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Mortgage Rates at All-Time Lows, Economic Gender Differences, Fraudulent Energy Star Label, Debunking Green Myths, Latinos in America

Aired October 24, 2009 - 09:30   ET


GERRI WILLIS, CNN NEWS ANCHOR: Hello, I'm Gerri Willis and this is YOUR BOTTOM LINE the show that saves you money. Home prices are dune cross the country and they're still falling. So, grab a pen and paper, we've got your guide to offseason home buying.

Green myths, we'll separate faction from fiction when it comes to what's good for the environment and your wallet.

The battle of the sexes, how and why men and women should handle their finances differently. Plus, what you can learn from your spouse. The show that saves you money starts right now.

Home prices are bottoming out, right? Well, maybe not. According to a new forecast, home prices are expected to get a whole lot more affordable. In fact, they're predicted to plunge in 342 out of 381 markets during the next year. Overall the national median home price is forecast to drop 11.3 percent by June 2010. For the following year, that's 2011, Pfizer (ph) anticipates some stabilization with prices rising 3.6 percent. The weakest cities, they're Miami, Orlando, Las Vegas, and the most stable, you might be surprised, Kennewick, Washington, as well as Fairbanks and Anchorage, Alaska.

Well, the fall and winter months are usually considered an off-peak time for home buying, but as you just heard with home prices dipping and mortgage rates at all-time lows, what are the secrets you need to know to get the best deal in the market?

Here with some advice is Rick Newman, he's chief business co correspondent for "U.S. World and News Report."

Rick, great to see you.


WILLIS: All right, we talk about how hard it is to get the mortgage, you have to put 20 percent down now, have a great credit score, 720, 740. You think there's more to think about.

Right, we know about home buying all the time because it's been such a great market for that and we talk about how hard it is to get the mortgage, you have to put 20 percent down now, you have to have a great credit score, 720, 740, but you say there's even more to think about.

NEWMAN: Right, well we know about this home buyer tax credit, the $8,000 credit that's supposed to expire in December, it's looking like, I mean, there's a lot of chatter in Washington maybe this is going to be extended. This has a big impact whether you qualify for that credit or not because that credit has driven up demand for houses in a lot of markets, which raises price ace little bit. So, people just need to be paying attention to that. There are some other things going on in Washington sort of behind the scenes that affect the availability of mortgages and mortgage rates which is going to affect the market for houses going into the winter.

WILLIS: The bottom line there, of course, is there's no guarantee this low mortgage rate also continue.

NEWMAN: Right, but I think for sure, the government is not going to let things go spiraling out of control, so I think the rationale in Washington for sure is at some point yes, the government needs to stop subsidizing the housing market, but it will be a gradual pullback, probably likely we'll see some extension of that credit, and mortgage rates are probably going to stay low for a long time because as all of the economists say...

WILLIS: That's good news.

NEWMAN: The housing market has to get better before the overall economy gets better.

WILLIS: One of the things you say, and I think it's interesting, before you go out and buy, make sure that job is stable.

NEWMAN: Right, so companies for the most part have stopped these big mass layoffs we've heard about, but unemployment is still getting worse, so your job might be stable, or you might feel like it is, but if something happens the chance you'll be able to get another job quickly are not great.

WILLIS: Right.

NEWMAN: So, you've really got to do all this homework and really make sure you're in a place to buy a house if that's what you're going to do. Now that said, as you pointed out it really is a buyer's market and it's going to stay that way for some time.

WILLIS: I want to talk to you about foreclosures. A lot of people think that's a great way to get in the market if you're having a hard time affording a house. Would do you it now?

NEWMAN: Well, it's not as simple as it sounds. I mean, this is not like buying a pair of jeans off of the clearance rack and just getting 50 percent off. Yeah it sounds like a great deal. Foreclosed properties are often complicated, there can be leans on those properties, other legal issues and foreclosed homes tend to be in neighborhoods with other foreclosed homes, so you're going to have to, you want to go to that neighborhood, look around, decide if it looks like, are there shabby, unkept homes, if you can get into some of the local real estate records, find out what other foreclosures have happened in that area and just get a feel for the neighborhood, is it a nice stable neighborhood, homes that are well taken care of or does it feel like it's kind of marginal. I mean, if you don't want -- you know, foreclosures are still going up so the house next to yours could end up in foreclosure, too. More than ever, get into the community you're interested in, do your homework, ask around, knock on doors, canvas realtors and do your own intelligence gathering, really.

