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ANDERSON COOPER 360 DEGREES
Home Renters to Home Owners; Secrets of Successful Home Buying; Dramatic Career Change
Aired September 17, 2009 - 23:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN HOST: Hey, I'm Anderson Cooper.
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: And I'm Ali Velshi. Two topics in the hour ahead: the economy and you.
COOPER: It's been one year since Lehman Brothers declared bankruptcy putting into motion a series of events that plowed the American economy deeper into recession and cost you money.
VELSHI: Everyone felt the effects as the crisis rippled through the job, housing and stock markets.
COOPER: In the hour ahead, we're going to figure out what happened over the past year and point you in the right direction for the year and years ahead. Our panel of experts will give you the tools you need to profit and even prosper.
Tonight on this CNN MONEY SUMMIT: MONEY AND MAIN STREET.
A year after the fall of Lehman Brothers there's good news and bad from the guys who crunch the economic numbers.
First the good, Federal Reserve Chairman Ben Bernanke said earlier this week the recession is very likely over. The bad news, not all economists agree with him nor do most Americans.
New polling we did for this program shows 86 percent of the country still feels we are in a recession. And more than three quarters of all Americans say it's a pretty bad one.
But it's not all doom and gloom. There is good news, things are improving in some areas very quickly.
We're going to be discussing this tonight with our panel: "Fortune" magazine, Senior editor Leigh Gallagher; an economist and author, Stephen Leeb; Christine Romans, host of CNN's "Your Money;" also "Money" magazine senior writers, Walter Updegrave and Donna Rosato; and Ryan Mack, president of Optimum Capital -- Ali.
VELSHI: Anderson, thanks.
But first, how did we get here? One year ago this week, America's subprime crisis became a global financial crisis. What had been a downturn fueled by falling home prices and mortgage defaults became in a matter of days something much bigger.
VELSHI: Monday, September 15th, 2008, Wall Street is in a panic. Lehman Brothers filing for bankruptcy after no one would buy it. The immediate fallout, already skittish credit markets around the world freeze. Banks won't lend. Not to businesses, not to each other.
BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: Many lenders have been reluctant to provide credit.
VELSHI: Without the flow of money, the entire global financial system is at risk.
COOPER: Good evening, we begin with breaking news about the crisis on Wall Street.
VELSHI: The credit system in this country is coming to a halt.
That day the Dow closes more than 500 points lower.
COOPER: Americans are as worried about bailing out Wall Street as they are about not bailing it out.
VELSHI: Enter the U.S. government and fast; the next morning a staggering, $85 billion bailout of AIG, American International Group.
GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: Government intervention is not only warranted, it is essential.
VELSHI: Within days, then Treasury Secretary Henry Paulson is working on a bailout, $700 billion to keep the financial system afloat.
HENRY PAULSON, FORMER TREASURY SECRETARY: This needs to be big enough to make a real difference.
UNIDENTIFIED MALE: Today is a...
VELSHI: But many Americans are outraged that Wall Street is being saved, rewarded for its misdeeds.
The economy is now the issue of the presidential election.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Make sure that we protect taxpayers.
SEN. JOHN MCCAIN, (R) ARIZONA: A lot of us saw this train wreck coming.
VELSHI: Congress defeats a rescue package on September 29th. The DOW has its biggest point drop in history that day. Urgency mounts. And on October 3rd, a bailout bill passes. The plan, government pumps money into banks hoping that cash will be used to make loans and get credit flowing again. By mid-October, progress, the global credit squeeze begins to loosen somewhat with banks lending to each other. Though some businesses still can't raise enough money and are losing customers. When businesses lose customers, Americans lose jobs. The recession deepens.
New hope, though in, early November.
WOLF BLITZER, CNN HOST OF THE "SITUATION ROOM": Barack Obama will become the president-elect of the United States.
VELSHI: America elects a new president who soon will be thrust into a new economic crisis. This time it's the auto industry in desperate of government cash.
UNIDENTIFIED MALE: Right now in today's circumstances, we can't do it alone.
VELSHI: With mounting business bankruptcy, job losses and home foreclosures, investor confidence craters and stock losses mount. By March 9th, the DOW is down 40 percent since Lehman filed for bankruptcy.
But this marks the bottom.
VELSHI: Or I should say at least we hope that marked the bottom. Now if you didn't get out of the market at the bottom, it's been a nice ride back. Take a look at this, major U.S. markets, let's look at the S&P 500; 500 major U.S. companies.
Well, since that bottom on March 9th, they've risen about 45 percent. The value of those stocks have risen about 45 percent giving you about a 10 percent gain for a year which some people would consider a pretty good gain.
More good news. The combination of low home prices, low interest rates and a tax credit for new home buyers has helped stabilize the housing market. But the national unemployment rate, there is a problem. It's still -- it's 9.7 percent right now. Hundreds of thousands of jobs are being lost each month. And that very fact is keeping U.S. consumers from fully re-engaging in this economy.
Let's have that discussion with my panel.
Ryan, you worked very closely with the people we're talking about right now. You're a financial adviser. Are people feeling that this recession is over and it's time to get in? Or are people still holding back?
RYAN MACK, PRESIDENT, OPTIMUM CAPITAL: Well, people are still feeling very anxious. They're a little bit skeptical. They're looking towards the government sometimes for answers, a little bit too much as far as I'm concerned. But I have to say, you look at the March 9th lows. Those who stayed in they stuck it out, they did this additional dollar cost averaging strategies, they are happy right now. Those who bailed out, they're learning difference between real and paper losses. They locked those losses in.
