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YOUR BOTTOM LINE

Home Prices Up, Sales Down, Rebuilding New Orleans, Stealth Job Hunting, Affordable College, Extra Insurance Protection Waste

Aired August 28, 2010 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


POPPY HARLOW, CNN ANCHOR: Well, big news on your number one investment this week, your home. Some prices may be up, but sales are way down. We're going to break down what it all means for you.

Also ahead, stealth job hunting: How to find a new job while you're still employed.

And from fees to insurance, you could literally be throwing away money. What you're likely paying for but could really do without. It's all ahead, YOUR BOTTOM LINE starts right now.

Well, the housing market cannot catch a break. The latest numbers are out and they are ugly. Existing home sales down 27 percent in July, the lowest level we've seen since 1995. New home sales also not looking good, down more than 12 percent, according to the Commerce Department.

Inventory rose 2-1/2 percent with now 12-1/2 month supply of homes on the market, talk about a glut of homes that are for sale, right now. And when it comes to prices, the median home price tag is just over $182,000, up just slightly from last year. Let's get to what it means for your No. 1 investment, of course, that's your home.

Carmen Wong-Ulrich is a personal finance author. And joining us from Atlanta, Ilyce Glink, the author of, "Buy, Close, Move In." Two housing experts. Appreciate having you both here, because really this week it's been all about housing, it shook the stock market, but what's also interesting is some investors had already priced it in expecting bad numbers.

Start with you, Carmen, when it comes to what buyers, sellers and people on the sidelines should do with these numbers. Why do they care?

CARMEN WONG-ULRICH, PERSONAL FINANCE AUTHOR: Well, here's the thing. They care a lot, obviously. If you're a homeowner, you've seen your equity fall in some markets 65 percent. And with over a third of Americans now underwater on our homes, we're trapped by this giant mortgage debt. And also home is no longer going to be a resource for your retirement. Lot of folks were banking on these great gains that we had for years and years as cushioning a very fantastic retirement. Well, between the housing market going down and retirement funds going down, we've got a new reality, here.

Now, if you're looking to buy, here's the thing, a lot of folks are looking to buy right now if they're in the shape to buy. Will lenders lend? That's the question.

HARLOW: That's the question. And having their credit in the best shape possible is a big issue here for them if they're ready to buy.

What do you think, Elyse? I mean, what should people take away from these numbers? We know they're abysmal, but that doesn't help us.

ILYCE GLINK, PERSONAL FINANCE AUTHOR: No. I mean, these numbers were just dreadful. Every economist was saying, oh, I was so surprised, but this was telegraphed way back in May. Mid-May, we saw the Mortgage Bankers Association start to say, hey, folks, the number of people looking to buy a house or get a purchase mortgage has plummeted 40 percent after the expiration of the home buyer tax credit to $8,000, $6,500. The message is clear -- if you're not handing somebody a wad of grand, you know, they're not going to be buying a house. And I think we're seeing that come home to roost now.

HARLOW: I want to show everyone this chart. Take a look at what has happened to home sales, folks, since that $8,000 government tax credit went away at the end of April, a complete fall-off. The boom we saw clearly, Carmen and Ilyce, it was a sugar rush and what we're seeing now -- it was a artificial, right Carmen. And what we're seeing now is the harsh reality that's here to say for the next six months or so, at least?

WONG-ULRICH: I mean, it wasn't sustainable. We know that this was going to happen to some extent. To this drastic extent, I don't think we thought that. But it is going to continue because here's the thing, it is a very much a confluence of events. It's not just the tax credit. It's unemployment. If you don't get people jobs, they can't borrow money to buy the home. It's also buyers and sellers at a standstill, because the sellers are saying come on, take it at this price, and buyers are saying I know the market's going to go down another five to 10 percent, so I'm wait it out. So, we're at a standstill, right now.

HARLOW: And you said, Carmen, people shouldn't feel pressure to buy right now.

WONG-ULRICH: Yeah, I still get asked, though, by a lot of people who are these prices as low as you can go and these interest rates are so delicious. Be careful though. Don't buy unless you are ready to buy, unless you really have a great cash cushion to buy. And really we're going to see interest rates are going to remain at lows. We've been assured by the federal government that this is going to stay down here at least through the winter, if not for another year. And home prices, a lot of analysts are saying, may continue to go down another five percent to 10 percent through the winter.

