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Open House

The Economy and the Auto Industry; The Very Latest on the Housing Market; How to Winterize Your Home; How to Make It Through the Holidays Without Breaking Your Budget

Aired November 22, 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.
The very latest on the housing market, plus how to winterize your home right now as temperatures are already falling in some places.

We'll tell you how to make it through the holidays without busting your budget and offer tips on how to score big deals for those big-ticket items.

But, we begin with the economy and the American auto industry in trouble. At stake: up to a million jobs in the very heart of the American manufacturing sector. The CEOs of GM, Ford, Chrysler spent two days on Capitol Hill this week, seeking $25 billion in loans from the federal government's bailout fund. And you were not shy when it came to sending us your thoughts.

(BEGIN VIDEO CLIP)

JOHN DULAC, NEW YORK: I think it's important that we do it in this case.

JENNIFER LEMAY, MARTINSBURG, WEST VIRGINIA: If we let the auto industries go under, there goes our economy.

DAVID WHITE, TORRINGTON, CONNECTICUT: If you have the technology to burn a cleaner fuel and make that vehicle available to the American public within the next five to 10 years, great. Other than that, if you're going to continue the ideology of putting tanks and large SUVs on the street, I'm not giving you a dime.

BARBARA RADEMACHER, BENTONVILLE, ARKANSAS: And now it's like their karma is hitting them in the face.

JOHN STEVENS, TORRINGTON, CONNECTICUT: The big three bailout, don't do it. Please, don't do it. They don't deserve it.

(END VIDEO CLIP)

WILLIS: And not only the auto industry in trouble, for consumers, might mean the deal of a lifetime. Here to tell you how to get just that is Mike Quincy, the smartest guy I know on cars. He's from "Consumer Reports." Thanks for being with us.

So Mike, tell me, what do you do? you buy now? MIKE QUINCY, CONSUMER REPORTS: Well, it really depends on your household situation. Can you afford a new car, can you get credit? I think that's the million dollar question right now, is can people even get financing if they want to buy a car?

WILLIS: All right. Well, let's talk details here. And about American cars. GM's October sales down 45 percent, Chrysler struggling. Would you buy American, here?

QUINCY: Well, I think there's a number of cars that "Consumer Reports" will recommend. We still recommend the Chevrolet Malibu, it's a real solid, four-door sedan, good reliability, good performance. We're real big fans of the Ford Fusion, another competitive four-door model, great reliability. is good or better than some of the Japanese competitors. So, "Consumer Reports" isn't about to pull the recommendation of these cars, regardless of the situations that are going on with the companies.

WILLIS: But, what about warranties and service contracts? If these companies are in trouble, can I expect my GM car to be serviced, that the warranty will be good?

QUINCY: Well, I think that when you consider that General Motors is looking to stay in business, whether General Motors backs the warranty or the government steps in, I think you're going to be pretty safe. I think you're going to get some coverage one way or another and that shoe hasn't fallen yet, so it's really difficult to tell. But right now, "Consumer Reports" is still recommending a number of cars.

WILLIS: All right, I guess the downside would be if they went bankrupt, that would be a problem. But, let's talk about something else and something you say that I think is fantastic. It's a way to negotiate for a car. You say negotiate up. How do I do that?

QUINCY: Well, what you do is you find the cost of the car that the dealer has to pay.

WILLIS: How do I know that?

QUINCY: Well, actually you go to "Consumer Reports." You get the "Consumer Reports" new car price service, you find out the dealer's cost. So, that's where you bargain up from the dealer cost, not down from the sticker. And the dealer's entitled to make a fair profit. The question is, how much is it going to be?

WILLIS: All right. So, what does it cost me for that service? There's a fee.

QUINCY: There's -- I think about $12, $14 for a report. You go to consumerreports.org, go to the Web site and you can sign up for this service and it gives you a certain number of reports. And again, you want to find out the cost. How much did it cost the dealer? And there are these things called holdbacks which is money given to the dealers from the factory that usually you don't know about. WILLIS: OK, there are lots of bells and whistles there. You want that one bottom line number. Let's talk about something else, though, because I think that not every car out there is going to be a deal right now.

QUINCY: Exactly. The fuel economy, that's the hottest car going right now, whether it's a toy on it a Prius, a Honda Civic. My guess is that if you want one of these cars you're probably going to pay closer to sticker than you want just because they're in much higher demand.

WILLIS: Right, so if you want the Toyota Prius, get in line, baby, because there's a long line there. Let's talk about how you pay for this thing. Now, I am getting e-mails from folks who say, yeah, I have cash. Is that a good thing to walk into a dealership with right now? Do you have lots of leverage?

QUINCY: I think so. I think the dealers are going to be so happy to see you because even popular models, even popular dealers are having trouble selling cars. So, if you have cash, that's one less hurdle the dealer has to deal with. "Consumer Reports" has always said the cheapest way to own a car, buy it outright and drive it into the ground.

WILLIS: And drive it into the ground, I love that. OK, I have got to ask you, how much off could I possibly get? How much could I save right now with the industry really mired in troubles? Can I save five, 10, 20? What am I looking at?

