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Open House

How to Start With a Clean Financial Slate in 2009; Will 2009 Be the Year of the Rebound for Housing?; How to Take Control of Your Bottom Line; Working Out Without a Hefty Gym Membership Fee

Aired January 03, 2009 - 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.
How to start with a clean financial slate in 2009 and protect your bottom line. We'll take you through a recession-proof workout and learn the dos and the don'ts of giving.

But, we begin with the mortgage meltdown, the housing market, well it sure took a beating in 2008, with homes losing around $2 trillion in value and more than one million homes in foreclosure.

The mortgage meltdown was a rude awakening for many homeowners. So, if you're looking to buy to sell or maybe just stay in your home, will 2009 be the year of the rebound for housing?

Let's ask our panel of experts. Brad Inman is the founder of "Inman News" and Amy Bohutinsky is with Zillow.com, a real estate Web site. Welcome to you both.

Brad, I want to start with you. Answer that question. Is '09 the year of the rebound?

BRAD INMAN, INMAN NEWS: Not rebound. I think it's the year of the bottom and it may extend to 2010. You know, one thing we've learned of these bubbles, the downside, when they burst, you know, they often are much worse on the downside than they were the upside and I think that's what we're seeing.

We have four million listings on the market now. We had one million listings just three years ago. We have a complete imbalance between income and prices and we have this huge supply/demand imbalance. And so we have a lot to work through, plus we probably have two to three million more foreclosures. So, the supply's only going to increase.

WILLIS: Wow, wow, wow, wow.

INMAN: So, it looks like a tough year.

WILLIS: You know, you're really sitting there at ground zero, Brad. I want to turn to Amy and let's drill down across the country, really looking at what markets will -- who will bottom in '09? Where is it going to start maybe looking at the turnaround?

AMY BOHUTINSKY, ZILLOW.COM: Well, certainly there are some markets that have a good chance and it starts with Atlanta and Dallas. These are markets that were not as volatile as some of the markets on the East and the West coast. They could bottom out this year because they just don't have as far to fall.

A couple other markets, San Francisco Bay area and Los Angeles, now these are two of the hardest hit markets, but what we saw in 2008 was that from the second quarter towards the end of the year, the year over year declines actually got a little bit smaller. So, if we saw another couple quarters of that, it would tell us we're nearing a bottom. So, possibly some hope for these areas, but we won't know for sure, of course, until about midyear.

WILLIS: All right. So, first in, first out, right? California first into this problem, maybe some of these areas the first out. Let's talk a little bit about what will get worse in '09. Are there markets, Amy, where we're still looking for the bottom, the numbers are going to look lousy?

BOHUTINSKY: There definitely are and it certainly starts with those markets that are having a tough economy overall. So, the central valley of California, this is the hardest hit area of the country, it also some of the highest unemployment rates. So, there's not a lot of hope for a rebound or even a bottom in '09.

Also, Detroit suffering from a lot of the same economic woes and job losses. But a couple other markets, quickly, Los Angeles -- or sorry, Las Vegas, Miami and Seattle, these are markets that we saw the declines year over year getting larger throughout 2008, so that tells us that we're not near a bottom and it's probably, unfortunately, in these areas going to get worse before it gets better in 2009.

WILLIS: Yes, more than one story going on there, obviously, with the recession really hitting markets like Detroit, so hard here and we'll be watching those cities to see what happens.

Now, both of you, though, say the turnaround, the recovery is really dependent on the success of some federal programs out there that are trying to bail out homeowners. Let's talk about that, Brad. Do you see much traction with these programs?

INMAN: Yes, I think we are going to see it. Already, look what's happened with rates. These option arms, there are so many this year. You know, last year was the subprime problem, this year it's the prime problem. And the re-adjustment of these option arms is really going to be important to the portfolio of many homeowners.

And with low, low rates, we can see a lot of refinancing and a lot of loan modifications going on to try to stop the hemorrhaging of foreclosures. And that helps two things, it helps the homeowners and it also helps the supply demand imbalance we have. And that to me is a crucial thing.