WILLIS: Do your homework. Great advice, Rick thanks for that.

NEWMAN: As always, thank you.

WILLIS: So, as we mentioned mortgage rates are at record lows. Take a look at these rates, 30-year fixed, 5.07 percent, a 15-year fixed 4.51. So, you want a piece of this action? You'll find a re-fi makes sense if the rate you can lock in is half a percent to three-quarters of a percent lower than the rate on your current mortgage. Shop around to get the best rate. You may find some lenders are more willing to be flexible than others. And remember refinancing is not free. You can expect to pay three percent to six percent of the mortgage amount in fees. And don't re-fi if you're planning to move in a couple of years unless you're worried your adjustable rate mortgage will reset to unaffordable levels.

Up next the battle of the sexes, men, women, and the different ways they can and should handle their money. I can't do this job without him,


WILLIS: Time now to pit the women against the men or in our case, our woman. Manisha Thakor, the author of "Get Financially Naked: How to Talk to about Your Money with Your Honey," against our man, he is Ryan Mack, the president of Optimum Capital Management and a frequent participant in our show, good to see you both.

All right, now there's going to be some fireworks here. So, I invite you to talk to each other. Manisha, I want to start with you. A lot of people are finding out their employers are cutting their 401(k) match, they're not happy, saying times are hard, I'm going to stop investing. Is that the right thing?

MANISHA THAKOR, "GETTING FINANCIALLY NAKED": Now, to me, you know, it's like when a woman is 30 pounds overweight and she's sitting there agonizing over romain over red lettuce. Just eat lettuce. So, a lot of lettuce are not saving enough for their retirement. And my point is this, we tend to spend 12 years out of paid workforce as compared to men, that difference is massive, over a life cycle, because we spend it in the early years and it means you'll get half as much in your nest egg, so you need to keep contributing.

WILLIS: Right. You can't disagree with that, now, can you?

RYAN MACK, OPTIMUM CAPITAL MANAGEMENT: Well, I agree with it and the bottom line is, well, sometimes men get a little bit overconfident and they tend to trade a little bit more frequently than women do. There's, a study by the University of California that studied 35,000 couples and found that men turn over their portfolios about 77 percent annually versus about 53 percent annually for women. You know, we all know that the buy and hold strategy works the best. And in your 401(k) strategy it's the best place to use that buy and hold dollar cost investment strategy. Those people who bailed out in 2001, 2002, they now know that or 2007 and 2008 when the market returned they know about locking in your losses and selling on the low.

WILLIS: Can I just say, good luck convincing men in that.

OK, Manisha, I want to ask you about investing money, a lot of people invest beyond their retirement, and that's typically a great idea because most of us even if we do the 401(k) we still will need more money in retirement. Where do you put that dough?

THAKOR: With someone you trust. And I highlight this because in the news right now we've Patricia Cornwall, the famous detective novelist, who now is looking for $40 million of her hard earned dollars because she invested, assumed the money would be taken care of. I see this mistake in women a lot. I really feel you want to take control of your finances, simple formula you can use, 110 minus your age as a woman, as a woman, maximum amount you put in stocks, remainder in bonds and cash.

WILLIS: Now, Menisha, you're saying get an adviser. Do you have to get an adviser, Ryan?

MACK: I think an advisor will definitely help, but I think the days of going to an adviser without adequate knowledge of what you're getting into, those days are over. I always tell individuals if I know that if steal a car and I'll get arrested, you know, I don't have to be to be a lawyer or have (INAUDIBLE) to have that knowledge. But you do you do have to have the basis knowledge. Now, the problem with men is that sometimes we might have a little bit too much pride to say that we actually need assistance from somebody.

