRELLA, CNN CORRESPONDENT (voice over): Neil Rubin is getting a new garage door installed at his home.

NEIL RUBIN, HOMEOWNER: This one's suppose to withstand, I think, 150 miles-an-hour wind, in that area, which is a lot better than I had. And since I have the accordion shutters. Why have a weak spot on your house?

ZARRELLA: And the garage door is considered the weakest spot in a home.

UNIDENTIFIED MALE: You lose the garage, you lose the roof, you loose the contents of the house, everything is gone.

ZARRELLA: But a new Mason-Dixon poll conducted for the National Hurricane Survival Initiative found a staggering 95 percent of the 1,100 adults questioned didn't know this, and 30 percent said they would not start preparing their homes until a hurricane warning is issued.

CHUCK LANZA, BROWARD CO., FL EMERGENCY MGMT: All the water is gone for the stores at 24 hours, the plywood's gone from all the larger stores. People need to make those plans early in the season.

ZARRELLA: The survey found bad habits resurfacing that existed before the devastating wake-up call season of 2005: Katrina, Rita, and Wilma. An astounding 50 percent said they had no disaster plans or survival kits. Why the complacency?

UNIDENTIFIED FEMALE: Because you've been through it so many times that, you know, most of the time it doesn't hit.

ZARRELLA: Emergency managers say while many people may not be prepared for the long aftermath, they do, in most cases, enough to survive a storm. LANZA: People still, at the last minute, usually make the right decision. The problem is if they don't have a plan in place and they haven't bought the supplies they needed.

ZARRELLA: And this may not surprise you. The high price of gas is compounding the under preparedness problem, that's because people aren't buying the supplies they need because they're spending so much money filling up their gas tanks.

John Zarrella, CNN, Miami.

(END VIDEOTAPE)

WILLIS: Well, money spent to protect your home is money well spent. This is not a place you want to cut corners. Home improvement expert, Danny Lipford, stopped by to offer some advice.

(BEGIN VIDEOTAPE)

WILLIS: All right, OK, let's start with things you can do before the storm hits. Obviously, you got to check your insurance policy. Really know what you are covered for. What are the words you should specifically be looking for?

DANNY LIPFORD, HOST, TODAY'S HOMEOWNER: Well, you really need to make sure you are checking out all the deductibles, that scares a lot of people when they realize how high those deductibles are.

WILLIS: Thousands of dollars in some cases.

LIPFORD: Right, exactly. And the replacement cost extended cost coverage is very important because here for only $40 a year, in some cases, you can increase your coverage from 100 percent replacement to 120 percent, very important after those storms.

The contractor rates go up a little bit, and certain the materials go up. This will protect you, there. And also very important, flood insurance. You'll be surprised how many people don't realize that the floods and storm surges really is what cause a lot of the damage. Without that flood insurance, you can really have some sad stories.

WILLIS: And that's separate coverage. You got to buy that separately.

LIPFORD: Right, a lot of people don't realize that.

WILLIS: Let's talk about what to do to prepare in advance. What should you always have on hand?

LIPFORD: Well, you know, there's certain things that you just need to have that emergency kit ready to go and in that kit you should include any of the plywood that you may need to protect your home to cover-up. You'll also need to consider a radio, maybe a few toys and books and games.

WILLIS: What's up with that? Why do you recommend that?

LIPFORD: Let me tell you, from all the hurricanes I've been through, and you have the kids around, they get bored really, really quick, so having a few things like that will keep a little sanity in the house all the way across. So, that's very important.

WILLIS: Lots of tools, obviously.

LIPFORD: Yes, making sure you have a tool kit ready, making sure, that maybe you have some plastic and some tape in case you do have some damage that you can address it very quick. This is something that should be in a box in the garage ready to go at any time.

WILLIS: All right, now, let's say I hear on TV that there's a hurricane approaching. What should I go get right now in the next 20 minutes?

LIPFORD: Well, without a doubt, make sure that you have sufficient food for three to five days, three to seven days, something like that, nonperishable, different types of food, there. Also, any blankets, any clothing that you may need, your cell phone, make sure you have the extra battery to charge it with, and then certainly make sure you have cash and any of the other things that are necessities. Keys, and important documents in case you have to evacuate your home. Make sure that you have everything you need.

WILLIS: Keys and medicine. The meds are so important. All right, let's talk about after the storm. And you know, you have some interesting information here I've never heard before. The things you need after the storm passes.

LIPFORD: Right, well, there again, if you have any damage whatsoever, cover it up and stopping any additional damage, very important. So, you'll be surprised how much you can cover-up with just some plastic and some ropes and tape and that kind of thing, very, very important.