HARLOW: Ilyce, you really have little to no faith in what the government did to try to prop up the housing market. You said look, the government programs were a complete failure. Will we see any more government intervention, here? Is that the recipe to fix this mess? GLINK: I sure hope we don't see any more government intervention. I mean isn't it enough that the fed just spent $1.25 trillion to buy mortgage-backed securities? They stopped buying it, interest rates fell a lot further a lot faster than when they were buying it. We spent, I don't know, $80 billion on home buyer tax credits, but turns out that's such a small portion of the people who actually bought homes needed that to actually buy it. Everybody else just said, wow, free money, let's just go for it.

So, I kind of think that we saw the marginal utility drop as we had the first home buyer tax credit, the most people who needed to buy bought then and it was still a teeny, tiny percentage the second time when they extended it, expanded it all the way to April 30, just a sliver actually need that help. I can't imagine what would happen the next time they did another stimulus.

HARLOW: What do you think about sellers right now, Ilyce? I mean, they're dealing with this huge glut of inventory on the market, double what we usually have in a normal market for housing. What does a seller do, right now? They have competition like they've probably never seen.

GLINK: If they haven't already torn their hair out, I'm sure they're probably doing a little of that. You know, the real thing that I tell sellers is -- and Carmen is exactly right -- in areas of the country where you don't see 13 percent unemployment or 15 percent true unemployment and you're seeing things being single digits, a little bit lower, those markets are doing a little bit better.

So, what you need to do if you want to sell is go outside your house and count the number of foreclosures in your neighborhood. If there's more than one or two you're going to have a tough choice to make. You're going to have to decide if you want to lower your price all the way down to where those foreclosures are selling or you're just going to have to hang out and wait until the market recovers and it could be a couple of years again.

HARLOW: I think it's great advice especially what to realistically do as a seller and Carmen also talking about the fact you don't have to sell right now. It's a great point.

WONG-ULRICH: Or buy. You can wait. Until you're ready.

HARLOW: Thank you both for joining us. I appreciate it. Thanks so much.

And this morning, we've got a very special "Building up America" report to share with you from one of America's great cities. By some estimates, more than a quarter million homes on the Gulf Coast were destroyed by Hurricane Katrina, and before many could break ground, they needed the government, agency after agency, to just get out of the way. As our Tom Foreman reports, they finally have help to rebuild their American dream.

(BEGIN VIDEOTAPE) TOM FOREMAN, CNN NEWS CORRESPONDENT (voice-over): When Katrina hit New Orleans working class neighborhoods took the worst of it; more fatalities, more flooding and less hope for navigating the bewildering tide of expenses and red tape to rebuild. In the Ninth Ward, Florine Jenkins felt it.

(on camera): Did you have any clue what to do?

FLORINE JENKINS, NINTH WARD RESIDENT: No.

FOREMAN (voice-over): In the Gentilly (ph) neighborhood, Nikki Najiola saw it, too.

NIKKI NAJIOLA, BUILD NOW: You can tear down your house, you put it back together. If put it back together, do you have to elevate it? If you do, if you are going to elevate it, how high are you going to elevate it? Where is that money going to come from? And do you take it from this pool of money or from that? It was just so overwhelming.

FOREMAN: That's why now Nikki manages a unique non-profit project called Build Now. Simply put, it is a construction company that offers an array of modestly praised home designs, an endless supply of free advice to anyone trying to build and a commitment to bring the working class neighborhoods back.

BEN SEYMOUR, BUILD NOW: We actually currently are in the living room.

FOREMAN: Ben Seymour is in charge of construction and says not only are the homes designed to stand far above floodwaters and resist gales with eve-less roofs and anchored porches, but the designs can also be easily adjusted; larger or smaller to fit the needs of families minding their money.

SEYMOUR: You can size it down, still gives you a big open feel. It is built to what you are going to use.

FOREMAN (on camera): In every way these really are working class family homes.

SEYMOUR: Absolutely. Absolutely.

FOREMAN (voice-over): This is not a giveaway. The clients pay fair value on average around $150,000. But just having a guide to the baffling process of permits, insurance and financing in the wake of Katrina, was a godsend for Miss Jenkins.