WILLIS: I'm making the list, so it's pride, you don't stay in your investments long enough.

THAKOR: Ants in the pants.

MACK: I have to say that most of the couples that I work with are those individuals the woman is always the one who comes for the assistance, they're always the one who takes the initiative and says look we need assistance, the man kind of just sits back and I don't need help, I can do it all by myself, but sometimes it's OK to be humble and say I could need assistance., but make sure you help yourself first.

WILLIS: The car, the metaphor for live, asking for directions every time.

MACK: Exactly.

WILLIS: All right, let's get on to emergency funds. This is a tough question and I don't really know the difference between the sexes on this one, but you have money you may need at any time in this market where interest rates are so low where do you put it? I'll let you start, Ryan. MACK: Well, I think that right now, if you look at they'll show the highest rates. I think that online bank accounts have great yields. I'm actually selling individuals, look at your local credit unions, they have great yields because they don't appeal to profits. And look at Maria Shriver, she had a great document, "The Women's Nation," it's out right now that's really saying that women are starting more businesses now and a lot the growth and a lot of different sectors are coming from women-dominated markets, so the men, they better step it up, otherwise they're going to have to need that emergency fund a whole lot more than women, it seems.

WILLIS: Menisha.

THAKOR: Well, an done thing I highlight is option rate securities, don't forget about that. We saw so many people...

WILLIS: The what? What are you talking about?

THAKOR: So, a couple years ago there was this fancy-shmancy product that a lot of firms offered their clients, where you could put your money in cash and get a higher than average interest rate.

WILLIS: So, they offered you a little more and you were a little greedy you would step out and buy that.

THAKOR: Exactly, and then you got your fingers chopped because the whole market froze up, and so what I like to tell women is don't get greedy. You want to make sure. If it sounds too good to be true with personal finance usually it is.

WILLIS: All right, OK. I have to get you to this question about asking for a raise because this is where women fall short. Men will ask for the money, women not so much. Menasha what is your advice?

THAKOR: Yeah, so I really feel you need to ask for it. In fact, there's a new book out called that title and I suggest women read it. Here's the problem, 80 percent of men identify with this statement, "I set my value in the office place." only 20 percent of women believe that and it's really hard, there are all of these articles with things like 11 powerful women that make men squirm. So there's a lot of societal pressure for us not to be strong. We need to encourage each other to do it.

WILLIS: Ryan, I want to get you in here, because you probably have good advice for us when it comes to asking for more money.

MACK: You know, definitely, I mean, most individuals, especially if they like their job, they can be on the brink of being fired for laziness and they'll still say, well, I deserve to get a raise, you know, so, but what are you doing to deserve getting a raise? Do you log and write down all of those things, do you get to work early, do you write down all those proposals and projects that you propose to say let me get that done to an increased value to the company more so than that person to the next of you.

WILLIS: All right, guys. Thanks so much for your help today, Manisha and Ryan, great information, good conversation and it's good to know that we can reinforce both of the sexes.

All right, we all have to worry about money, but for Latinos the relationship with money can be very different from other folks. Some Latinos, a community leader explains, have never, never trusted banks.


JOHN HERRERA, LATINO COMMUNITY CREDIT UNION: The community was basically then attacked; people were being robbed because there wasn't a safe place where to keep their money.


WILLIS: A little later in the show we'll speak with the author of "The Latino Journey to Financial Greatness."

Also ahead, we'd all like to go green and save green at the same time, but can you believe the hype surrounding those eco products? We're separating fact from fiction.


WILLIS: Remember that rebate program for appliances that was announced right after Cash for Clunkers? Customers were encouraged to trade in their old energy burning washers, dryers, refrigerators for new ones with Energy Star efficiency. But there is something you may not know about those Energy Stars and our Mary Snow found that what you don't know could cost you.

Hi, Mary.

MARY SNOW, CNN NEWS CORRESPONDENT: Hi there, Gerri. And you know, you see the Energy Star labels they become so common, they're put there by manufacturers on a voluntary basis. But a government report found some holes in claims made by appliance makers and so did "Consumer Reports."