And one of the things that we found is the plywood can be so heavy and this is a type of material we're seeing a lot. This is a clear panel, translucent panel, and it can be really depressing if you have all your windows, all plywooded up, and it's so dark. This way you get a little bit of that light in, it's very lightweight and much easier to install on your windows.

WILLIS: Great stuff, Danny. Thanks for that.

LIPFORD: Sure.

(END VIDEOTAPE)

WILLIS: Now, if your home ever suffers major damage from a storm, look out. There are dishonest service people out there who prey on disaster victims. Don't be pressured into signing a contract with any roofing or building company. Instead, collect business cards and get written estimates for the proposed work. Beware wary of contractors that encourage you to spend a lot of money on what they call temporary repairs. Investigate the track record of anybody you consider hiring and be sure to ask for references.

It is always a good idea to check in with the Better Business Bureau at bbb.org. And hey, don't hand over that deposit until you've thoroughly done your homework.

Still ahead on OPEN HOUSE, teach your children well. How to raise money smart kids. And why the mortgage meltdown means big bucks to some folks out there. OPEN HOUSE will be right back.

(COMMERCIAL BREAK)

WILLIS: Personal savings rate in the U.S. is just 2/10 of a percent. The average American household with a credit card owed nearly $10,000 last year. Now, we may be in a mess of financial trouble, but can we save our kids from the same fate?

Our next guest says the summertime is a great time to teach your kids about money. Terri Cullen Is with the "Wall Street Journal."

You say it pays to pay your kids some money, a little bit each and every week. Now, why does an allowance make sense?

TERRI CULLEN, PERSONAL FINANCE COLUMNIST, WSJ.COM: Well, an allowance is really the only way for a kid to get a consistent form of income. And when you have regular money coming in, that's the way that you learn how to budget, how to -- what you're going to spend your money on, what you're going to save it on, how you're going to donate.

WILLIS: How much do you give them?

CULLEN: Well, it depends. Some -- my rule of thumb is generally $1 for each year of age. So, for example, my son is 8-years-old and gets $8 a week in allowance.

WILLIS: And he's happy with that? I don't know. I think kids get a lot more money out there. But, you brought us a bank, here. Now, tell us how this works and why this is a good idea, because it's a special bank.

CULLEN: When I started looking for ways to teach my son about money, I wanted to make it a little bit more tangible. And this bank isn't your traditional bank. Instead of having one slot where kids put a lot of change in, it has four different slots. One more spending money, one more saving short-term, one for where you donate to your favorite charity, and another one for investing.

WILLIS: It is like the investing part is the biggest part, here.

CULLEN: Well, right now, especially when they're young, you want to give them a long-term goal. And for my son, it's saving for college.

WILLIS: Well, that's a great idea. I love that. OK, so you know, there's a debate about whether you actually pay kids for chores or not. Do you just give them an allowance or do you actually for pay for work they do around the house.

CULLEN: A lot of kids are very against giving kids money for household chores because they think, well, you're a member of this family, chores are you responsibility. But, especially in the summertime there are a lot of extra chores we ask our kids to do: helping clean out the garage, maybe clean out the pool. These are great ways to basically give a little extra to your kid for doing these chores and in a way to encourage they to save their own money.

WILLIS: And beyond making the bed. OK, so summer vacation time, though, you say is a great time to show kids how to spend wisely. Give me an example. How do you do that?

CULLEN: All right, right now, you know, in a few weeks, maybe a month or two you're going to be going on vacation. Now is the time to say to your kid, you know what? Mom and dad are not going to be opening up the envelope and just saying, here, take money for whatever souvenir you want.

WILLIS: Darn it.

CULLEN: You are going to have to start spending your own money, putting some savings away now so that you have some savings to spend when you're on vacation. And you'll be surprised when you see that kids are much more wary of spending their own money rather than when mom and dad are just handing it out.

WILLIS: Now, see, that's a really interesting strategy. I love that. OK, the other thing you sat that I think is so important is "Talk about the money," talk about it in front of the kids. They're not going to understand it unless you actually open the door and let them know what's going on.

CULLEN: In today's economy, the way that money is just done electronically, we're paid by direct deposit, we get our money through ATM machines. It's just not very easy for a child to understand where money comes from and how it's earned and how you spend it.

So, from a very young age, I'm talking three, four years old, when you're in the grocery store, when you're on your way to the bank, talk to your kids about, you know, this costs a little bit more that that, I'm going to take money out of the ATM machine, but the money came from the bank, where daddy and mom puts her paycheck. Just by talking about these things helps the kids kind of understand what's going on so that when they get older, it's a little bit easier concept for them to understand.