The specific federal programs that are really laser-focused on particular needs aren't going to change the overall market, but the movement in interest rates, this radical -- we're at a 50-year low in mortgage rates. That really makes a difference. WILLIS: Let's talk about that, yes, for a second, because, you know, we've been seeing just above five percent here for 30-year fixed rates, that's fantastic. Amy, will this have real traction, particularly when you consider that a lot of Americans are under water on their mortgages and can't refi right now?

BOHUTINSKY: Yes, this will have traction for the people who qualify. So, for buyers who have excellent credit, people who are going to refinance, who have some equity in their homes, it's a fantastic time then to take advantage of some of these rates.

But one in seven Americans is underwater on their mortgage. These people can't refinance right now. So, unfortunately, these are the people that if they fall behind in their payments, are going to turn into foreclosures. So, there's some good news and some bad here -- news here with it. But for people who can qualify, it's good news.

INMAN: I agree with Amy, but I do think we're going to see a trend we've seen in the U.K., Gerri, and that is pressure by the national government and here by this president to force lenders to lend and to ease up a little, not to make the same mistakes they made two and three years ago, but to be a little more flexible to help people, because unless the private market frees up some of that mortgage money we're in trouble.

WILLIS: All right, so, but there is some good news out there if you're a first-time home buyer, you are in the driver's seat now. And we're going to have to look for those people to really solve a lot of these problems at this point. I want to thank both of our panelists today. Amy, Brad, thanks to both of you.

INMAN: Thank you, Gerri.

BOHUTINSKY: Thanks, Gerri.

WILLIS: With foreclosure rates soaring around the country, one organization seems to have figured out a lending system that works, one that keeps folks in their homes.

Our Ted Rowlands explains.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Here's your key.

TED ROWLANDS, CNN CORRESPONDENT (voice-over): There were plenty of tears this weekend as the Gaxiola family received the key to a brand new Habitat for Humanity house in Los Angeles.

VERONICA GAXIOLA, 21 YEARS OLD: It's so beautiful. Thanks to every one of you guys that has helped us to get our dream come true house.

ROWLANDS: The family of five, including father Jose, who's legally blind are going from an apartment in a crime-ridden area, to this three-bedroom, two-bath home complete with an elevator for Jose and a much safer neighborhood for the kids.

CARLOS GAXIOLA, 17 YEARS OLD: The most I go outside is either go to school or church and come back home.

ROWLANDS: The Gaxiolas don't get this house for free, they do have a mortgage, like anyone else. Given Habitat for Humanity's track record, odds are they'll be able to live here as long as they'd like. Of the more than 250,000 homes built by Habitat for Humanity, less than one percent have ended in foreclosure.

JO-AN TURMAN, HABITAT FOR HUMANITY: That family that worked so hard all these years to become homeowners. And finally have obtained home ownership. They usually try to do whatever they have to do to keep their homes with us.

ROWLANDS: The reason for Habitat's success could be traced back to the lending system. The Gaxiolas, for example, will be paying $750 a month, about 35 percent of their income. The mortgage is no interest for $135,000 over 20 years. There was no down payment required, but the Gaxiolas, like every family, put in 500 hours of work during construction.

They also took classes in basic finance and home repair. But, most importantly organizers say, the lender is Habitat for Humanity. So, if a payment is missed, or a job is lost, there's an open line of communication to help keep them in the house.

TURMAN: We have worked with a lot of people, especially in the past two years who have been late on their payments and almost near default, but somehow they've been able to come back through.

ROWLANDS: Ted Rowlands, CNN, Los Angeles.

(END VIDEOTAPE)

WILLIS: Good to see a happy ending.

Well, it's a new year, shore up your finances in 2009 and protect your bottom line.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Christmas is over, the new year is underway it's time to get rid of the tree. Be sure to dispose of the tree and be environmentally friendly at the same time. Don't just put your tree out with the trash, many cities offer tree curbside Christmas tree pickup.

Others offer free tree mulching programs and some wildlife organizations even accept leftover Christmas trees for use in lakes and wildlife refuses. Your discarded tree could be sunk in a lake to form a habitat for fish.

Contact your local wildlife management agency for more information on local Christmas tree recycling programs. That's this week's "Greenhouse." (END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: It's 2009 and a new year means new chance to take control of your financial future. Here with the steps you need to take right now to protect your bottom line in 2009 is Pam Kruger. She's the author of "The Money Track Method" and joins us here.

Pam, great to see you.