WALTER UPDEGRAVE, SENIOR WRITER, "MONEY MAGAZINE": Money people still feel that we're in a recession. So if you look at the money flowing into investments, since the beginning of the year, more than 90 percent of the money going into mutual funds is actually going into bond funds. So I think people aren't quite aware of these opportunities that are now -- exist in the stock market.
VELSHI: Stephen Leeb, you follow this closely. This market might be up 10 percent for the year at this point, up 45 percent or more since March 9th. Is it too late for people finally waking up to say I need to get into this market?
STEPHEN LEEB, ECONOMIST AND AUTHOR: I think it's not necessarily too late to buy stocks. But it really depends, Ali, which stocks. I think it's much too late to buy any stock whatsoever. But I think if you have the right stocks, if you have -- I believe in commodities at this particular point in time. I believe in franchises like Johnson & Johnson.
It's still probably ok to invest in this market. But don't get carried away. That will be my advice.
CHRISTINE ROMANS, CNN HOST, "YOUR MONEY": But you go back to the 9.7 percent number. There is a big group of people who are in no position right now to be putting new money to work in the stock market. They are trying to stabilize and repair their balance sheet, repair their situation and move forward and they are worried about their jobs.
You can't invest when you don't have money. So that's one of the issues here, you've got people who are trying to find opportunities right now. And it's the right time to find opportunities but another big group of people who are in no position to find opportunities.
VELSHI: Well, let's see whether we're half empty or full half full kinds of people. Let's take a look at job losses since the beginning of this recession. January '08 was the first month of the recession, where we started to see job losses.
But can you see up until August they were still contained. And then the bottom started to fall out. By January of this year, we had lost more than 700,000 jobs in one month. But then it started to pull back. It started to taper back. And in August, which is the most recent month for which we have the statistics, only 216,000 jobs were lost.
What am I saying? Donna?
DONNA ROSATO, SENIOR WRITER, "MONEY MAGAZINE": Only... VELSHI: ...only 216,000 jobs were lost. We think of that as a good thing. How do you bring an economy like ours back when you are still shedding 100,000 and 250,000 jobs a month?
ROSATO: Well, that's right. And I think Christine brought up a good point, whether you feel better about the economy it kind of depends on whether you have a job or not. And it's really been a dual economy here. If you are in certain industries, actually, you held up pretty well.
We've been looking at pretty closely where the jobs are. And we all know health care jobs, education and some energy and even tech jobs have held up pretty well during this recession. But certain things, like manufacturing and you know, media and energy have been really decimated.
So you can't bring it back without the jobs. And some of the government stimulus programs have been aimed at developing jobs in some of these critical areas like environmental and energy.
VELSHI: Well, we'll take a good detailed look at not only where the jobs are by industry, but where they are in the country geographically.
We also have a housing issue. We continue to -- it does appear that these low interest rates, the fact that there are lots of homes available for sale, that people needed to sell at fire sale prices and this incentive for new home buyers to buy homes. It does seem that all of that put together has helped the housing market -- Leigh.
LEIGH GALLAGHER, SENIOR EDITOR, "FORTUNE": It has absolutely, by all indicators. Prices are turning around. Sales are up. But you have to remember, a lot of the sales are driven by forced sales. They're people that are in desperate situations and they have to sell.
And you also can't remember -- that you can't forget that there is a foreclosure rate that's really still escalating pretty significantly.
GALLAGHER: And so that's linked to jobs and to the consumer which is a big, big part of this economy that's still yet to recover.
LEEB: And also Ali, I mean, in addition to the unemployment which is a hideous problem in and of itself...
ROMANS: And getting worst.
LEEB: ...and getting worse and by some measures, if you count people that are only partially employed, 16 percent, I mean that's the number, not working and only partially working.
In addition to that horrible, horrible fact is also the fact that consumers are now saving. They're scared. They've seen a sea change. So money that otherwise might be going into the economy is not...
VELSHI: So what we're going to have a discussion about today is in all of those places how you take advantage of that. Where you put your money for investments, whether it's stocks or whether it's precious metals.
And I know you've got some stuff to say about that, Stephen or whether it's bonds or whether it's cash. How Americans have actually changed the way they spend. And more importantly, how you deal with this market when it comes to where you live, how you train and whether or not it's time to buy a house.
We've got all of that lined up for us. But Anderson, we'll have more with the panel ahead. We're going to head now over to you.
COOPER: Ali, thanks. More with the panel, as Ali said.
We'll also head to St. Louis to meet a group of ordinary investors. Not one is an investment professional, I should tell you. Yet, they have profited handsomely from the rebound in the stock market. That 45 percent jump in the stock market we mentioned earlier had this group worth now over $1 million.
A quick break, but before we go, an iReport from two kids here in New York inspired by this recession. Take a look.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Me and Mark (ph) are going to give it to you very slowly. Money, money here comes honey, money, money, here comes money, the economy is in recession. Please don't be in deep depression. Money, money it got started I lost my breath.
(END VIDEO CLIP)
COOPER: I want to show you a chart that Ali and the panel were just looking at a couple of moments ago. The market plunged 46 percent from when Lehman collapsed a year ago to when it bottomed out on March 9th.
And the portfolio of our next guests did a little better than that. They only lost 33 percent. But when that only costs you $362,000, it hurts. For members of the Mutual Frames Investment Club in St. Louis, it was a scary loss.
So what did they do? Well, the same thing they've always been doing.
COOPER: Ray Bahr and his friends meet once a month for exactly an hour and 15 minutes. They have a strict agenda, to make money by beating the stock market. RAY BAHR, MUTUAL FRIENDS INVESTMENT CLUB: Gentlemen, it's 7:00. We're going to go ahead and call the meeting of the Mutual Friend Investment Club to order.
