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Your Bottom Line

Renting Versus Buying; Cities That Are Hiring; How to Get Greener Pastures the Green Way

Aired May 30, 2009 - 09:30   ET


GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is YOUR BOTTOM LINE, the show that saves you money.

It's a buyer's market, but is buying a home the right move right now? We'll talk renting versus buying and what makes sense for you. Plus, jobs are still disappearing but not everywhere. We'll take you to places that are hiring. And if you're green with envy at your neighbor's lawn, don't worry, how to get greener pastures the green way. YOUR BOTTOM LINE starts right now.

If you're in the market to buy a home, good news, you're likely getting a 20 percent discount, right now. But, for those looking to sell, that means the value of your home continues to decrease. According to the S&P/Case-Schiller report released this week, home prices plunged a record 19.1 percent in the first quarter compared to last year and that is across all 20 metro areas the index tracks.

All but three reported a monthly decline in March, but things look especially grim in Minneapolis, Detroit and New York. Those three saw record price declines in Minneapolis, down 6.1 percent, Detroit down 4.9 percent, New York down 2.5 percent.

With low prices, low mortgage rates and tons of homes on the market you may be wondering if now is a better time to rent than buy or buy than rent. Here to help us out is Dani Babb, she's a real estate expert.

Good to see you, Dani.

DANI BABB, REAL ESTATE EXPERT: You too, thank you.

WILLIS: Well, let's get down to it. You know, a lot of people out there, they look at these low prices and they say why wouldn't you buy now?

BABB: Right, no, that's absolutely the case. You have to look at the rent versus buy decision very analytically and from a numbers perspective. First of all, you want to know how long are you going to stay there? The longer you stay, the greater the benefit to you, overall, the greater the tax benefits and the greater the chance that you're going to ride out this deflationary time and crisis and get to an appreciate -- a time when we have appreciation, which is important.

WILLIS: But Dani, can you really time the market, here? You know, we always talk about how you can't time stocks. Is it easy to time the real estate market and where do you go for the best information on prices in your area? Because, after all, real estate is local.

BABB: Yeah, right, exactly. I mean, we talked about the Kay Schiller index, that's only 20 metropolitan areas. if we look at, you know, suburbia, for example, or middle of the country, they may not be included here. Really, the best location, as an adviser, that I tell people to go to is City-Data, this is going to give them -- it's on the Internet -- it's goig to give them...

WILLIS: For free.

BABB: For free, absolutely, very important. It's going to give them the last several years historical information in most cities, sometimes just a couple of years. What I look at is what have prices done in the last three months? If they're stable, it's maybe a time to jump in.

WILLIS: Yeah, and one thing to mention here, these prices are sort of in the rear-view mirror, they're at least three months old, so they're not absolutely up to date, but then none of this data really is.

BABB: Exactly. And Kay Schiller is a great example of that. It's not -- people are using it as an index, but it's not really all that current.

WILLIS: It's not real time, because that's not the way these things get priced. You know, you say that if you're going to buy and if you're making that buy versus rent decision, you've got to look at whether you're getting a substantial discount in the market because everybody I know is trying to time this thing they're saying have we hit bottom yet? What do you mean by substantial discount?

BABB: Well, it's going to depend on a particular area like you noted. That's why I use the City-Data, because they actually do look at even the very last previous month, so if the data looks like it's stabilized, then getting something that's within that median price range for the neighborhood, I would consider to be a good deal.

But, if it's not and it's still in a downward spiral, like the areas you mentioned or like South Beach, California, even Idaho now is starting to take a dip, if it's in the decline stage I personally would look at whatever the foreclosures are selling for and I would want a resale market for that price or I would just buy a foreclosure.

WILLIS: OK, all right, because you can get substantial discounts there and that's what people are doing. We should note here, though, that sales are actually rising in some of these markets. The price is a lagging indicator; we're not going to see that turn up for a long time. But, what do you make of the increases in sales across the country and how would you use that to weigh in on whether to buy or rent?

BABB: Well, the median price dropped from $225,000 last year to $170,000 across the country. So a lot of people are realizing that coupled with the first-time homebuyer credit, is a really good combination if we're going to stay in an area for a while to ultimately get a really good deal. So I think that's why we're starting to see sales go up. Though, but historically spring, they do.

WILLIS: Yeah, spring, it's that time of the year. It's home buying season after all. I mean, we've forgotten that entirely this year. Let's talk about the tax credit because if you are in the market right now, you're thinking of buying that $8,000 tax credit for first-time home buyers is the thing to watch.

BABB: It is and it's not just -- a lot of people believe if I've owned a home, I'm excluded from it. If you haven't owned a home for three years, you are included in the tax credit, so that's something to look up and it's great. Plus you can write off your property taxes and you can write off the points that you pay on the loan, so all of that is not a loss.