PAM KRUGER, AUTHOR: Great to be here, thanks.

WILLIS: You say, first off, you have to fortify your credit. What does that mean?

KRUGER: I think that '09 is all about fortifying yourself financially. So, step one is if you're not already credit fortified with a score of at least, what, 680, let's say...

WILLIS: Some loaners are asking for 750.

KRUGER: That's true, but the baseline, at least for a goal, if you're really struggling with credit is maybe to make a realistically goal of 680 and really focus on getting there, big, big, big goal for '09. Because in this current environment, being credit fortified gives you power.

WILLIS: Now, when you say credit fortified, you know, people are losing their jobs out there. Sometimes they're struggling with things that are more fundamental than worrying about their credit score. What do you say to them?

KRUGER: I say that it's just as important because you may need to borrow. You may need to get a car loan or do something that's essential to your life and how much you're going to pay for that loan, there's a huge difference between what you're going to pay in rates if you are in a great, good credit position versus not at all.

WILLIS: Let's talk about credit card debt. Just this week, Federal Reserve talking about changing rules, possible are struggling with higher and higher interest rates despite the fact the fed keeps cutting rates. What's your advice for folks out there who are struggling with a lot of credit card debt?

KRUGER: You know, the first thing is the inclination is you want to stop all your accounts and close them down. And one of the key ingredients in a credit score is keeping that credit open, so don't close those accounts and just...

WILLIS: That can actually hurt your credit score?

KRUGER: Absolutely. What you do want to company, though, is just attack aggressively as much as you can, those really high rate cards. And you know what I do? I get on the phone and I call the credit card companies constantly because they change all the time. I say am I still getting the 5.9 rate? And sometimes you won't even realize it, but for no reason at all, you've been ramped up to a 19 percent rate.

WILLIS: Yes, that's scary stuff when you get in the mail or if maybe looking at your statement online. Let's talk about 401(k)s for a minute because my e-mail in box is full with questions on retirement savings. People have lost 30, 40, even 50 percent in this market.

KRUGER: Absolutely.

WILLIS: They're worried, first things first. How do I know that I'm going to be able to retire?

KRUGER: Right now, as long as you're just socking away that small amount of money, I say your 401(k) is your new best friend, your new best friend forever because the 401(k) is taking the emotion out of investing and every single month, no matter what the market is doing, your 401(k) is in that market buying low where you might not do that emotionally. That's a good thing.

WILLIS: I can't tell you how many people tell me, why would I buy stocks now? You know? Because they're cheap.

KRUGER: The whole axiom of buy low, sell high. When do you think you can buy low if it's not in a time when it's very scary? But, your 401(k) is doing it for you automatically while you're sleeping.

WILLIS: And you have got some interesting things to say about learning about investing. The 101, the steps, baby steps you want to take when you're just getting involved.

KRUGER: I think that the payoff to investing truly is patience driven investing. And that's where the payoff is, which is getting back to basics, which is what we talk about in the book a lot. But, it's all about understanding how your money is growing, where it's invested, just the essential elements of diversification wins all battles, but why? And just getting a grip on that. And believe me, everybody can learn this stuff. It's basic.

WILLIS: Yes, it's not brain surgery. But one thing that is sort of brain surgery right now, I think there are a lot of scams out there, no matter what market you're talking about, there's always somebody out there who's trying to get one over on the consumer. And now that everybody's suffering, I think there are even more scamsters. What do I need to watch out for?

KRUGER: You know, especially older Americans, they might as well have a big bull's eye painted on their back sides because they're wealthy or they have more money accumulated than the rest of us and they are targets. And the main thing is, if you're dealing with a financial adviser, which is a hot topic, of course, right now, I think what you need to know is you can check that adviser's background because every state has a regulator that has a database, and every adviser who's registered has a rap sheet.

WILLIS: Where do I go for that?

KRUGER: To the state regulator in your state. And they have a Web site that you can go to and it will take you to your state regulator and you can go directly online or through the SEC and actually do a background check on your adviser.

WILLIS: Great advice from you. This is Pam Kruger. Her book is called "The Money Track Method." Thanks for joining us, Pam.

KRUGER: Great, thank you.

WILLIS: Looking to get fit in the new year? We'll show you how it can be done without the hefty costs of a gym membership.