QUINCY: Sure I think depending on the model, the dealers are going to do anything to get you in the store. The factory is going to back a lot of these intensive deals and cash-back offers. This is nothing new to the auto industry. But, now, more important than any other time, trying to get people just in the dealerships to clear out inventory, now is probably a good time. Especially if you want a really, really big SUV, the world is your oyster.

WILLIS: Yeah, right. Well, I don't know if I want that, but Mike Quincy, you are the smartest man on cars. Thanks for helping us out today.

With the foreclosure crisis taking a toll on so many lives, some folks are turning to, well, let's call it a higher power.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It's our testimony to ourselves and to the public that we have a God who never forecloses on anybody.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WILLIS: Applications for home mortgages unclimbed last week with loans for purchases of single-family homes falling to their lowest level in nearly eight years. Very simply put, fewer folks are buying homes, but this could help first-time home buyers. National median home price suffered a record nine percent drop, year over year. That's down to $200,500.

Now, housing starts are at their lowest level since the Commerce Department began tracking them way back in 1959. Also in October, a 12 percent decline in building permits, breaking the previous low set in March of 1975. Now, one group is looking for answers to the foreclosure crisis in the Bible.

Christine Romans looks at how church leaders are using the power of prayer and advocacy from the pews to urge help for homeowners.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: We come to let Congress know it's time to wake up. Secretary Paulson, it's time to wake up! Senators, it's time to wake up!

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): It might look like a protest rally on this Washington D.C. sidewalk but this is a prayer rally to stop foreclosure.

PASTOR LUCY KOLIN, RESURRECTION LUTHERAN CHURCH: We're standing in front of the Treasury Building to pray, to blow the trumpet of prayer so our nation's leaders will wake up to the crisis that is devastating families all across the country.

ROMANS: This group of churches called PICO National Network is asking Treasury Secretary Henry Paulson to create a more systematic way of modifying mortgages.

KOLIN: Today, PICO says Secretary Paulson, we don't want to reduce preventable foreclosures, we want to stop them.

ROMANS: PICO leaders say every bank that accepts taxpayer bailout money should be required to adopt the same set of loan modification procedures, setting monthly payments to 34 percent of the borrowers' income and in some cases reducing principal to reflect current property values.

MINISTER MARVIN WEBB, BETHLEHEM MISSIONARY BAPTIST CHURCH: The church is involved because when there's no one to turn to a lot of times they will come to the church and ask for help.

ROMANS: Minister Marvin Webb is looking for a mortgage modification himself. He says his monthly payment takes up more than 60 percent of his income. He said the solution to the foreclosure crisis is in the Bible.

WEBB: You see your brother lacking something. You are supposed to give him, don't just say I'm going to pray for him, but you see other people, not just Wall Street needing a handout or a coat, give them a coat. Give them some shelter.

ROMANS: PICO members met with congressional leaders and treasury officials and they believe their prayer rally will help get their message through.

KOLIN: It's our testimony to ourselves and to the public that we have a God who never forecloses on anybody.

ROMANS: Christine Romans, CNN, New York.

(END VIDEOTAPE)

WILLIS: Ministers say it's unfair what lenders are doing to communities, but there's another moral issue here, homeowners who choose to intentionally go into foreclosure. In San Diego, a company called You Walk Away teaches homeowners how to do just that, for a price.

But, before you intentionally go into foreclosure, there are some practical considerations you'll want to make. First off, your lender can come after you, sue you for the amount you owe, it's not common, but it does happen. Plus, there's no guarantee that you can get a mortgage for another house. And then there's the great big credit splotch on your record.

First things first, if you are having trouble paying your mortgage, contact your lender. If the lender is reluctant to help, contact a housing counselor at the Department of Housing and Urban Develop. You can call 1-800-225-5342 and ask to get in touch with a local community counselor or to become part of one of the growing list of housing programs to bailout homeowners in distress.

Recovery in the housing market won't happen overnight, it could take years, but you want to do what you can to protect your own credit score and your reputation. For more tips on increasing the value the biggest investment of your life, pick up a copy of my book, "Home Rich." it's a step to accept guide to buying, maintaining, selling your home, coming out ahead.

OK, holiday debt. A scary thought when budgets are tight, but it's so tough to avoid this time of year. What you could and probably should do right now so you don't end up in the red.

(COMMERCIAL BREAK)

WILLIS: $832, that's a lot of money for some folks to spend, especially when so many are trying to cut back. Personal finance author, Lynnette Khalfani-Cox, is with us to show us how to save some money this holiday season.

You know, the intentions out there are great, Lynnette. Folks are saying they're going to spend less, they're going to buy more with cash, maybe some debit cards rather than credit cards, but intentions, reality, they can be two different things.

LYNNETTE KHALFANI-COX, PERSONAL FINANCE AUTHOR: They don't always match up. A lot of people are saying they don't want to go into holiday -- into debt this holiday season because they've already got so many other bills to worry about, the mortgage, rising food costs, et cetera. But there are, fortunately, some smart strategies people can use...