COOPER: They're an investment club with 34 members, each contributing $75 a movement every member gets one vote to buy or sell; the majority rules. They're not stock brokers and don't work at finance. To them, this is mostly a hobby. But they do know their stuff. Right now they have over $1 million in their portfolio.
BAHR: Our market value of our stocks at the end of Monday, September 7th, was $1,118,170.
COOPER: Ray started the club over 30 years ago with three friends, $60 and a paper ledger. He says they wanted to learn about investing.
BAHR: Actually, I'm lying. We got together to play poker eastern drink beer. And that's why the first couple of years, we didn't really make money.
COOPER: But that changed, Ray says, after they joined the National Association of Investment Clubs who offer classes in investing; that was back in 1976. Since then, the club has grown steadily, in members, in technology and in profit.
The goal is to make a 15 percent return on their investment and despite fluctuations in the market, they've done it consistently.
BAHR: I've learned that basically if you want to make money, you better understand how it makes money. It isn't the paycheck you bring home. It's what you do with that paycheck.
COOPER: Ray estimates his share is worth $250,000. They've done better than most investment clubs, better investing. The National Organization of Investments Clubs calls their track record outstanding. So what are they doing right?
UNIDENTIFIED MALE: It's not rocket science, anybody can do it.
COOPER: The fundamentals are simple; they invest on a regular basis.
UNIDENTIFIED MALE: Are there any buy motions?
COOPER: And they diversify their holdings. This club own 17 stocks in 13 different industries.
UNIDENTIFIED MALE: But we're now up to about 27.4 percent of small cap stock.
COOPER: They say to buy quality over quantity. And most of all, be patient.
BAHR: When we buy a stock, we buy with the idea we keep it for life. How's that? The best stock you'll ever own is when you never have to sell.
COOPER: They look at how stocks will perform five years down the line, not five weeks. That's why the recent down turn didn't concern the members too much.
UNIDENTIFIED MALE: We were down this past year just like everybody else was. It did not discourage us. Because we know that there are peaks and valleys in the market and it always comes back. It always comes back.
COOPER: They firmly believe it, so they keep investing.
UNIDENTIFIED MALE: We have a motion to buy 200 shares of Dow Chem at market all in favor, please raise your hands.
BAHR: I have fun making money. You name me somebody that has fun losing money; I'd say he's a different kind of person.
COOPER: Now, I'm joined now by Ray Bahr from St. Louis. Ray, your investment suffered big losses like everyone else during the September through March market plunge. But you stuck it out when a lot of others bailed. Why?
BAHR: I think because we, as far as the market is concerned, you have to realize that it has its peaks and valleys. And, therefore, the experience of the club is obtained through being in a club is important.
A club is really an organization of many national clubs throughout the nation. And they've learned through education, the training and the tools that were given to us to make it successful.
COOPER: So what's the benefit you think for an individual investor to be in a club?
BAHR: Well, it's a learning process. You learn from other clubs and other people how they invest, when to invest, when to stay in, when to possibly withdraw. But the bottom line is be patient. Be cautious with your investments.
COOPER: Your individual investing style, is that different from the kind of investments your club puts money into.
BAHR: Yes. It would be different. Each member of the club -- we've got 34 members -- each one is different. The club meets once a month. We therefore, can only invest once a month. We can only sell once a month.
Whereas the individual investors and there's like I said, 34 of us, we can make decisions for ourselves. Most of the guys in the club will probably be a little bit more aggressive in their investments. I think the club really needs to stay within the scope and be a little bit more conservative; 12 to 15 percent is fine. Individually, I'm sure there's others in the club -- they're doing better than that. There's probably others that are not doing as well.
COOPER: Before I give it over to our panel, do you have any stock tips for me, Ray?
BAHR: Personally, I like the idea of keeping balance between large cap, medium cap and small cap. Right now we are really interested in DOW Chemical, Frontier Oil, also we have what we call Rofin Sinar (ph) Technologies and tractor supply. That's small cap. The medium cap, certainly like Pfizer, I mean it's done as well. Large cap, I can think of Emerson, Johnson & Johnson. There are more on the conservative side. They won't get you to 15 percent but it gives you peace of mind.
COOPER: All right, Ali Velshi is over there taking notes as we're talking all about of this.
COOPER: Let's take it over to him -- Ali.
VELSHI: I absolutely am. That is fascinating. Congratulations, Ray.
I have Donna Rosato from "Money" magazine has a question for you -- Donna.
ROSATO: One of the questions I have, so you say you hold on to your stocks for life. But you must have some rules for when you do sell. And I wonder if there are any stocks that have appreciated that you have decided to sell and have a particular rule that you use to determine when you're ready to sell?
BAHR: For example, maybe stock took off and we've got a couple right now in that situation. Probably next month we'll probably shave off a little bit. I've learned all about 30 years ago on a broker that I knew and he was my broker, he said sometimes it's good to take half off the table, let the rest ride.
Now do we do that? All the time? No. Sometimes you have to take all off the table. And go a different direction.
VELSHI: Ray Bahr, it's good to have rules about when you sell stocks. Thanks for sharing your experience and advice with our viewers and I think some of us have learned something from this as well.
Let me show you some information that Fidelity gave us about 401(k)'s and Americans and how they've changed their investing habits over the last year because of this recession.
I want to start with this pile of money. Because that's what there was before this recession came into place. But let's look at about the middle of 2008. This is what the average Fidelity 401(k) looked like: 76 percent of it was in stocks; 18 percent of it was in cash, allowing for some opportunities to buy more stocks if prices were good. About six percent was in bonds.
Now let's take a look, Fidelity has given us some information about how that's changed. So this is the before; 76, 18 and six percent. Take a look at what happened now. And this is about the middle of 2009 that the percentage in stocks has decreased. 68 percent of the money is in stocks. A lot more in cash; 24 percent, almost a quarter of the portfolio is in cash. And 50 percent more is in bonds, from six percent to nine percent.
