With the financial and housing markets in turmoil, people always wonder about the likelihood of a recession. While a lot of reputable sources are saying that it won't come to that, Clark has noticed that the interest you earn on a CD or treasury is actually higher for shorter-term investments. Historically, recession has followed when short-term investments like a 90-day treasury pay better returns than a 30-year treasury. In addition, the stock market may be ready for what's termed "correction" -- when it drops by 10 percent. On the real estate front, we've been binging on the housing punch bowl for years and it's starting to dry up. Normally, a home's value goes up by the rate of inflation plus a smidge more for the fact that there's a limited amount of land. So in the past a house would appreciate about three percent per year. But more recently it hasn't been uncommon for a home to appreciate three percent per month.

For example, Clark's oldest brother lives in a Phoenix suburb. He and his wife bought new construction and during the nine months it took to build their home, the value went up $100,000. Then the next year the value went up $150,000. But when Clark recently visited his brother, there were a ton of houses for sale in his neighborhood with no willing buyers. If the housing market gets ahead of itself and people can't afford anything, it has to correct. Think of the market as a ladder, where people enter on the first rung with a starter home, condo or townhouse. But when you can't even reach the first rung, the builders have a tough time selling. So the builders themselves have gotten into the mortgage business and lowered the lending standards so that people can qualify for homes that may be out of their price range. The problem is that homeowners now can't sell for close to what they owe on a loan and they can't refinance. As many as five million people across the country are in a similar situation and could face foreclosure. So where's the silver lining? Well, the long-term benefit is that when we're done with this "correction" period, homes will become affordable again for the typical family. The question is how long will this process take? Meanwhile, Clark doesn't profess to be an economist, but he does think the odds of a recession are better than 50/50.

Are you buying a new house and worrying about what to do with your old home? Clark knows what it's like to have two houses and two mortgages -- it's a burden he once carried for 14 months. But what if there was a way to avoid the double payout headache? Clark recently read a story in Money magazine about a Southern California homebuilder who has started a trade-in program. You can trade your old home in and buy your new house in the same day. There are no real estate commissions on the sale of your home, which is important because they don't pay you market value. Rather, they offer a little more than 90 percent the value of your home. But you get the certainty that you're out from under having to make payments on two houses.

There's no way to gauge if this practice will pop up elsewhere in the country. What we do know is that a lot of homebuilders are desperate right now to unload their product. On a related note, the National Association of Homebuilders reports that there are offers available from a small number of builders that have a long-term guarantee. That means that if you're stuck with your house on the market for too long, the builder of your new home will buy your old one at somewhere below fair market value. The trade-in plan is obviously more to the advantage of the consumer. The downside for the building company either way is that they have to be financially strong enough to carry your home until they can sell it off.

Clark has felt very strongly that Americans could build better, more efficient housing if we build these homes in factories instead of on site. There is enormous waste, theft and inconsistency when homes are built on site. Making homes in factories is a much smarter way to do it. However, the idea has not caught on in areas of the United States outside a small pocket of the Northeast. Evidence of that was shown recently when Pulte Homes has to close the special factory it built to manufacture factory-built homes. The plant was designed to build 1800 a year, but only 1000 total homes were built. Still, the construction took less time and the buyers were happier. One small and surprising group has made factory-built homes work to their advantage. A group of Amish residents have been building factory-designed homes in their factory in suburban Washington D.C. for several years now. The homes they build are in such demand that there is a two-year waiting list for them. The homes are much less expensive to build and are as well-built as you can get. Construction of the homes costs $50 a foot, whereas homes built on site cost a couple hundred a foot. One buyer got a complete home for $90,000 in just five weeks. In addition, there are no contracts. A handshake in person is all that is required.

Clark gets comments regularly from people who feel strongly one way or the other about factory-built homes and site-built homes. Clark is a big fan of factory-designed homes, which are custom designed and erected in a factory before being shipped to the site. Builders often take issue with his stance on factory-built homes. They say he discredits site-built homes when he talks so favorably about factory-designed homes. But they are pretty neat. Clark saw a story in the Financial Times of London about one factory-built home that is much more interesting looking than anything that can be built on site. Other organizations include: Dwell Magazine, As of now, these homes are equally or more expensive than site-built homes. But soon they will be less. In addition, they take a lot less time to build and are built much more tightly and consistently in a factory. So, Clark is standing his ground on this one. By the way, if you’re thinking about doing this, you want to build a home on land you already own, particularly in a rural area.

In Asian countries, people often live in very small one-room homes. Some even have no windows. It sounds pretty claustrophobic, right? Well, people in the U.S. are buying up these types of places like hotcakes, with prices starting at about $150,000. In addition, Marriott has been building a number of “Marriott Suites” properties, which are about 350 square feet in size. The suites have a bed and bedroom, bathroom with tub, work area and kitchen. People have become so accustomed to having huge amounts of space in their homes, but it’s possible to fit everything into a much smaller space for much less money. Along the same vein, Lowe’s is offering something called “Katrina Cottages.” They are designed to withstand a hurricane and they cost between $25,000 and $50,000. The cottages are available in certain Lowe’s stores in the Gulf Coast region area. You have to build them yourself, but that’s a great price is you like the look and need a new home.