WILLIS: Tell me about the budget and the buddy.

KHALFANI-COX: Well, I think any time you're going to go out shopping you need those two things. Your budget is your pre-set limit. It's your amount you can spend in cash without whipping out plastic. Your buddy's job is to come along and keep you accountable. It's his or her job to say, OK, you said you wanted to spend only $500 or $800, or whatever it is. Now you've hit your limit, time to leave. Time to stop shopping.

WILLIS: So, pull away while you can.

KHALFANI-COX: Yes.

WILLIS: Black Friday is coming, but should I be waiting for the better deals down the road instead of getting into stores this weekend?

KHALFANI-COX: You know, I think there's a lot of deals now. You know, one of the things that that the national retaliation has said is that 40 percent of consumers started shopping before Halloween even. So, there are deals available online and in stores. They're trying to merchandise and market to customers early because a lot of retailers don't expect this to be a great season, obviously.

WILLIS: All right, let's talk about time and you brought it up before. You say you can take a stopwatch with you to the mall. Now this, I have to say, Lynnette, this is silly.

KHALFANI-COX: Well, no.

WILLIS: Why would I do this?

KHALFANI-COX: This is a great tip here, let me tell you why. I tell people all the time that you have to not only keep track of the amount of money that you're spending, but be cognizant of the time that you spend in the mall. I like the idea of taking a stopwatch with you and setting it for, say, one hour, two hours maximum, because that's your audible reminder it's time to go. If you spend your Saturday, you know, hour upon hour upon hour no the mall you are destined to do a lot of damage to those credit cards. So, limit the time.

WILLIS: Absolutely, my favorite thing to do is leave. You know, like if I'm trying to make a decision, is this too much money? I don't know. Get out. You can always come back.

KHALFANI-COX: That's right, and that's why I like the 24-hour rule. This is to curb those folks who do a lot of impulse shopping or a lot of splurge spending. Walk away from the item. Give yourself a 24-hour cooling off period, a lot of times you won't even want the item.

WILLIS: Yeah. It's imperative not to spend your entire weekend at the mall. Let's talk about layaways, because this is becoming very popular, lots of folks out there. Kmart, lots of retailers bringing back the layaway program which probably a lot of our viewers don't even know about because they weren't around the first time.

KHALFANI-COX: First time around.

WILLIS: Paying on time, over time instead of putting all the purchase price on a credit card, you actually pay the store.

KHALFANI-COX: Exactly.

WILLIS: About every two weeks. Do you like this?

KHALFANI-COX: I love this idea because it's a great way to get people to control their spending and to spend within their budget. Like you said, Kmart, Fashion Bug, Sears, TJMaxx, a lot of retailers are doing this. Even online, there's a Web site, elayaway.com that tells you about 1,000 retailers that are offering layaway. You won't put this on a credit card and, therefore, you won't pay interest on those purchases.

WILLIS: But, you do pay some fees. I was looking at the delays with Kmart in particular, it's a $5 service fee, there's a cancellation of 10 bucks. And this isn't a case where you pay every month, you pay every other week. I think people need to understand the details before they get involved with that.

The other tip, though, that you say that I think is fantastic, you say make some gifts. You know, there's nothing like a -- something really personal.

KHALFANI-COX: Absolutely. And this is a great time for everybody to get creative. Let's say if your mom or your grandmother, wouldn't they love to get a handmade photo album, something that shows a collage of family pictures or maybe newspaper articles?

WILLIS: Love that.

KHALFANI-COX: Something that's personalized that they can keep as a keep sake probably for a generations to come. It's low-cost way to give a very thoughtful, personal gift.

WILLIS: And it will always be, Lynnette gave me this and I remember it because she gave it to me. Great ideas, Lynnette Khalfani-Cox, thank you for that.

KHALFANI-COX: Thank you.

WILLIS: All right. We told you how to avoid holiday debt, but we know you're still going to go shopping. How to at least score a deal on big ticket items, next.

But first, it's getting cold outside. This year, with the high price of home heating oil and the dismal state of the economy, it's more important than ever to prepare your home for the elements before winter sets in.

CNNMoney.com's Poppy Harlow takes us on a home energy audit.

(BEGIN VIDEOTAPE)

POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: Owning a home is a big investment. And when you lose energy, you lose money. So with us now, Kevin and Kelsy, they own this house here behind me in Hopkins, Minnesota. They're looking for their energy fix. To help them do that, Jimmie Sparks, Xcel Energy auditor.

Should we head inside guys?

UNIDENTIFIED MALE: Sounds good.

JIMMIE SPARKS, AUDITOR, XCEL ENERGY: OK. This is where we like to start. Basically, like your mother used to tell you, let's put a hat on our heads. We want to see how much insulation we have up here to stop the heat loss. We actually recommend R-50.

HARLOW: How many inches is that?

SPARKS: You're probably looking 16 to 18 inches of insulation.

So, I notice in your master bedroom you have a fireplace. One thing to know about most fireplaces.

(END VIDEOTAPE)