The ABCs of CMAs

By Michael Weiss – Agent/Relocation Specialist

Doing a comparative market analysis is an important part of both the selling and buying processes.  However, I feel as though many people that I’ve worked with have questions regarding what exactly goes into a comparative market analysis (CMA), so I’ve decided to take this opportunity to describe the analysis further.

Two important factors: Comparable homes (COMPS) should be in the same geographical sub-market and sales data meant to ascertain value ought not be more than 120 days old if possible.  The markets move up and down each month and values can fluctuate depending on the time of year and outside economic factors.  And as we all know (especially in St. Louis), simply crossing a street can see home values soar or plummet, so location is king.

Of course proximity and time are only two factors.  Simply put, the more similar the properties being compared, the better.  Here are some other factors that are often given prominence in a CMA:

• square footage
• number of bedrooms
• number of bathrooms
• lot size
• garage spots
• cosmetic & systematic upgrades

Look to see that the home fits comfortably into its price range and is not an outlier compared to other homes that have recently sold.

Notice how many days it took to sell similar homes and how far off the original asking price they had to come down to sell.  Where homes sell quickly, you can expect people to want to gain entry when it’s time for you to sell.

Ultimately there is no crystal ball as to whether a real estate deal will work out in the end financially, but if you look at real estate values over the last 100 years the average appreciation of a home was right at four percent.  Homes have different values to different people and it all has to do with a million little factors that play into it.

Remember, for buyers a home’s value is based on what they believe is within reason depending on their personal circumstances, financial and otherwise. Meanwhile, for sellers a home’s value is what someone will offer for it on any given day.  What you should sell it for is a totally different question and can only statistically be justified by intelligent use of COMPS.

Put Your Intentions in Writing

By Liz Rainey – Agent/Relocation Specialist

The first step is always the hardest, but this will help make the process run smoother.  Before you decide to put your home on the market you need to make sure you have clear goals and that you are selling the house with someone that has the same goals and expectations.  Unexpected challenges and situations might come up in the course of selling your home, so having a clear idea of your ultimate goals at the outset is imperative to help you make the right decisions along the way and to remind you when you might need to course correct.

When you are working on your goals it is important to be specific.  Drilling down to the details of what result it is you want your home sale to achieve in your life.

Establish where your priorities lie, either with speed or dollars.  Is your goal to sell your house as quickly as possible or to sell your home at the best possible price, regardless of how long it is on the market (no matter how long it may take).

Being as clear as possible from the very beginning on your priorities and ultimate life objectives for the sale will allow you to communicate these crucial things to your agent, and will power your decision on issues like:

• Which home improvement projects, if any, to complete before you list your home
• What offers you would consider and those that you wouldn’t (paying for closing costs, home warranty, etc)
• How aggressively to negotiate counter-offers, and on which points to push back against a buyers offer

If you are considering selling your house in 2012, outlining your goals and establishing realistic expectations is the best first step to take.  It’s already past the first of the year, and Spring will be approaching fast; start today!

There was not much in the way of data yesterday other than the July personal income and spending report.  Income came in up .2% while spending was also slightly better up .4%.  Lots of news due out this week highlighted by the Weekly Jobless Claims and July Pending Home Sales on Thursday followed by the big one – August Unemployment due out Friday morning. 

The good news from the mortgage rate side is that there really isn’t any strong evidence indicating rates will increase while the economy continues to struggle.  Stock, bond and mortgage markets should continue to see extreme volatility this week.

Josh received his Undergraduate Degree from Babson College in Finance and Entrepreneurial Studies and has his Law Degree from Washington University.