(COMMERCIAL BREAK)

WILLIS: One of your goals for this new year might be getting into shape, but if your gym membership is the latest casualty of budget cuts, well don't worry, my next guest says you can stay off the couch and in shape all for no cost. I spoke with Jackie Warner, she's fitness expert and star of the Bravo TV series "Workout."

(BEGIN VIDEOTAPE)

WILLIS: OK, so you're going to teach me how to work out on the cheap?

JACKIE WARNER, BRAVO, WORKOUT: I am.

WILLIS: OK, so let's say with start with arms and biceps.

WARNER: You want to start with arms and biceps? OK, you can use a weight, you can get it in any sportswear store.

WILLIS: But, that's an iron.

WARNER: Yes, I'm going to show you can use. You can use a free weight, if you want to buy that, but if you want to get started today and affordably, pick up an iron or anything that has weight.

WILLIS: How heavy are those?

WARNER: Feels about four pounds.

WILLIS: OK.

WARNER: So, as a starter, it's a good idea. OK, let's get in good form here. Knees soft, elbows in front. OK, straighten, stay away from the table. And here we go, just up.

WILLIS: All right.

WARNER: So, there you go, up. Give me 15. It's very simple.

WILLIS: Fifteen? Jackie. All right. WARNER: Fifteen, you don't have to really overcomplicate your workouts. This works. Do 15 on this side and then switch it over and do 15 on the opposite side.

WILLIS: That's a great idea. Wouldn't have thought of using an iron.

WARNER: Irons, cans, bottles of water, jugs of milk. There are many, many items that you can use.

WILLIS: All right, let's -- you know, legs for women, very big issue. What do you suggest?

WARNER: Look, everybody wants a firm butt and they want their thighs in shape and toned. So, you can do a variety of things. One is a simple squat. So, grab the back of that chair.

WILLIS: I'm not a big fan of squats.

WARNER: No, you're not?

WILLIS: No.

WARNER: Well, how can we make it fun for you?

WILLIS: Fun?

WARNER: Yes. So, grab the back of the chair.

WILLIS: I got it, I got it.

WARNER: And all you want to do is go ahead and separate your legs a little bit, shoulder width apart, chest out, shoulders back, just barely lightly grab. There you go. You don't want to cheat too much. And squat down, putting all the pressure on the heel, not the toes. So, squat down.

WILLIS: OK, how is that?

WARNER: Well, it's a little chest out, shoulders back. And now come up and squeeze. Down, up and squeeze and do about 15 repetitions of that and there's your squat.

WILLIS: And another 15 or so of those.

WARNER: But make sure to have perfect form. So, chest out, shoulders back always when you're performing a squat or any kind of leg work-out. You should always have this positioning. So, it looks down and up and squeeze the booty. Right?

WILLIS: OK. All right. So, how about your back? Let's talk about your back for a second. A lot of people have problems because they don't have enough strength. What can you do at home? You're exercising at home, to strengthen that back.

WARNER: Something that we use around the gym all the time is a row or any variation of a row. And that really works this area. By the way, the back is not just the center of the back, you're trying to really get that back fat, you know, off. Right?

So, go ahead and again, use a chair or the back of a couch. Stabilize yourself, back nice and straight, arm down and in a sawing motion, bring it up and twist towards your spine. Slowly down, don't just drop it and up, twist, towards your spine. About 15 repetitions of these, and you're going to really feel it in this area and tighten that.

WILLIS: OK, and you can do it -- you know, we've got an actual weights here, so I'll use these.

WARNER: I prefer weights. And they're very cheap. You can get a couple 10-pound weights at the local store for about, I don't know, $10, $15. But, if you want to get started right away, like right in your living room now, you can grab an iron or anything that has any kind of weight that you can hold on to.

WILLIS: Those 10-pound weights are heavy. All right, let's talk about diet, because so many people, you know, they try to do the workout, they don't change their diet. What do you recommend?

WARNER: Well, the two in combination is the best way to go, because that's how you make a lifestyle change. One quick rule of thumb is Monday through Friday, try to cut sugar out of your system, so that means refined sugar.

WILLIS: No sugar?