(on camera): Which house do you like better, your old house or this one?

JENKINS: This one. This one.

FOREMAN (voice-over): And one at a time, that is how they hope to keep turning empty lots into homes again.

Tom Foreman, CNN, New Orleans. (END VIDEOTAPE)

HARLOW: What a story. And as you know, tomorrow marks the fifth anniversary of Hurricane Katrina's landfall on Mississippi's Gulf Coast. 90,000 square miles were affected by that storm and the somber truth is that people in the region are still working to pick up the pieces half a decade later. If you'd like to help out, make a charitable contribution of any kind, here are some tips to follow.

First, charitable contributions must be made to qualified organizations if you want them to be tax deductible. Generally you can deduct your cash contributions and the fair market value of most property that you donate to one of those qualified organizations so make sure you know what those are.

Also, make sure to keep good records of any contributions that you make regardless of how big or small they are. For any consideration also that is made in cash, you have to keep a record of that contribution such as a bank or credit card statement or something like that. And for any contribution of $250 or more you must have written acknowledgement from that charitable organization that will back up your donation.

All right, well up next this morning, stealth job hunting. How to look for a job while you still got one.

(COMMERCIAL BREAK)

HARLOW: Well, anyone employed these days feels pretty lucky just to have a job. But what if you sense impending layoffs at your employer or what if you're really unhappy with your current gig? Well, Liz Lynch joined us to talk about stealth job hunting, how to look for a job while you still have one. She's the author of, "Smart Networking: How to Attract a Following in Person and Online."

(BEGIN VIDEOTAPE)

You know, people that do have jobs right now, they are lucky but people are still, and rightly so, looking to advance. So, the No. 1 thing you say is you have to prepare early and build your network. What's the best way to do that that's going to make a difference, not just gathering a lot of people on LinkedIn?

LIZ LYNCH, AUTHOR: Exactly. Well, you have to have a purpose. And since networking is the best way to find a job, you need to start building your network early, so that means going to networking events, attend professional association meetings, industry conferences and start to network face to face, but also start to build your network online as well. So, that means joining LinkedIn, filling out your profile, make sure it's complete and also up to date so that people can contact you.

HARLOW: And you said look, bosses expect you to be on LinkedIn. They may even be on LinkedIn. So, that's not a sign that you're trying to leave your gig, right? LYNCH: No, exactly. and actually, you know, it's not like a job site where your boss sees your resume there, he can get suspicious. So, he would expect you, or she would expect you to be on LinkedIn to network for your own job, right now.

HARLOW: You know, when it comes to the connections you make networking and turning them into meaningful opportunities for you, what's the best way to do that, because I think it's far more than handing out your card at a networking event. There is a lot more you have to follow up or it won't result in anything.

LYNCH: Absolutely. And the key is you have to have conversations. You have to talk to people. You know, talk to friends and your former colleagues and in your you networking contacts. Find out what they do. Ask questions. I mean, the whole point is you may not know who's hiring or what you might even want to do next, but it's through those multiple conversations that you can begin to collect information that could connect you to your next opportunity.

HARLOW: It's also about talking to your friends, you know, they may things that you'd be fit for that you don't even know. Right? It is about that.

LYNCH: Exactly. and so you need to let people know that you're open to looking so that when they hear of opportunities they can point you in the right direction.

HARLOW: What about telling your current boss? That's a real sticky issue. When is the right time?

LYNCH: Usually it is best to wait to tell your boss until you have a job offer in hand and are ready to leave. People will view you differently when they know you have one foot out the door. It is just human nature. The one exception to this though is that if you are networking and trying to look for a job internally, because word gets around, it is a smaller environment and you want to break the news to your boss before somebody else does.

HARLOW: So tell them right away, so and so from this department approached me, here's why, here why's I'm interested in exploring it, just be very open?

LYNCH: Exactly. Just say we talked in our last performance review how this might be good for my career path and I'd just like to explore it.

HARLOW: More and more people are looking at graduate schools, looking at professional training degrees but why spend that money unless it is exactly what you want to focus on? What do you think the right time is for folks to look into getting additional train that's really going to elevate them in the job search process?