So Americans have become more defensive. They have become a little more conservative. We're not quite sure whether they actually changed those allocations or those allocations were changed for them by the market.
But Walter, you sort of beat this drum a little bit that while we are looking for opportunities and while this may be a great time for investment opportunities, people have to be secure. They have to protect themselves.
UPDEGRAVE: They do. They have to have stocks for growth. But you also need something to cushion you in the event of downturns like we just had. And you need bonds for that. So, for example, those figures show that people to some extent losses in their stocks but also have been going more into bonds.
But you still have to do that based on your age. The older you are, maybe the more bonds you want. And before the down turn, what we saw was a lot of people had way too much in stocks...
UPDEGRAVE: ...unfortunately, they didn't realize it until they took the hit.
VELSHI: Ryan, you do this for people. You manage their money. What do you think of this investment club? They seemed to have some good rules.
MACK: It's discipline. They understand the bigger picture. There are going to be peaks and valleys. They understand. That the simple fact that they understand one, they're here to learn. And they've learned a lot just by simple fact that he was able to outline the mentality of when he wants to get in and when he wants to get out of stocks.
These are things that we all could use in every one of our portfolios.
VELSHI: Let me just show you again, information from Fidelity about who's investing in their 401(k). Markets like this can really scare people out of the game entirely. And what's interesting here is in the 20 to 29 age group, only 44 percent of those qualified to have an IRA or a 401(k) are actually investing. And that's kind of interesting. As you get into your 30s, that number jumps to 62 percent and then 68 percent from 40 to 49. It peaks for those people who are 50 to 59. 71 percent of people, perhaps judging that they're getting close to retirement and they really need to make some money in their investments, from 60 to 64, 68 percent of those who can invest in the 401(k) will do it. And then from 65 to 69, that number starts to go down a little bit.
But interesting that those at the earliest stages where they can absorb as much risk as they can...
VELSHI: ...are not taking full advantage of.
ROMANS: But you know it's not enough because there are other studies that have shown that there are like $26,000 in the average or I guess the median account. And that's simply not enough. Health care cost are going up, they're trying to address that. But there all of these other issues that you have.
We're not saving enough for retirement. We just aren't. And especially when we're talking about health care costs. That's one of my big concerns. The people have been scared away from the market over the past year. So maybe some of those young people are saying oh, this isn't for me. Look, I was better off not being in it.
And people still aren't preparing well enough. And I know that I've head Walter and Donna and Ryan and everybody talked about this. We're not -- we're really not ready, are we?
GALLAGHER: There's an interesting phenomenon which is 401(k) inertia. A surprising number of employees do nothing with their 401(k).
GALLAGHER: They've leave money on the table. They don't take advantage of the match. If you look at the number of people that are actually 100 percent in stocks still, it's a minority. But those people, there are many of them, that are still in 100 percent stocks even after what we've been through. So that just goes to show you...
VELSHI: Just because you think they don't go to the computer and change it.
GALLAGHER: Those people with their 401(k) is self-directed investing. And many people just think, oh I set it up and then I leave it there. There is a real lack of investor education and in a time like this. This is the 401(k)'s biggest test really.
VELSHI: Well, you taught us a great class at one point -- I guess when you were saying your son was in fifth grade.
LEEB: Yes, so long ago. I don't want to say how long ago.
VELSHI: Give us the basic lesson. You brought us -- you dug out the lesson. Very simple.
LEEB: I mean the lesson is, if you ask a bunch of young kids, fifth graders, you know, what companies do they know? What investments do they know? You'll get answers like Johnson & Johnson, Nike -- certainly any fifth grade boy knows Nike -- I mean there's no doubt about it. McDonald's if I didn't mention it, Coca-Cola, maybe if they're a defense buffs, Lockheed Martin.
VELSHI: Especially a lot of fifth grades talking about that.
LEEB: You know one answer and I've got to get this in, any fifth grade girl when they're talking about investments will say gold. I want to own gold.
VELSHI: Lots of good information on that -- Anderson.
COOPER: All, coming up next, on "Money in Main Street" a young couple put their negotiating skills and their savvy to work and buy their first home using the government's new tax credit for down payment. Could the same approach, work for you? Find out, their story is ahead.
COOPER: We talked about the stock market. But if you own a home, that's where much of your overall wealth is probably tied up. And unlike the stock market, there is yet to be much of bottom or even a bounce off that bottom.
That could change in the year ahead, however. According to our latest CNN Research Poll, 79 percent said they expect home prices will be the same or higher. Only 22 percent said they expect prices to be lower a year from now. Nationwide, one thing that is helping potential new home owners to buy is the first time home buyer tax credit.
People like Alex Bauer and his fiance Ashton Goshorn are now proud owners of a three bedroom, two and a half bathroom townhouse in the Yorktown, Virginia.
COOPER: Alex Bauer and his fiance Ashton Goshorn consider themselves fortunate to be new homeowners rather than home renters.
ASHTON GASHORN, NEW HOMEOWNER: We're extremely blessed. I mean, it's not every day, you know, that a couple our age gets to see their first home start from scratch.
COOEPR: This young couple thought about buying a home together in the Newport News, Virginia area. They even went out with a realtor. But when they couldn't find anything in their price range opted to remain renters.
GOSHORN: We were dumping a lot of money into a home. And it just really wasn't worth it. COOPER: Alex is a nuclear engineer and Ashton works as an administrative assistant at a hospice, the facility that provides care for terminally old patients. Even after combining their salaries, they were unable to find a home that was within their budget. Until they learned about the government's $8,000 tax credit program for first time home buyers.