WILLIS: And of course that tax credit the federal government working right now to make sure that you use that tax credit perhaps as part of your down payment. You don't have to wait until you file your taxes to get the $8,000, it could really help you buy that home.

Dani, just briefly, what are the elements to figure out, what do I want to know if I'm making that big decision to buy or rent, right now?

BABB: Job stability, are you going to be there for a while? Are jobs moving in and out of the area? If they're moving out, it may not be a very good time to stay. Tax benefits and how long are you going to be there and will the first time home buyer credit help you out.

WILLIS: Love that. Thank you, Dani, for helping us out today. We appreciate it.

BABB: Thank you.

WILLIS: Now, if you're on the other side of the equation, you own a home, but can't sell it in the market, you may consider becoming a landlord. But first make sure you get the rules in your state. There are laws governing how much deposit you can receive and how much you can charge for the application process. Go to your state's department of consumer protection for more information.

It's almost impossible to be fully prepared, but you need to know where to get information or assistance when you need it. Join a local landlord association or real estate association in your area. You'll be able to get referral, support and guidance from fellow landlords. You'll also want to create a network of professionals who can help you when maintenance issues arrive.

Maintain close relations with plumbers, electricians, attorneys. To make sure you're pricing your rental right, do your research, check out what the rates are in your area. It's also a good idea to attend an open house that's advertised just so you can compare what's being offered. And when it comes time to choose a tenant, make sure you run a credit check on applicants. The unemployment numbers across the country can be frustrating if you're looking for a new job. We have the scoop on some U.S. cities that are bucking the trend -- they're hiring.


WILLIS: Well, you've probably seen those grim unemployment numbers, but believe it or not, there are towns across the country booming with jobs so if you're looking for a change of scenery and employment, take a listen to our next guest. Bob Frick is a senior editor with "Kiplinger's Personal Finance" magazine and joins us now from Washington.

Bob, welcome. Good to see you.


WILLIS: Now, I know people want this list, so let's get right down to it. Let's talk about Washington, you say that's a great place to go, really good job opportunities.

FRICK: Washington, D.C., as well as the federal government has a tremendous number of jobs in the high tech, information tech industry, biotech, it's really a boom city. It's been a boom city for a long time and of course it's all the federal spending now for better or for worse, there's a lot more money sloshing around.

WILLIS: A lot more money sloshing around and a lot more jobs. I want to give folks this Web site. If you're looking for a federal job, even if it's not in Washington, it's a great place to go. You can actually find jobs by location.

So, Bob, let's drill down on Albuquerque, New Mexico. Now, what's going on there? Why should I look there for jobs? This is not, frankly, an area that I thought would be growing, but you say it is.

FRICK: Well, you know, every city the unemployment rate is up. But what we're talking high-quality jobs and in Albuquerque the state, the city, the university of New Mexico, Sandia National Laboratories, all these entities get together to try and bring good, high quality jobs to the city and they've been very successful. They have quite the solar industry operations going on there. Plus they have a growing film industry. They have 3,000 people making movies and TV shows.

WILLIS: Well, that's a real diverse range of jobs out there and the good news is that those aren't like just entry level positions, maybe not a lot of interesting experience, these are jobs that will really develop an area that's very interesting to live in, you know, a very diverse population.

FRICK: Right. Our whole study concentrates on what we call or what is called the creative class kinds of jobs, these are engineers, architects, designers, educators, artists. These are our readers and so we focus our studies at cities that are growing these kinds of jobs.

WILLIS: How about Huntsville, Alabama? Now, they've got a population, about 378,000, kind of midtier, midsized city. I never would -- this comes as a surprise to me, too.

FRICK: Well, Huntsville is the No. 1 city and for good reason. As well as all the aerospace jobs there, as I'm sure you know, you know, it is the aerospace, one of the aerospace hubs in the United States. The U.S. government has all kinds of research going on there, the military. They control all the supply lines, they say from beans to bullets in Huntsville. It's also apparently a pretty nice place to live.

WILLIS: Athens, Georgia. Now, I think music when I think of Athens, but you've got some other ideas, right?

FRICK: Well, University of Georgia is there, obviously, but it is a very cool and funky town and they've expanded on the university base. The whole town was created basically for the university and now they have a good number of high-tech professional level jobs and as you say the music scene there is really unparalleled.

WILLIS: You know, Austin, Texas also has a great movie -- or music scene and this is on your list as well, one of my favorite cities and an interesting place to live.

FRICK: Yeah, Austin makes pretty much every one of these lists. It's so unbelievably diverse. The state capital, higher education, plus now it's a hub for high finance and also biotech and all kinds of high technology jobs and, yes, one of the funkiest and coolest places to live.

WILLIS: Salary growth of seven percent, are you kidding me? That's amazing.