LYNCH: Well, people need to have a good sense of where they want their career to go and if you're looking at different job postings out there and if you see there are any gaps in your skills or your knowledge, it is really good to start to fill those gaps in now. You know, it's really a competitive job market out there. So, even though you are employed, you do have an edge, but it really helps to try to increase your advantage as much as possible.

HARLOW: Night courses, weekend, you can do all of that.

LYNCH: Yeah, and you know, and some companies even still have in-house training programs, if you can believe that. Take advantage of that while you're still there.

HARLOW: Right. See what they're going to pay for, they may help you out, there. But I think a critical, critical point that you always make, is stay on top of your current job. Even if you're not happy, you really have to be a top performer or you could lose that job.

LYNCH: Yeah, absolutely. You know, you are much more attractive to a potential employer when you are employed and you have more negotiating power at that point as well, so don't do anything to rock the boat. Make sure your work gets done, you aren't falling behind. Also don't raise any red flags. Like, don't wear a suit to the office if that's not the normal dress code and if you need to eat into personal time at lunch or after work to do interviews, change into your suit just before that. You know, it's a juggle act but one that stealth job seekers have to manage when they live in these two worlds.

HARLOW: Or better to take a day off if you're going to an interview, focus on that interview, wear the suit all day, don't go into work dressed up an hour late. Liz, thank you. Appreciate it.

LYNCH: Thank you.

(END VIDEOTAPE)

HARLOW: All right, good tips for stealth job hunting.

Well, did you know the first step to a good job is a pretty good education? But what about the skyrocketing costs of college these days? We're going to show you how to make college more affordable.

(COMMERCIAL BREAK)

HARLOW: Well, the cost of a college education these days is simply not affordable for many families. A "Princeton Review" survey shows that 68 percent of families say the economy is affecting their college decisions, of course, 86 percent also say financial aid is "very necessary." So, if you've got a high school junior looking at colleges or soon to be college freshman, we have some advice. Ted Beck is the president and CEO for the National Endowment for Financial Education, joins us now.

Thanks for coming in. It is an incredibly important topic with 3.3 million college graduates last year and of course, expected this year. When it comes to paying for college there are so many private and public scholarships and grants out there. What's your advice when it comes to those? Because they're more critical now maybe than ever before. TED BECK, NAT'L ENDOWMENT FOR FINANCIAL EDUCATION: Well, the first thing to do is sit down and talk to your student about what their expectations are and what the family can realistically contribute. And a really key way to go about that is fill out a FAFSA form which stands for free application for federal student aid. And that will allow you to figure out what the schools expect the family to contribute. And that will give you a good starting point. and then you really want to start looking at scholarships that might be available, different kinds of aid packages if your student has been accepted to a school. The school really wants them to be there, so work with the school and try to figure out what assistance they can provide.

HARLOW: What's the way to have that conversation with your child? Maybe they have aspirations after college that's much more expensive than the family can afford, at least at that point in time. How frank should you be with your student about that?

BECK: Well, I think you should be very honest. It's very important not to scare your student because this could be one of those first sort of adult conversations you've had with them about what their expectation s should be and then you have to manage those expectations.

HARLOW: When it comes to going to a four-year college, you're often going to pay a lot more than you are for a community college. What is interesting, I thought that you said, is look, community colleges are a great place to start. First two years there, transfer to a four year. It's not go to matter in the end. What matters is where you get that degree from?

BECK: Yeah, I've never had any ask in an interview or an interview I've given to some perspective employees, where did you start school? The question is, where did you finish? And the first two years can be very affordable if you go the community college route and then transfer. It could make a lot of sense for the family, it could make a lot of sense for the student.

HARLOW: What are the best savings strategies for college? Obviously, you want to start young. Some people when they have children. Some families aren't able to do that. Some teenagers, hopefully are working, saving for college as well. What are the best most effective strategies are out there, right now?

BECK: Well, there's different programs like the 529 savings programs. If you have assets you can set aside, also you should just develop a family budget that's going to help with that savings plan. That's very important. And make the child part of it. Summer jobs...

HARLOW: If kids pay for part of college, they're going to make a lot more of it.

BECK: They take it a little more seriously. Also, one of the interesting things we just seen in some survey work that we did is when students are getting graduation money, about half of the money, right now, is set aside for school and paying for books and that first tuition bill. So, the kids are taking responsibility here and you got to encourage that.