SNOW (voice-over): The Energy Star label is intended to guarantee consumers a product is energy efficient, but a Consumer Reports Labs, Mark Connolly has found appliances like this freezer that should not have the Energy Star logo.

MARK CONNOLLY, CONSUMER REPORTS: In our labs, we found it used a lot more energy than indicated.

SNOW (on camera): Can a manufacturer just put on an Energy Star sticker?

CONNOLLY: Well, they are supposed to have the products tested and they do but they themselves tested it.

SNOW: So if you had not run this test people would buy this thinking OK I'm saving on energy and I'm saving money.

CONNOLLY: Correct.

SNOW: But in reality?

CONNOLLY: In reality it's using twice as much energy that it claims.

SNOW (voice-over): And in an appliance like this claiming an energy bill of $60 a year could actually be double. Of hundreds of products he tests every year he estimates five to 10 percent should not be labeled Energy Star.

CONNOLLY: For the most of the products we test, that claim to be Energy Star, are in fact telling the truth but, again, there are enough products out there that give us some concern.

SNOW: Those concerns are shared by the Department of Energy's inspector general who in an audit found that "the department had not implemented planned improvements in the Energy Star program." The report concludes that those delays "could reduce consumer confidence in the integrity of the Energy Star label."

We asked the Department of Energy's Kathy Zoi about the criticisms.

KATHY ZOI, DEPARTMENT OF ENERGY: The inspector general identified a number of improvements to the program and frankly we agree with those improvements and we've put a plan in place to get all of those improvements implemented.

SNOW: But as the Department of Energy works on the improvements it's in the process of planning a rebate program for consumers buying Energy Star products, $300 million of stimulus money is being used. Can consumers be confident those products are as energy efficient as they claim to be?

ZOI: There have been examples that are very rare where a manufacturer has misused or misappropriated or misapplied the Energy Star logo and when the Department of Energy or EPA have found out about that they have taken steps and actions and those manufacturers have had to recompense people who have bought those appliances.


WILLIS: Unbelievable. Mary, I thought the Energy Star label meant something. What are these people saying about the label and about these independent audits of energy efficiency?

SNOW: Yeah, Policing is the big issue here. And we asked the Department of Energy about that. They say they have started third- party testing on some of these products. They plan to expand it to others. No set timetable. They are hoping in the meantime some of these punitive actions that they mentioned are going to get manufacturers in line.

WILLIS: Well, that's just an amazing story. Thank you so much for bringing it to us.

SNOW: Sure. WILLIS: Saving energy not only helps your wallet, but the planet as well. With so many products, labels and trends out there, it's hard to know just what's worth is and what's just hype. Here to debunk some of the most popular green myths out there is Pat Esswein, she's an associate editor with "Kiplinger's Personal Finance" and she's joining us now from Washington.

Pat, welcome.


WILLIS: All right, well let's start with the first of these. You know, my mom always told me I had to turn out the light bulb every time I walked out of the room, but you say that's not necessarily true now.

ESSWEIN: Well, it depends on what kind of light bulbs you have in the room. If they are traditional incandescent bulbs, then your mom was right. You should turn them out every time you leave the room. With compact fluorescents, it's different, and that's because the more often that you turn a CFL on and off the shorter its operating life.

So, what the Department of Emergency recommends as a rule of thumb is that if you're going to leave a room for more than 15 minutes you should turn the CFLs off.

WILLIS: All right. That's great advice. I have to ask you about the labels, though, "ecofriendly", "green," "earth smart." Does this mean anything?

ESSWEIN: Those really fall -- those kinds of vague marketing claims really fall into the category of "green washing." The Federal Trade Commission has begun to crack down on these sort of green labels to ensure that they meet their regulatory smell test, if you will. Meanwhile, maybe because of the FTC's concern, some manufacturers have begun to clarify their labeling and put more information and advice for consumers on their Web sites.