ALEX BAUER, NEW HOMEOWNER: If you didn't have the tax credit, we wouldn't have had the money to buy the house.
COOPER: The $8,000 tax credit nearly covered the entire down payment.
GOSHORN: I love it. It's my French door refrigerator with the bottom freezer. It's my pride and joy.
COOPER: Instead of a two bedroom rental, the soon to be newlyweds now live in a new home: a three bedroom, two and a half bathroom townhouse with a garage and a backyard.
BAUER: We can work on our cars in here.
COOPER: And it's not a budget buster. Their monthly mortgage payment is only $150 more than they paid to rent and they'll get to deduct the interest each year on their income tax. Many Americans like Alex and Ashton are benefitting from this particular Recovery Act Program.
The National Association of Realtors says that nearly two million Americans will qualify for the tax credit this year. According to industry experts, extending the tax credit will continue to help the fragile housing market.
As of now, however, it's set to expire at midnight on November 30th.
The bursting of the housing bubble has been a painful process for many Americans who've lost their homes. But for others, people like Alex and Ashton, the combination of a dramatic drop in home prices, historically low interest rates and government programs such as the first time homeowner tax credit has made the dream of homeownership a reality.
GOSHORN: I love everything.
COOPER: Alex and Ashton join me now.
First of all congratulations on being new homeowners. Ashton, with the market as it is now, why did you both decide to start looking to buy a home?
GOSHORN: Well, as you know, we were renting our apartment. So we figured we didn't have a home to sell. So it would be the best time to go out. So we didn't have anything to sell. So we just wanted to go in.
COOPER: Alex, what was the process like for applying for the tax credit?
BAUER: The process was pretty simple. I went to my dad's tax guy who actually does my taxes before this since I just got out of college. So I went to him. He amended my 2008 taxes, put it in the mail and they came within about five to six weeks, I think.
COOPER: And it's amazing, Alex. Your mortgage is still within your budget. I mean, it's only $150 more than what you were paying for rent.
COOPER: It seemed like you gave yourself a good cushion.
BAUER: Yes. We didn't want to overspend. We didn't want to, you know, take out a loan and a house mortgage that was over our spending limit. We didn't want to cut off our daily life, our Friday and Saturday night. We want to still have money to spend. So we didn't want to go over that maximum amount.
COOPER: And Ashton, how is your dog Isaac settling into the new house?
GOSHORN: Isaac is loving it. He's still getting used to the backyard. I think he's so used to being walked on a leash all the time. So he's adjusting well, though. And I think he'll definitely benefit from having a home.
COOPER: Well, I'm sure he likes ice out of the brand new freezer as well.
GOSHORN: Oh, yes.
COOPER: We're going to have more after a break.
First, Ali with some numbers on Newport News, Virginia, the area where Alex and Ashton bought their home -- Ali.
VELSHI: I can't believe that Alex said they didn't want to overspend. I want to go out and hug these people. I wish everybody would think like that.
The metropolitan area that they're in is the Newport News metropolitan area. They've only seen a drop in prices of about 4 percent over the course of the last year. This is interesting, whether or not it's time for you to buy has got to do with where you are and whether your area has seen a drop like those areas in red or an increase like those areas in green.
Now this is just a sampling. But let's just take a look at some of the areas and the kind of drops that we've seen in prices over the last year. Las Vegas, that's a poster child for it. This is an area that had huge, huge run-ups and increases in its prices. The drop in Las Vegas over the course of the last year has been 39.7 percent. Now that doesn't mean it's not going to drop more. But that's always worth considering when you're thinking of buying.
Another very hard hit area, in fact, harder hit than Las Vegas -- let me just stop that for a second and point into that -- that is Ft. Myers, Florida. We constantly hear about Florida, again which is a big speculative play has really seen a lot of price drops.
Let's take a look at the price drop in Ft. Myers -- I hope you're sitting down for this one -- 52.8 percent. Some might say and some have said that Florida ends up being a good buy because of the amount that home prices have lost.
I want to show you a state that is near to my heart because Christine Romans is from there; Davenport, Iowa has seen some of the biggest increases. In fact, it is a metropolitan area with the biggest increases over the last year. Look at that, 30.6 percent higher.
If you're a buyer in a place like that, you want to consider that that run-up has already taken place in Davenport, Iowa.
We're going to talk a lot more about housing when we come back after this break.
VELSHI: We're back with our panel and with our guests, Alex Bauer and Ashton Goshorn, new homeowners who found a way to make the current housing market work for them in part by being good negotiators in addition to using the $8,000 tax credit from the government for their down payment. They negotiated a $5,000 discount from the builder, $1,400 credit from the real estate agency.
Alex, are you just a born negotiator? How tough was all this negotiation?
BAUER: I think I got it from my dad. He always taught me to negotiate on everything from beds to cars to houses especially.
VELSHI: We hope there are many more stories like yours. Alex Bauer and Ashton Goshorn in their new home.
BAUER: Thank you.
VELSHI: One of the things that they talked about is the interest rate that they paid. It's an important calculation right now. There are a lot of people who are interested in buying a house but are worried about where their home prices are going to go.
First of all, let's take a look at mortgage rates. This is a 30- year fixed mortgage. Some of you will remember in the 80s it was up close to 17 percent for a 30-year fixed mortgage. That of course has been in decline for quite some time.
We're now not only at the lows since the '80s, we're at historic lows right now; a 30-year fixed mortgage still in the -- between 5 percent and 6 percent range.
Now here's a calculation that has to come into play if you're planning on buying a house. Take a look at a house that's $250,000. Assuming you're taking a 30-year fixed mortgage, you're putting 20 percent down at an interest rate of 5 percent. Your total paints over that 30 years will come up to about $386,511.