The National Association of Homebuilders holds a meeting once a year to discuss the housing market and how builders are doing. For the past few years, it’s been a very joyous occasion. But the tide is shifting. Builders take on a large risk when they build on spec, hoping that someone comes along and buys a house. And, right now, one in five homes is owned by speculators. In markets such as Las Vegas, Orlando, Phoenix, Miami and San Diego, one in four homes is owned by speculators. Normally, it would be about one in 25. Basically, a spec house means the person who purchased it, didn’t need it to live in. The reason for buying is instead to ride the wave of increasing home prices and sell the home for a higher price than it cost you. But with home prices going down in these markets, spec buying could land you in financial trouble. Spec buyers have as little money as possible invested in the deal. So, with commissions and closing costs, there is no viable exist strategy and spec buyers just hand the keys over to the bank. When it’s just an investment, people are more likely to walk away. If you own the home, you will do what you can to keep the home afloat, despite the dwindling value. So, as long as you plan to own for at least five years (seven years in a bubble market), you should be fine. If you’d like to buy a condominium, look for distressed sales or foreclosures only. Buying a condo in a coastal market could really hurt you.

Housing costs have increased so much in recent years that the value of a dollar toward a home just isn’t what it used to be. Since 1986, Clark has believed that people would be much better off if they built their homes in factories instead of having them built on site. It may seem like you’d get better quality doing it on site, but that is not the case. It’s very haphazard with unreliable workers and lack of building standards. In a warehouse, it’s much more exact and yet every house is unique. One magazine, Dwell, has its own line of high-end factory built homes. And it’s something that is growing in popularity across Europe. The homes can be built for much less and takes just a fraction of the time. One designer can build a home for $45,000 and put it in place in one day. That doesn’t include the time it takes for the site to receive the house. But once it’s ready, one day gets it done. We’ll start to see this more often in the States, mostly in cold months at first.

Homebuilders are offering incentives to get people to buy their homes because it’s become such a tough market out there. Builders are paying closing costs or giving people money to buy furniture to get them to buy. It’s a complete change from the spring when builders could get whatever they wanted for their properties. About 60 percent of builders have to offer incentives these days and some of them have climbed as high as $20,000. Builders are looking for certainty these days because they don’t want to pay lots of interest on a home that is complete. It won’t be a hot buying time until about March of next year, so it’s a great time for you to buy. As for used homes, you know if a home is in good shape thanks to the inspection. The home is already in an established area and you get a much better deal on used property. With a new home the risks are higher because the problems don’t show up until later on.

You may have noticed home getting larger and larger over the years. We’ve gone nuts when it comes to the size of houses we’re building, and builders are giving us exactly what we want. But to every trend there can be a counter reaction or reversal in trend as a result. Take Texas, for example. Everything is big in Texas. But right now, people in Dallas are actually starting to buy smaller homes. They want these smaller homes because it’s less maintenance, lower bills and a better-structured home. But one builder has had trouble convincing banks to help him subsidize these homes because it bucks the trend. His customers prefer an 1,800 square foot house rather than a 3,000 square foot house. But he finally convinced them, and now it’s a trend. In fact, Matt Holly apparently can’t find enough land to build all of these small houses. When you buy a house, don’t base it on pizzazz. Instead, look at the quality of the home in general.

Clark sometimes gets calls from people who are “building” a new house. Usually that means he or she is buying a house in a new subdivision, but rarely people actually build their own houses. Clark talked to one of these people today on the show. The man whose name is Robert lives in the Seattle area, and he built a four-story home in roughly four years. He constructed the entire home, from the plumbing to the nailing to the roofing. He came up with plans for the house, but the building department came back with a stack of fixes. At that point, he thought about giving up. But he heard some sage advice, and that was to carry it out “one step at a time.” It sounds simple, but it’s so important to remember. So, if you’re thinking of really building your own home, heed Robert’s advice.

The once-overheated housing market is no longer overheated. In fact, builders are feeling a bit fearful about sales in many communities around the country. Builders have had to cut the price of homes in the L.A. area by as much as $70,000 in order to sell them. When the market shifts, people who aren’t having much luck selling their homes pull their homes off the market. But it’s different for a builder. They must move that house. So, they try to find the right mixture of sales incentives and features to keep houses moving through the pipeline. Several years ago, builders in many hot areas didn’t have to offer any incentives. But it’s all changing now. According to the National Association of Homebuilders, one in three realtors are offering optional items for free. These include flat screen televisions, finished basements and bonus rooms. So, if you’re considering buying new construction, make sure you survey the area you’re interested in and work on an offer with lots of builders. If you’re trying to sell a home that is in a new construction area, just make sure you start with an aggressive price before the market softens anymore. As for the used home market, you tend to get a lot more square footage for your money. Clark prefers used homes because the areas are usually already built up. And remember that if you’re thinking of building in a new development and you’re promised a swimming pool or tennis community, don’t believe it. Builders often promise things that are never delivered when the community is finished. So, until you see it, don’t believe it – and don’t pay for it!