WILLIS: That's a great idea. Let me ask you about hybrids, though. I know people think I'm going to pay more for the hybrid, but you know what, I'll make it up as I save money on gas. True or false?

ESSWEIN: Well, that's sort of true. With the hybrid, the degree to which you recoup that up-front premium, which is usually about $3,000 plus, depends on how often and how far you drive, how long you expect to keep the car. Generally, you need to keep it five years or longer to recoup that premium. And also it depends on the price of gas.

The higher the price of gas, the more quickly you'll recoup the premium. When gas prices are low, as they are right now, then if you buy a hybrid, it's -- you're buying it sort of as an insurance policy against future higher prices.

WILLIS: Pat, great information. Thanks so much for your help today. We certainly appreciate it.

ESSWEIN: You're welcome.

WILLIS: Fewer than 50 percent of Latinos in America carry a credit card. Our here to tell us why and what the implications could be.


WILLIS: Most everyone is feeling the financial pinch, but what are some of the issues facing Latinos in this country today? Louis Barajas is the author of "Latino Journey to Financial Greatness" and he's joins us from Los Angeles.

Great to see you, Louis.


WILLIS: All right. I want you to start by telling us about some of the problems Latinos face. I know they're growing rapidly, the fastest growing minority population in the country. What kinds of issues are facing them when it comes to their money?

BARAJAS: Well, we've got two core issues, right now. First of all is the aftermath of the subprime mortgage. There's a lot of predatory lending in Hispanic communities, and so what's happening is we're seeing a lot of Hispanics, a lot of Latinos who is purchased homes who are now losing them more than any others in America. We're dealing with foreclosure issues right now.

Another key issue is this recession has really affected mostly blue- collar worker, and that really more resemble what is the Latino population is in America, blue collar, and they're being affected by unemployment. Another key issue is lack of credit because Latinos deal so much in money, so many Latinos are unbanked in America.

WILLIS: I want to talk to you about that, Louis. my understanding, Latinos are twice as likely not to have a banking account, which sounds to me something that sets you up for more financial problems. Now, a lot of us started not trusting banks. Is that true in the Latino community, as well?

BARAJAS: Well, what happened is that you have to go back to the cultural issues. A lot of Latinos come from poor countries and in those countries they don't trust the institutions. The banks and governments have ripped them off. They come to the United States and bring those beliefs with them. Then all of a sudden we have those banking fiascos, and they're saying, see, we shouldn't put money in the banks. The problem is they're going to check-cashing places, they're paying more money and they're not getting any credit if they're not opening up bank accounts and getting credit cards.

WILLIS: Well, you say they're not getting credit cards. Fewer than half of Latinos have credit cards. But that's how you establish credit. Tell me, how do you fight back against that? How do you get people to really become part of the economic mainstream?

BARAJAS: It's education, education, education. You know, I've written several books now for Latinos, I've written several books for most people and I think there's a disconnect American right now, between Wall Street and Main Street and that's what I focus on I call "My Street." And we have to talk to people at their level about what's concerning them. A lot of Latinos are watching television and they're seeing their -- they're talking about 401(k)s disappearing. They're seeing jobs disappearing. Most people -- I think it's 70 percent of most Hispanics in America do not even invest in a 401(k), so they don't care about the market. They care about their jobs, they care what's going on with their homes.

WILLIS: All right, so obviously not investing for retirement, so you could see in the short run that's a benefit, right, you didn't lose all that money, but long term the Latinos have to get involved in investing for retirement. Right?

BARAJAS: Absolutely. And again, it goes back to education. Also making sure that they're well educated., you know, right now we have a 50 percent national high school dropout rate. We have to get Latinos educated so they can earn more money and learn the American process of making money, putting it away, opening up a retirement plan. That's how we're going to do it, but back to these type of meetings that we're having right now.

WILLIS: Louis, thank you so much for join us today. We appreciate your time.

And tonight at 8:00, join Soledad O'Brien for an encore presentation of "Latino in America," tonight at 8:00 Eastern, only on CNN.

As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will 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. 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 are next in the CNN NEWSROOM. Have a great weekend.