Let's say you wait a year and that house goes down a little bit from $250,000 to say $240,000. But the interest rate has gone up to 6.5 a percent. And there are some people think that interest rates are so low right now they are bound to go up. Let's say it goes up to 6.5 percent, your total payment over 30 years has now become $436,885.
It's tougher to make that calculation when you're waiting for home prices to go down.
Christine, interest rates right now might be the steal of the century.
ROMANS: They absolutely are the steal of the century. But the most important thing is your job stability as Alex and Ashton said. They both have secure jobs; that's incredibly important.
Your appetite to afford the payment on this house; you really have to take a good hard look at that because for too many years we got houses that's were just too big for us. We couldn't really afford them if there was going to be some kind of a change.
You still have to have a cushion. You still have to be investing for the future. If everyone can go back to basics and some of -- sounds easy now. But we forgot these lessons -- then, yes, it is a good time to buy.
GALLAGHER: And Ali, it's especially good for first time buyers. I think the key thing is what Ashton said. They had no home to sell. They were not caught up in this market at all. In fact, they were priced out of the huge boom that made it impossible for many Americans to even own a home at all.
So this is the people that are going to benefit. And this is really the spark of what's going to help turn around the housing market. I think that the $8,000 tax credit is really doing its part to stimulate this kind of buying. It's just the kind of thing that is prompting all this activity.
UPDEGRAVE: And I think it's great that people can take advantage of this program. I see though already the housing industry is trying to push a program to increase it to $15,000 and to make it for anyone, not just first time home buyers who can stay in a house for two years.
And I feel like we're kind of getting back to the situation where before we were enticing people to get into houses with a, you know, an adjustable rate mortgage that would then escalate. And now we're kind of enticing them in with these tax credits where they're getting a subsidy from other taxpayers.
At some point, I think you have to say, all right, subsidies are over. Let's let the housing market actually recover.
VELSHI: Let's talk about that market for just a moment and let's look at where we are. Let's go back to the beginning of this recession. Back -- it started in December of '07.
Let's start in January of '08 where prices were around $190,000. They went up in the beginning'08. And then by the time -- we're talking a lot about a year ago when Lehman Brothers failed and our subprime crisis really became a financial crisis. They were back to around $190,000. Then dropping a fair amount until January when houses were about $164,000 median, that means half of all homes sold above and half lower than that price.
And now we see an improvement. We're at about $178,300. so, again, whether you look at houses or you look at the stock market, we've seen this pattern a bit. We've been talking about investing. We've been talking about housing.
The last big topic that we need to tackle in this hour is jobs. Now let me show you something. We got some numbers from Moodyseconomy.com. They have projected out what the job situation is going to look like a year from now in the United States. So they've gone from the middle of 2009 to the middle of 2010 and made projections.
Everything here that's in orange, dark orange or red are states that are projected to lose jobs across all sectors. So you can see the only standouts here are Texas, Maryland, and the District of Columbia. They're slated to gain jobs on average. But that's all sectors.
What if you take out everything else and you just leave education and health care? These are two areas that we know there's been growth in. Ashton is employed in health care. Take a look at how this map changes.
This is job growth in all sectors between 2009 and 2010. Take a look as I change it over to health care. All of a sudden you have very few dark orange states. You have a few that are orange. And most states are gold or yellow which means job growth across all states.
We're going to have more on this discussion about jobs and the type of jobs and where they're going to be when we come back on the CNN MONEY SUMMIT: MONEY AND MAIN STREET.
COOPER: The numbers are grim: seven million Americans are out of work right now and thousands of jobs still being lost every month. Here is the really scary part. Many of those jobs may be gone for good.
The man you're about to meet is one of the casualties. He lives in Longmont, Colorado, which "Money" magazine last year named one of best 100 places to live. Even so, Eric Olinger has been laid off more than once. Each time, he's watched his family's security shrink.
Finally, he said enough and decided to start over in a job as different from his first career as can you imagine.
ERIC OLINGER, UNEMPLOYED SALESMAN TURNED NURSE: Cedar is my favorite smelling wood. Cyprus has a nice smell to it. My favorite is Doug Fir. Just because of all the sap that runs through it.
COOPER: He knows lumber. For 20 years, he's been selling wood to Colorado home builders. When the housing boom went bust, so did the only career this 36-year-old father of two has ever known.
We were building at 30 percent above average. That's a lot of houses per year that we were putting up. And then all of a sudden it stopped.
COOPER: That's when Eric did something drastic. He went from two by fours and timber to bed pans and blood pressure monitors.
OLINGER: I'm basically starting over. Instead of a 16-year-old, I'm a 36-year-old starting over in a new career from the bottom.
COOPER: Starting over and starting here.
UNIDENTIFIED FEMALE: But you want to hold it down.
COOPER: A three-month course to become a certified nursing assistant at this local community college.
PATRICIA GRAHAM, DIRECTOR, NURSE AID PROGRAM: I think he has -- unlimited potential. And I think that he has a lot of job opportunities.
COOPER: What he won't have is a big paycheck. Eric is taking a massive pay cut, almost 50 percent, to shift from lumber to nursing.
OLINGER: You know, I want to get into the health care field for myself. But I want to immediately get into a location that has at least decent health insurance at a reasonable rate. I'm willing to pay 25 percent of my pay to get that health benefit.
COOPER: Taking a job that pays a fraction of your former salary is becoming increasingly common. Adding Eric to the ranks of the underemployed; those that work for less money or below their skill level just to have a steady paycheck.
UNIDENTIFIED MALE: I had to put an A in there.
OLINGER: When Eric lost his job, the family's insurance bill jumped to $1,200 putting health benefits out of reach.