WILLIS: Yeah, I think so many people, so many kids think that, you know, the money comes from the ATM and they don't understand it. If you have one thing, just one thing to tell parents for this summer, what would it be?

CULLEN: Don't assume that your kid doesn't understand about saving, investing, and donating. Don't think that they're ever too young. And if there's one thing that you want to do with your kids this summer, a great thing to do is to try a lemonade stand for charity. It really helps for a child to learn about earning money, as well as giving it away at the same time.

WILLIS: I love that idea. Terri Cullen, thank you so much.

CULLEN: My pleasure.

WILLIS: As always, if you have an idea on how to save money, send us an e-mail to openhouse@CNN.com. And if you want to check out this project savings again, check out our Web site, cnn.com/openhouse.

Still ahead, imagine if you could guarantee sunshine on your next vacation or your money back. Sound too good to be true? We'll check it out, next.

(COMMERCIAL BREAK)

WILLIS: Some businesses out there have found a way to take advantage of the foreclosure crisis. CNN's Thelma Gutierrez looks how the housing bust has turned into a booming business.

(BEGIN VIDEOTAPE)

THELMA GUTIERREZ, CNN CORRESPONDENT: Gerri, it's the silver lining to the mortgage meltdown. And as more of these homes hit the foreclosure market, more opportunities are created.

(voice over): Welcome to the business of foreclosure, a lucrative fast-paced, sometimes dirty business that California entrepreneurs are cleaning up on.

MICHAEL BUESCHER, BUESCHER CONSTRUCTION: We're seeing tons of these things, now.

GUTIERREZ: Meet general contractor, Mike Buescher. He fixes foreclosures for the bank.

BUESCHER: We tell the bank the windows are missing. We need a new window in there, frame it all. They could call us the next day and say, so do the window, or they may say, just leave the board in there.

GUTIERREZ: Susie Carriere, a former dairy farmer, has built a mini dynasty off something called "trash-out."

SUSIE CARRIERE, SC LANDSCAPING: Anything, if it's not fastened, it has to go. If there's bricks in the yard and it is not part of a pathway, they have to go. If they're piled up, they have to go.

GUTIERREZ: And businessman, Robin Rodgers saw an opportunity in all those filthy, neglected swimming pools, like this one that now belongs to the bank.

(on camera): What are we looking at, here?

ROBIN RODGERS, ENTREPRENEUR: We have mosquito larva, we have a gopher.

GUTIERREZ: A dead gopher.

(voice over): Bottom line is that the banks want to move the foreclosed properties off their books. To sell them, they've got to be cleaned up. That's where Buescher, Carriere and Rodgers seized the moment to grow their business.

CARRIERE: Business is insane. It's crazy. We do, depending on how bad the trash-outs are, anywhere from three to seven trash-outs a day. We're doing about 600 yards a month.

RODGERS: By sheer volume, we have added 30 percent to our bottom line this year.

GUTIERREZ (on camera): So, it is good business?

RODGERS: Yes, it's good business.

GUTIERREZ: When you saw it coming , did you realize that this was a business opportunity for you?

BUESCHER: Absolutely. Absolutely. The best money I've ever made in my life was back in the '90s when we rehabbing the foreclosed homes. Best money I ever made.

GUTIERREZ (voice over): If these are the worst of time, with financial forecaster predicting more foreclosures will be dumped onto the market, these entrepreneurs say that for them, the best of times are yet to come.

CARRIERE: Doing landscaping was probably $40,000 to $50,000 a year this year it will probably going to go over $500,000.

GUTIERREZ: Not bad for the few who are seeing green in a housing market that's deep into the red.

(on camera): As good as business is right now, our entrepreneurs told us they realize this is a wave that will subside. They did this back in the '90s during the last housing slump, and right now they say they're going to ride the wave while it is hot.

Gerri, back to you.

(END VIDEOTAPE)

WILLIS: Well, at least somebody is making some money. One last deal to tell you about before we go. Forget singing in the rain. No one sings in the rain when it rains on their vacation, but how about someone guaranteeing sunshine. Sounds too good to be true, but it's yet another offer from one discount travel Web site to lure in consumers.

Priceline.com is offering sunshine guaranteed vacation packages to more than 100 destinations, worldwide. Here's the deal. If it rains more than half an inch a day on half or more of the days of your trip, you get a 100 percent refund. We'll be sure to check back in to see how it's going and whether people are actually getting that money back.

America's economy is "ISSUE No. 1" here at CNN, your house, your debt, your savings your job. Ali Velshi and I, along with the rest of the CNN money team are on top of the day's economic news every weekday at noon Eastern, 9:00 Pacific.

You can hear much more about the impact about 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. And don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.