WARNER: Cookies, candies, you know what sugar is, ice-cream, all of those things. Really cut that down. If you even are in a deficit of 100 calories per day, that might just go from a non-fat creamer to just something that's low fat, because non-fat products have sugar, they have to flavor it somehow. So, 100 calories deficit a day will get you to where you need to be.

WILLIS: Over time.

WARNER: Over six months, actually...

WILLIS: All right, cut out the sugar. What else, Monday through Friday.

WARNER: And again, go from nonfat products down to low fat products. There is a big change because fat doesn't make this country fat, sugar does. And sugar is in almost everything, so try to stay in single digits per meal. So, nine grams of sugar and below per meal.

WILLIS: All right, well, Jackie, thanks for your time, today. Great information.

WARNER: Thank you.

WILLIS: I love the workout and you can do it at home without spending any dough. (END VIDEOTAPE)

WILLIS: How the Internet and the help of a few generous strangers helped one family stay in their home this holiday season.

(COMMERCIAL BREAK)

WILLIS: Many of you have struggled to hold on to your homes and your jobs this past year. This holiday season, CNN's photo journalists bring us stories on photos of the people helping others in this time of need. Photo journalist, Oliver Janney, introduces us to the Sampsons, a Maryland family that was headed for a foreclosure not so long ago. Out of work, nearly out of their home, until a friend had an idea of giving that clicked.

(BEGIN VIDEOTAPE)

DANIEL SAMPSON, FACING FORECLOSURE: There was an outbreak of salmonella. I ate a tomato that happened to be contaminated and then I got sick. I was sick for so long, I ended up losing my job because of it.

EBONY SAMPSON, FACING FORECLOSURE: A few weeks after that, I found out that I was eight weeks pregnant, that was a shocker.

D. SAMPSON: I called the police. I said, I believe someone stole my car because it is not in front of my house and they told me that the car was repossessed.

E. SAMPSON: So, I come to the door and there's this guy and he's like, he's like, yes, I want to put in my bid for the auction on December 8th, you know, I want to buy your house.

JAKI GRIER, FAMILY FRIEND: She was like, you don't happen to have $10,000, do you?

D. SAMPSON: That was, I believe it was like November 20th or November 19th.

GRIER: She doesn't really do Internet stuff like I do.

D. SAMPSON: The sale date was for December 8th.

E. SAMPSON: There was really no hope for us.

GRIER: She was basically like, blog, what are you talking about? Who cares?

E. SAMPSON: It's not going to work.

GRIER: So, I started out with the blog.

E. SAMPSON: If we get $5, that's more than that we had.

GRIER: I just sent links to people and I said if you can't donate, then just share the link with somebody. If you think it is a hoax, I'm sorry, I can't prove it to you in the few days I have. If you think it is a hoax or you're willing to take a complete random bet on a stranger, help me out. You're losing a dollar.

E. SAMPSON: By Thursday, we had $3,400.

GRIER: Another girl was like my house is being foreclosed next week and there's no way I can get the money, but the least I can do is give you guys a dollar.

I woke up at 12:00 that Saturday and the PayPal account said $10,900. And at this point, I'm freaking out. And by the time I got to my computer to take it down, it was $11,000 even.

E. SAMPSON: Out of nowhere, you know, just the kindness of strangers and just people that came and provided for us.

D. SAMPSON: We want to let everybody know that we are definitely grateful.

E. SAMPSON: That is going to be our personal Christmas story that's going to get told every year for generations and generations to come.

(END VIDEOTAPE)

WILLIS: Great story. Check out all our "Focus on Giving" stories by logging on to CNN.com/impact.

This year will be an especially hard one for charities. So, to make sure your contributions go as far as possible, look at charities that spend less than 25 percent of their budget on administrative costs. You can find breakdowns of specific charities budgets at CharityNavigator.org.

Now, if a charity calls you to ask for a donation, hang up. Telemarketing is the most expensive kind of fund-raising out there and it's a sign that there are some serious flaws in the organization. Watch out for charity fraud. Legitimate organizations won't demand donations or make you feel pressured. Never provide your credit card number, bank account number or any other personal information to a charity that you have never heard of before.

And check with the Better Business Bureau to see if there are any complaints against the company. Keep in mind, not all charities allow you to deduct your donation from your taxes. Verify the organization's tax exempt status at irs.gov and type in "Publication 78."

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

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