OLINGER: I think we're okay right now. We haven't had any major medical issues. I know that if we did, that it would be pretty much financially devastating to us.
COOPER: Another blow to a family that's already had to downsize their home.
OLINGER: We went from a 2,000 square foot finished house with a 500 square foot basement to this which is about 900 square feet.
COOPER: Tough decisions like these led Eric to try for a new career in nursing where he'll be following in his wife's footsteps.
Eric and (INAUDIBLE) inspired think 16-year-old daughter Bethany to pursue nursing as well.
OLINGER: When you pushed down on the heart, what happens? What is it doing?
BETHANY OLINGER, ERIC OLINGER'S DAUGHTER: Circulation.
E. OLINGER: There you go.
COOPER: Not yet employed, Eric says he is hopeful and has enough perspective to offer some advice.
OLINGER: Don't be afraid. If you have to do something that you've never done. You may not like it. You may have to try something else. But don't just sit there. Try something.
COOPER: Good advice. Don't be afraid.
Eric joins me now from Denver. Eric, where are you in your job hunt right now?
OLINGER: I'm waiting to hear back from two locations, hopefully today or tomorrow.
COOPER: Has it been tough moving from a job in lumber sales to a nurse's assistant?
OLINGER: Yes, it has been. I feel that not knowing the future going into the nursing field whether it will be something I can accomplish or something I wasn't going to like at all. It was -- it was a little stressful.
COOPER: Do you like it?
OLINGER: I do. I love it.
COOPER: What do you like about it?
OLINGER: I like the care that I'm able to give to people. I love the opportunity to be able to help somebody. At the end of the day knowing that I was able to help make somebody's day a little brighter.
COOPER: Eric, we're going to bring our panel in on this in a moment. I want to toss it over to Ali first.
VELSHI: I think it's great how Eric says, if you want to try something, just go ahead and try it. I think frankly, Anderson, his bet is correct about going into health care. We showed you what job growth in all sectors according to Moodyseconomy.com will look like next year between 2009 and 2010.
Here's what it looks like if you're looking at health care. Obviously much better prospects for you, those yellow and gold mean that there will be job creation.
Another area that you should think about if you want to get a start is government. Take a look at this. This is that original map of job growth in all sectors across the United States from the middle of 2009 to the middle 2010.
Let me show you what it looks like when you move it over to government jobs. The map is even more optimistic than it is for health care. There are no dark red states here or dark orange states; just a few that will be losing jobs. The majority of states in the United States will be adding government jobs.
Remember, a government job can be many, many different things. We're going to talk about that in detail when we come back.
You're watching the CNN MONEY SUMMIT, MONEY & MAIN STREET.
COOPER: Before the break, we were talking with Eric Olinger who made a career move from lumber sales to nursing. We go back to Eric and the panel in a moment.
But first, an iReport from San Jose, California, Silicon Valley where Aileen Chen was working as a business analyst and IT and found out her job was being terminated but wasn't concerned about finding a new job, not with her credentials.
(BEGIN VIDEO CLIP)
AILEEN CHEN, LAID OFF IN SILICON VALLEY: I started to casually look at some job Web sites and take sort of the normal approach, I thought, to finding a job. But then as the weeks progressed with the economy being the way it was, and with the companies sort of just being the way they were and the way the positions I was finding, I was finding I wasn't getting very much response.
As the weeks progressed, I grew closer and closer, it became more and more stressful, actually. And I actually didn't have very many responses or even interviews. I was surprised. I was shocked, actually. (END VIDEO CLIP)
COOPER: Shocked. Aileen did eventually find a job but not through the usual ways sending out resumes. She landed it through a career counseling session. Her advice, if the way you're going about looking for a job is not getting results, change things -- Ali, back to you.
VELSHI: All right Anderson. Let's have a look at another one of our polls. Aileen is like many Americans who find out that the job search is taking longer than expected in this economy, it's taking longer to find a new job.
Here's another CNN Poll on that. The question, if you lost your current job how long do you think it would take to find a new job? 35 percent said that they would find it within a month. 41 percent said six months -- within six months. 11 percent within a year and 11 percent said it would take more than a year.
As you can see, most people think it will take six months or less. That's a good part of things.
Let's go back to our guests, Eric Olinger who has made the change from working in the lumber industry to nursing. Eric, our panel -- first of all congratulations -- I like your idea. Don't be afraid to try something else.
Members of our panel have some questions for you. Leigh Gallagher from Fortune.
GALLAGHER: I have a question for you.
GALLAGHER: You said you took a pay cut obviously, I think you said about 50 percent to make this move. I'm just wondering have you looked into down the road, is there room for growth here and to what degree? A few years down the road can you work your way up the ladder and maybe lessen that gap a few years from now?
OLINGER: Right. Yes. I plan to go ahead and further my career in the medical field. Possibly obtaining my RN license, which is a minimum of two years associate's degree. And up from there, you know, you have physician's assistant, which is another -- a total of six years of college. So the sky's the limit, really on what you're willing to put into it.
MACK: I have to tell you, Eric, if I could bottle your spirit and sell it, I think I'd be a millionaire. I congratulate you for that.
There's a family out there right now who has a husband or a wife and a child and they might have lost their job. And they're saying, you know what, I don't have the time or the money or the patience. I can't change my career or I can't go back to community college. What would you tell that family outside of just don't be afraid?
We need to take your spirit and give that to them. What would you tell that family?
OLINGER: I'll tell them what I told myself the day before I actually went to class at my community college was, either I'm just completely going to fail at this or I'm going to rise above the situation that has been handed to me and make the best of it. And that's what I did.
VELSHI: Eric Olinger, great spirit. I think Ryan put it very well. We'd love to bottle it and have more people follow your lead. Thanks very much for joining us. And best of luck. Keep us posted on how that goes.