FRICK: Well, that's over four years, but you have to realize is that even though the unemployment rate there was up, which is kind of statistical fluke, they actually added over 3,000 really high-quality jobs there in the last year.

WILLIS: All right. We've got to talk about one of thigh my favorite cities, that's Raleigh, North Carolina. I'm from North Carolina. Just has been a boon state. Let's talk about what kind of jobs are available there, a lot of people don't know, frankly.

FRICK: Well, it's really the Raleigh-Durham area and apologies to people from Durham that we didn't name them, but it's that whole Raleigh-Durham-Chapel Hill area. You've got the research triangle, you've got three great universities and any industry that is worth having, you know, green tech, biotech, information tech, it's all there and Raleigh is kind of a renaissance city. They've kind of cleaned up their act. It's becoming not just a state capital, but it's becoming a fun and interesting place to live.

WILLIS: Yeah, and really attracting a lot of people, now. I think what's interesting about all of these is that often there is a big university's presence there and that really fires up some interesting job opportunities.

FRICK: Right. When you look at our list, it's basically, again for better or for worse, there's a lot of government spending in these cities and there's a lot of higher education, which when handled correctly generates a lot of jobs for the area. And right now, in a recession, we look for job resiliency and job creation, those are two things you can absolutely bank on. You know, there's always going to be government spending and universities don't shut down.

WILLIS: Bob, thank you for your help today. We appreciate it.

FRICK: You bet.

WILLIS: When it comes to your savings, your mortgage, your investments, a good financial adviser may be worth every penny, but when should you hire one and how do you know if yours is qualified?


WILLIS: Look, no matter how much money you've got, figuring out how to manage it is tricky and a decision to hire a financial adviser can be touch. Here to make sure you put your hard-earned money in the right hands is Heidi Brown, she's senior reporter for "Forbes Woman."

Heidi, good to see you.

HEIDI BROWN, FORBES WOMAN: Hi. How are you? Thanks for having me.

WILLIS: So, Heidi, let's talk first about who needs an adviser, because I think a lot of people out there frankly they can't afford an adviser. It costs so much money to have somebody run your money for you that you might be better off doing something else. So, who should hire one?

BROWN: Well, Gerri, the thing is that there's so many different options now. It doesn't really matter whether you have just a little bit of money to invest or you're very affluent, because over the last few years we've had a very wide range of services.

We, at "Forbes Woman" have counseled our readers to look for a certified financial planner, and that's someone who's actually a member of an organization that has to have had specific train and passes specific exams, they have to have had three years of experience...

WILLIS: And those are pretty rigorous examines. I'm pretty familiar with the program and you can't get in there by reading some cheap book and taking the exam quickly. This is a process for those folks.

BROWN: And you're expected to maintain your knowledge and to be an active member. There's also other options, you can look for what's called a certified financial analyst. Those courses are also very rigorous and you've also got the CPA option, the accounting option. WILLIS: Right, exactly. You know, one of the big problems that people have out there is that they feel like when they're hiring an adviser they're worried they're hiring somebody who's just paid to sell them product and we see a lot of that in the marketplace. How do I avoid that?

BROWN: You know, that's true and unfortunately a lot of brokers and financial advisers have gotten reputations, for a very good reason, but we have something now that is called a fee only adviser and these people have become much more popular because they assure their clients that there's no conflict of interest. They do not get -- they do not get commissions based on their transactions, they don't get commissions for selling you and setting you up with insurance policies.

WILLIS: Which is so common in the industry. This is very different. They get paid by you for what you do.

BROWN: Exactly.


BROWN: And so basically the way the fee structure works is you either pay them based on the number -- the amount of assets that they're managing or they simply charge you a flat fee per year.

WILLIS: All right. You can go either way. And, of course, you can always hire a financial adviser just for the hour, say, to look over your 401(k) to make sure you're investing in the right thing. You guys recommend the Garrett Planning Financial Network, a great group of folks.

BROWN: Absolutely, it's growing. I just think it's such great for people who are just starting out or don't feel comfortable, you know, talking about financial markets.

WILLIS: All right, so let me ask you this question, because I think this is something that gets ignored in the whole conversation. Which is do I want to pick somebody that I actually get along with, especially as a woman when you're hiring a planner, you can get people who are, you know, a little bossy, they may think you don't understand anything that's going on, they want to tell you what to do. How important is that match with personality?

BROWN: It's so important. In fact, I think that beyond having the qualifications. And beyond having an adviser whose in good standing and hasn't had any, you know, problems or other complaints from regulators, that you find someone who you have a rapport with and has the same background as you or at least understands your background, because let's face it, you're going to be, hopefully, if this works out, working with this person nor a your life.

WILLIS: A long, long time.

BROWN: Yeah, they're going to be helping you not just with having -- have you allocate your assets, but they'll be helping your figure out how much life insurance you need, one day estate planning.