HARLOW: You also you need to take responsibility when they start school. I mean, you often do have time for a part-time job either on campus or off campus. Some of those job, Starbucks, for example, and some other companies out there, actually offer health care to even their part-time employees. So, not only can they make money, they might be able to get some of that health care cost covered?

BECK: That's a really key point. And if we find that up to about 20 hours, it actually can be good for a student to have a part- time job, because it really helps with time management. It make things, take it a little more seriously. It's a good discipline and it also helps make their contribution to both the cost of living expenses as well as tuition.

HARLOW: Now, you have to remember, living expenses, tuition, spending money and health care costs, of course, too. Ted, thank you so much.

BECK: Great.

HARLOW: Appreciate you coming in.

All right, well do you ever throw away your money? You probably do. There are actually certain times you shouldn't have collision insurance for your car. We're going to explain that and also tell you about the other ways that you might be wasting your money.

(COMMERCIAL BREAK)

HARLOW: As you well know, there are a lot of financial products out that that are marketed to you every single day. There are extra insurance protection plans on big ticket items and a lot other things, but our next guest says you could literally be throwing away your money on some of these items. Mandy Walker is the senior projects editor with "Consumer Reports." She joins us from New York.

Thanks for being here, Mandy. Appreciate it.

MANDY WALKER, "CONSUMER REPORTS": Sure, my pleasure.

HARLOW: I think a big place where people can save and they don't know it is their auto insurance, when it comes to collision insurance. It costs you more, but you say you don't always need it?

WALKER: Right, no, if you have an older car. It gets to the point where your older car is worth -- well, it can end up costing you more to have collision insurance than your car is worth. What happens is collision insurance covers damage, but only to the amount your car is worth. So, as it gets older and it's worth less, you want to start checking the book value. If that collision insurance starts costing you more than 10 percent of that book value, that's when you want to start thinking about dropping it, because you're obviously repaying it year after year and hopefully you won't have an accident. So, then you can just rely on savings instead. HARLOW: All right, so check the blue book, there. Make sure you're not spending more than your car's actually worth. What about mutual funds? I mean, our brokers market these to us all the time, you see them online, but they have these load fees. The front or the back, either at the top or the bottom. And a lot of times they're excessive, these fees?

WALKER: That's right. It can be $200 to $300 for every $5,000 of your investment. At no load studies have found, year after year, tend to do either as well or even outperform load funds. So, it really doesn't make sense. I mean, you're paying a sales commission. You can get the funds that do not charge sales commission. Go to morningstar.com and research them if you're investing on your own or even make those choices in your 401(k).

HARLOW: What about when we come to checking? I mean, it's amazing, there's still checking accounts out there that charge you. Should you skip this option completely always?

WALKER: Absolutely. Look for a no-fee checking account. Otherwise, you could be paying up to $600 or more is for those accounts plus the cost of checks for the few checks that you're probably still writing. There are so many choices, so many banks and credit unions offer no-fee checking and they don't even require a minimum balance anymore.

HARLOW: What about credit card offers for insurance on your credit card?

WALKER: Yeah, this can be really expensive insurance on your credit cards. It can be about $1.35 or so for every $100 on your balance. The theory, that they'll pay it off or keep paying your balance if you lose your job, or you become disabled. You want to rely on other insurance you have instead, like disability insurance or your health insurance.

HARLOW: Right. Identity theft. It's something that can cost people a lot of money if they're a victim of it. At the same time, people spend a lot of money trying to prevent identity theft when they could just do a few things themselves and save that money?

WALKER: Right. The good news about identity theft, is it only impacts a small percentage of U.S. households each year, but as you say, can be horrible if it happens. Identity theft protection plans can charge you up to $250 a year or so. And basically they do things that you can do yourself for free. Or they have big holes in their protection. The Federal Trade Commission issued a report on one that said the holes were so big in this protection you could drive a truck through it. So, it makes sense to take care of those things yourself.

HARLOW: All right, we appreciate it. Thanks so much.

All right, that's going to wrap things up for us this morning. Don't forget to check out YOUR MONEY today at 1:00 p.m. Eastern, right here on CNN. But right now, it's time for a check of your top stories in the CNN NEWSROOM, CNN Saturday continues, right now.