When people buy a new home, they sometimes let their guard down and focus on the “extras” that come along with it, instead of the basics and necessities. They focus on features such as crown molding, marble countertops and lofted ceilings. And they don’t pay nearly enough attention to the structure or the foundation. Did you know that approximately 15 percent of new homes have at least two major issues wrong with them? That means one out of six homes has a serious defect. So, if you’re going to buy a new home, there are some basics to follow. First of all, never negotiate with the builder’s representative on your own. The builder’s rep is there to work against you and get as much money out of you as possible. Also, don’t sign a contract with a builder that doesn’t allow a home inspection. You should have at least three inspections when building a new home. So, you can’t afford to do business with a builder that doesn’t allow a home inspector to check it out. No one builds a hospital, school or commercial site without having several inspections. It’s a government requirement. And make sure you get those problems fixed before you close on your home. The likelihood that you’ll get a builder to fix problems after the closing is slim to none.

Clark has always said he will accept lower quality for a lower price. The one exception for him is his house. If you buy a poorly built house, you buy nothing but problems over time. Clark thinks people should pay extra to make sure their homes are structurally sound and environmentally efficient. In recent years, people have started paying more – about three percent – to ensure that it does meet those standards. It’s still a new concept, though. Most people buy based on the monthly payment and that is all they consider. But it’s clear based on recent news that building homes to certain standards pays off. Compare Hurricane Andrew, which struck Florida in 1992, with Hurricane Charley, the hurricane that struck the same state just a few weeks ago. Florida upgraded its uniform building code about three years ago. And according to emergency management types, homes that had been built to the new standards sustained far less damage than did those that had not been built to the standards. Clark thinks government should provide some kind of role here. Yes, it will cost additional money. But over time, cities and counties will recoup the cost. Not to mention the amount of lives that could be saved. It took a lot of courage and hard work for the Florida legislature to overcome the power of the building lobby to set up standards for builders. But it has paid off and it’s benefited everyone.

If you are considering buying a house, Clark urges you to have your own inspection. First-time homeowners often skip the inspection because they think government workers have somehow inspected the house. Although they have, these kinds of inspections are not enough. Think about when a hospital, school or office building is erected. There is a construction manager who makes sure things are being done as they should be. You want someone who does the same thing for you. It's especially important if you're having the house built. And be sure that you don't hire an inspector that your real estate agent recommends. Recent reports show that 70 percent of people hire the inspector recommended by their real estate agent. Agents only suggest inspectors they know will not kill their deal, and that is not in your best interest. You want someone who will kill the deal if the house is not in good shape. Two sites that offer great referrals are ashi.com and nibil.com. NIBI requires that its inspectors carry Errors Inspectors Insurance. This means that if they mess up, they are responsible for it. You also want someone who is CABO certified, which means they are code current. Spend some additional money when buying a house and get an inspection. It's worth it. And before you sign a contract with a home builder, make sure you inspect the contract. Some builders forbid you from hiring an inspector and that wording is included in the contract. So, if you see it in there, give that builder the boot.

Homebuilders are facing a huge burden because the cost of materials has escalated dramatically. Plywood, steel, aluminum and asphalt are all going way up in price. So, builders have come up with an idea in new home contracts that you may not know about. Let’s say you are buying a home for $200,000. When you get to closing, they spring it on you that you actually owe $235,000. They’ll cite a clause in a hidden subsection of the contract that gives the builder the right to pass on to you any materials costs above the expected total. It’s called an “escalation clause,” and it’s something many builders are adding to their contracts. According to the LA Times, the No. 1 request coming into the National Association of Homebuilders is for language to use in contracts for escalation clauses. This is why you should NEVER EVER sign a builder’s contract! They are very one-sided and you cannot control the outcome. And, don’t ever negotiate with a builder’s representative without have an agent working for you. Be prepared to negotiate a cap for what you agree to pay. If it goes beyond a certain amount you get your money back and can walk away. Having a construction attorney review the contract for you is smart, too.

A few years ago, Clark talked about a New Jersey man who decided after a trip to Scandinavia that he wanted a factory built home shipped to the United States and built on his lot. The 5,500 square-foot home and its parts cost about $600,000 and was assembled on site. It was about one-third less than a traditional site built home and was more energy efficient. To view pictures of the pre-fab home assembly process, click here. Today, according to the Wall Street Journal, top architects are now designing and building ultra high-end homes that are built in a factory and then shipped to their final destination. Because of computer-aided design, architects can design much more interesting rooflines and exotic frames. Anytime you hear the word factory, people think it’s referring to trailer homes. But the truth is that these houses are much better built and beautiful. Building houses on site – or “stick building” - is much less efficient because of the coordination of workers and the often paltry construction work. As land for housing becomes more challenging and expensive, there has to be a way to build a better quality home for the money. You may turn your nose up at this idea. But if Clark were to ever build a home, this is the way he would do it.