WILLIS: You know, I know financial advisors who even look over mortgages, for example, and help people understand what they're signing on to, which I think is a great idea.

BROWN: You know, what it really becomes is a personal relationship. You want to be able to go to your financial adviser for every aspect of your financial life.

WILLIS: All right. I've got to get you to another question here, which I think is critically important. You know, we've all heard about Bernie Madoff. Just last week there was another ponzi scheme that was exposed in California, a real estate investment scheme.

You know, people want to know how can I trust this person with my money. And you've got great ideas for just going on the Web to find out what you need to know about the adviser you're considering hiring.

BROWN: Great question. I think it's actually given a little hit to the financial adviser industry. But the fact is that there's a government Web site, the Security and Exchange Commission Web site, has a section you can go to do your own due diligence and we actually advise our readers to make sure that you do this when you're interviewing financial adviser. You want to go to the SEC Web site and look at The Investment Adviser Public Disclosure Web site.

And on that site there are two forms, they're called the ADB parts one and two. And each form will give you exact information whether they have been any complaints by other clients any problems with regulators. You'll find in part two, their fee structure, their investment strategy. You can get a lot of information about this. You can also make sure that whoever you're working with is in good standing with their own organization.

WILLIS: Great information, Heidi, thanks for helping us out today.

If the grass is always greener on the other side, maybe it's because your neighbor's lawn is ecofriendly. We'll help you make sure your yard is good for the earth.


WILLIS: With summer on the way, you're probably thinking of spending more time in the yard, but that can mean you're spending more time around artificial pesticides and fertilizers. We visited Rutgers University to learn how to keep your lawn looking great and still be friendly to the environment.


WILLIS: How do you define an ecological sound lawn? What does that mean?

JAMES MURPHY, RUTGERS UNIVERSITY: Well, to most people that would mean a lawn that doesn't use a lot of pesticides, doesn't use a lot of water or a lot of fertilizers to maintain it.

WILLIS: Does that mean you have to pick out a certain kind of grass? And if so, what kind of grass do you use?

MURPHY: Well, there are many to choose from, but certainly the choice of grass has a lot to do with how easy it is to maintain in an ecological friendly fashion.

The grass that we're standing on here, the perennial ryegrass, this can be maintained in a low maintenance fashion, the difficulty with doing that is if you make mistakes with it, you're going to get weeds and some diseases in it and it will be difficult to maintain and low maintenance...

WILLIS: A lot of fertilize fertilizer, a lot of water, a lot of care, right?

MURPHY: Yes, yes.

WILLIS: All right. Well, what do we have over here?

MURPHY: This is Kentucky bluegrass and most people would recognize this grass because many people have it in their yard. It's considered by many to be a more higher-maintenance grass and take a little more time and energy to maintain it properly.

WILLIS: OK. Well, show me something that isn't going to take a lot of maintenance, not a lot of money to maintain that I can put in my yard.

MURPHY: OK. Sure, over here. This grass here is tall fescue.

WILLIS: This is bigger blades. You know, it's really heavier.

MURPHY: It's a little wider blade. It's very tough and durable. This grass will put up with less water, less fertilizer, much better than the grasses we just talked about.

WILLIS: All right. I want to ask you about over here, we have one of these old-fashioned mowers. There's absolutely no engine here. This is human power. Does this really work? Come on.

MURPHY: Yes, these work. They work better under certain situations than others. And if you...

WILLIS: They're hard to use.

MURPHY: If you put it over here in the shorter grass, it will be easier to use.

WILLIS: Hey, look at this. That's not bad.

MURPHY: Not using it the right way.


WILLIS: OK. It's getting it started. The faster you go, the easier it is to use.

MURPHY: Yeah, you got to keep up some momentum behind it.

WILLIS: Yeah, but you get a workout workout, good gosh.

MURPHY: That's why people don't use these even if you're ecological friendly. A push reel mower would be more useful for people who have smaller properties, not as much pushing and energy to do the work.

WILLIS: So, this is compost, right?


WILLIS: Now, do I just do this? I mean, is that what you're looking at?

MURPHY: Yeah, basically you would apply maybe a gallon every three to five foot over the turf and just spread it around. You want to put it lightly enough so that it filters into the grass and goes down to the soil. Because ultimately that's what you're applying the compost to do is to try to improve the soil that the grass is growing in -- all that good organic matter.

WILLIS: There are places that have turned over completely to this kind of lawn care, and it's very successful, right?

MURPHY: When you go completely organic, there are going to be cases where you get what many would consider weeds growing into the lawn. But as long as you're willing to accept that and repair it with some seed and some tender loving care, then it's not a problem.


WILLIS: And, of course, my lawn looks exactly like that.

Thanks for spending part of your Saturday with us. We'll be back next week, right here on CNN. You can also catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern Time.

Your top stories are next in the CNN NEWSROOM. Have a great weekend.