OLILNGER: I will. Thank you.
VELSHI: Eric has listened to a lot of the stuff that we've all talked about, where there is job growth. There is of course some issue with the fact that we can't have everybody moving from lumber or construction into health care, nursing.
You bring this point up all the time, Christine. Eventually if everybody listened to us, we'd still have a problem.
ROMANS: There's something big and scary happening in the American labor market and people who are in it know it. When I look at your charts, Ali and I see all that yellow when you talk about Texas or you talk about health care, what I'd like to see is I'd like to see a lot of different industries where private companies are creating jobs, not just the government and not just health care. It has to be more diverse and broad-based.
We're not there yet. It means it's going to be will be tricky for the near term. People shouldn't lose hope. It's going to be tricky and I think we all have to know that.
VELSHI: Donna, you wallow in this idea of where jobs are being created. You really run these numbers all the time. Aileen who we heard from and we got an iReport from has left IT, lost her job in IT. That's a strong area.
In fact let me just show you quickly before I get your response to it, the top fastest growing jobs according to the Bureau of Labor Statistics. These numbers are due to be updated in the next few months so you might see this change as a result of the recession.
Network systems and data communications jobs which require a minimum of a bachelor's degree are actually the fastest growing on the list. Personal and home health aid, which requires less training than a nurse but still in health care requires on-the-job training. Computer software engineers need a bachelor's degree but again, very fast growing.
Veterinary technologists need an associate's degree and personal financial advisers require a bachelor's degree. Does that jive with what you sort of are seeing, Donna?
ROSATO: That's right. The fastest growing jobs are in IT and the highest paying but you need a higher skill level to get those jobs. What you're seeing are the data entry jobs, the programming jobs are outsourced. There's an issue with security there. But the higher level jobs will require more education and more skill level but they are there.
And they're going to not only -- a lot of the health care jobs aren't as well paying necessarily but if you have a higher skill level, you're going to see something beyond health care and government in IT. Also environmental jobs and energy jobs -- there's a lot of the jobs growing in that area as well.
VELSHI: Right. Both traditional energy and alternative energy because there are still jobs required to be filled in traditional energy, natural gas, coal and oil.
ROSATO: That's right.
UPDEGRAVE: I think going forward though, job security is certainly important. I think that we're going to have to think not so much in terms of just a job and industry, but sort of skills. What sort of skills do I bring to a situation and a willingness like Eric to be able to switch around because the idea that you're going to stay in the same job or even in the industry, I don't think is going to be...
VELSHI: Regardless of the worst recession we've seen in the last 75 years, that's not a reality of our labor market today. Things have changed dramatically.
We're going to continue this discussion with our panel. Over to you, Anderson.
COOPER: Ali, still ahead on MONEY AND MAIN STREET, the hands down most important question for you, how is your family doing a year after the financial meltdown? I'll tell you what people told us.
Plus our panel's take, next on MONEY AND MAIN STREET.
COOPER: A year ago in the wake of the Lehman Brothers bankruptcy, the economy was beginning its free fall. And as we've been talking about today, there are signs of a rebound. What fed chairman Ben Bernanke calls green shoots.
VELSHI: Green shoots, not a thriving forest of good news by any measure, not yet. We wondered how the recovery feels to you.
Here's our polling on that. The question, how is your family's financial situation compared to last year? Only 9 percent said better. More than a third, 39 percent said worse. 52 percent said the same. COOPER: That said, now is the time to plant the seeds that could help you profit if the recovery takes firmer hold. Let's get final thoughts from all the panelists. Let's start with Christine.
ROMANS: First of all, I think you have stabilize and you have to prepare your balance sheet and then move forward from there. I think once you're in a situation where you know that you have money to invest and put away for the future, then I think that there's going to be opportunities for people.
LEEB: I think basically steel yourself to the fact that the economy may have changed in a very major way. For an investor, that might mean considering other asset classes like precious metals to protect yourself. For someone in a particular job like we heard, it may mean considering something entirely different.
I don't -- I think things could be good coming out of this but I think they're going to be much, much different than any of us have experienced.
GALLAGHER: I agree with Stephen on that. I would say, what's going on in the stock market right now and what's going on in the greater economy are not necessarily totally linked. Yes, we're seeing some really good signs but we still have a long way to go. Until there's job recovery, there's not going to be consumer spending and the greater economy is still going to be suffering.
UPDEGRAVE: We're not going to come out of this as strong probably than other recoveries but it's important to look ahead. We see the stock market starting to go up so start looking for opportunities to take advantage of.
ROSATO: One of the bright spots in this really changing job market is that a lot of the jobs where the growth are, are jobs where people can feel a lot more satisfaction helping industries like education, health care, making the world a safer, more green place.
VELSHI: Ryan, give us some free advice that you'd be giving your clients who have to pay you for it.
MACK: Well, right now, the big thing in the news is what regulations are going to come out over Wall Street. We have to regulate our own personal finances and make sure that we're preparing for the worst but expecting the best. Let the government do its job, you need to do your own job to make sure your personal finances are in order. And you'll be ok.
VELSHI: Thank you to all of our panelists for spending the hour with us and also thank you to our guests who shared their stories of ingenuity and determination and financial smarts.
A reminder, if any of you missed any of this special hour, it will air tomorrow noon to 2:00 on cnn.comlive/money&mainst. You'll also have a chance to chat live with our panel.
COOPER: A moment ago, we showed you a poll and only 9 percent of Americans said they were better off than a year ago. We hope the advice you heard this hour is going to help push those numbers higher in the year to come.
As always, thanks for watching. We'll see you again on the next CNN MONEY SUMMIT: MONEY & MAIN STREET.