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Issue #1 CNNJune 4, 2008 GERRI WILLIS, host: It’s that time of the show when we hear from you and answer your money questions. Let’s get right down to it. Bob Moulton is with Americana Mortgage, Kendra Todd is the Yahoo! finance columnist and real estate broker, and CNN’s Business Correspondent Stephanie Elam as always. All right guys, let’s get right down to the questions. Number one from Andrew: “What is the worst”--or, I’m sorry--”the most effective way to purchase a house without paying too much for it? Owners seem to be listing homes at the same price they paid or even higher instead of what they are worth right now in the market.” Kendra, what do you make of that? Ms. KENDRA TODD (Yahoo! Finance Columnist): Well, a home is only worth what someone is willing to pay for it. So people need to realize there is a distinct difference between an asking price and a selling price. So, go out there and make offers. You’d be surprised. There are people there listing their houses at half a million dollars, but at the end of the day, they’re accepting $380,000. WILLIS: Wow, that’s a big difference. Bob, I want you to weigh in because you’re in the marketplace. You know what is going on. Tell us just a little bit about what you’re seeing with pricing. Kendra is in Florida; you’re up here in the New York area. Mr. BOB MOULTON (Americana Mortgage Representative): The pricing is very localized and people do have their house out there still at the high watermark somewhere where we saw prices in 2003, 2004. If you think you want to pay a lower number for that house--if the house is listed for $400,000, you want to pay $350,000--or for $300,000 and meet somewhere in the middle. WILLIS: Low ball. Mr. MOULTON: Everything is negotiable. Each seller is motivated very, very differently. People ask you for advice--should I low-ball 10 percent? Find out from your realtor--why is that person willing to sell? WILLIS: Or go on your own guts sometimes. If you know a lot about the marketplace. Let’s answer Jennifer’s question in Arkansas. She asks: “If interest rates are going down, why are the long term mortgage rates going up?” Stephanie, make sense of these rates. Ms. STEPHANIE ELAM (CNN Business Correspondent): Well the thing is everyone hears the Feds fund rate. That’s the rate that we hear all of the time that they’re cutting. Well, actually your long term mortgage rate--that’s actually connected to the 10-year treasury yield. So that is actually controlled by bond traders. And so, they’re worried about inflation. So, if the Fed cuts rates, then they’re worried about inflation, so they’re going to demand more and therefore, your prices come up. WILLIS: Your mortgage rates go up. Ms. ELAM: Go up. WILLIS: Very well done. Devinder--and I hope I’m pronouncing that correctly: “What help is there for people who lost their down payment and their equity due to falling prices? Our bank doesn’t want to refinance because we owe more than the house is worth now.” Kendra, so many people caught in this horrible situation where they owe more than the house is worth. What do they do? Ms. TODD: I wish there was a straight answer for such a screwed-up real estate market, but there isn’t. The best answer is that they’re just going to have to wait it out or try and negotiate with the banks. You do need to realize that lenders do exist to do more than just collect monthly mortgage payments and they’re getting into situations where they are willing to negotiate in some cases. WILLIS: All right--tough situation. Mr. MOULTON: This is a similar situation that we saw about 15 years ago--prices went up dramatically in the 1980s, dropped in the early 1990s, and you really have to ride it out. It’s like buying a stock. If it goes down the following week, hold onto it. If it is your primary residence, you’re enjoying it, you’re getting a tax write-off, enjoy the home, make the payment and hopefully it will come back in five years or so. WILLIS: It can be easier said than done, though. Ms. ELAM: Yes. WILLIS: A lot of people out there really have to move. It’s a tough--it can be a vice grip for some folks out there. Audrey asks: “My husband and I have been looking for a home for the past two years with no success. Our purchasing power is $410,000. The homes are so overpriced. How does someone in our circumstance find an affordable home?” Bob, weigh in. Mr. MOULTON: You know talk to your realtor. Go on to Zila (sp), go onto to PropertyShark. Do your homework. You need to understand what’s happening in your marketplace. You need to understand where prices are going. They could be dropping 5 percent; they could be dropping 10 percent. People are looking to buy the house at the absolute bottom price. But again, if you’re going to live in it, if you’re not a speculator, you have great interest rates right now, mortgage rates are at 6 percent-- WILLIS: This is true. Mr. MOULTON: If you wait for the prices to come down, mortgage rates could be at seven or eight, you’re going to be locked into a higher payment. WILLIS: Guys, great answers, tough questions. Kendra Todd, Yahoo! columnist; Bob Moulton, who is right in that industry, and Stephanie Elam.
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