Upper End Properties is real estate company dedicated in understanding its clients’ individual needs and providing them with an exceptional real estate experience. The real estate boutique is located in Clayton, Missouri and has over 14 agents that utilize their vast knowledge and experience to make the buying and selling experience as easy and as enjoyable as possible from start to finish.  In addition to buying or selling a home, Upper End also specializes in property management, corporate relocation, and leasing.  For more information about Upper End Properties and its services please visitwww.upperendproperties.com

The treasury will be borrowing about $102 billion worth of 2 yr, 5 yr and 7 yr notes or roughly $2 billion less than it borrowed last month.  July existing home sales are due out and are expected to be down roughly 13% while new homes sales are actually expected to have increased 3%.  Existing home sales fell 5.1% in June and 2.2% in May.

So – it looks like the trouble for the housing market continues and is even increasing with the expiration of the homebuyer tax credits.  May and June sales were up 19.2% and 9.8% over the same months last year (again most likely a result of the tax credit).  New home sales saw a nice little push in June, increasing 23.6% after a decline of 36.7% in May.  Some of that push could be attributed to such a low volume in May.

Weekly jobless claims, which caused the interest rates markets to decline last week are again expected to decline, this time from 500,000 to 485,000.

Last week, they were expected to decline but ended up increasing 12,000 to 500,000.  Last week the mortgage bond market saw a bump Thursday when jobless claims were released and mortgage rates took a dip.  We’ll also see the 2^ndquarter revision of GDP which is expected to be up 1.4% after a decline of 2.4% was reported last month prior to the release.

Mortgage rate levels will most likely continue to test current low yields.  The only other news due out this week is the Mortgage Bankers Association (MBA) weekly mortgage applications release Wednesday.  Many experts believe that the 10 yr note and 30 yr mortgages are losing momentum in the short term while the longer term still appears bullish.

Listen to the economic forecasters such as Peter Yen from the National Association of Realtors.  He was recently in St. Louis speaking about how the unemployment rate is directly tied to real estate trends.  He believes if unemployment goes down in the next quarter we can most likely consider the worst is behind us.  Listen to an established real estate professional; These are the ones that have made this their career.  Every single day they access the latest available property list.  He/She can tell you what has gone down in price, what is under contract, and what has sold for less than asking price. Point being, they actually do know what is happening in the market place and it’s not just from watching the nightly news.  Listen to what these people are telling and follow their advice. Remember this is why you look to them.

Learn to adapt to this market.  Realize that what worked before is not necessarily going to work today so learn how to price your property appropriately and then learn how and when to adjust it.  If you are looking to buy, learn how to make a solid offer before your dream home becomes available.  You don’t want to be caught in the dark, being prepared is always best. Learn all of the parts of a sale contract and the process of buying/selling a house so that you feel comfortable discussing all possible scenarios and variables when that contract is written.

Let go of anger and resentment about the economic climate.  Let go of blaming anyone or anything for the current state of the market.  Let go of comparing neighborhood sales from the past 3 years to what they are selling for now.  If you can get past these things and understand that it is a fact that people still need to move for their own reasons. Then you are truly “letting go.”   A house may not be worth as much as it was in 2006 (when it was, in all probability, over-inflated) but that should also come as good news if you are looking to buy.

By listening to the information provided by professionals, learning how to react and adapt to this market, and letting go of negative re-enforcements, I believe you hold the keys to a successful real estate transaction.

Jen Ross

The bond and mortgage markets opened stronger this morning while US stock indexes and global markets opened weaker.  In the last few weeks it appears that investors have realized that despite Washington painting a picture that the economy is in recovery, the world economy is not in good shape.  This has caused investors to move into the safety of long-term treasuries and in turn caused mortgage rates to fall even lower.  Mortgages opened up .25 basis points from Friday’s close while the DJIA traded down about 13 points at 10:30 this morning.  At 8:30 this morning, the August NY Empire State Manufacturing data hit with the overall index increasing to 7.0 from 5.08 in July.  The new orders component took a hit and went negative for the first time in a while to -2.71 from +10.13, the employment component was better at 14.29 from 7.94 and prices paid for materials decreased due to price declines in commodities.  The National Association of Home Builders housing index came in at 13 down from 14 in July.  This may imply that housing starts which are expected to but up over 1% could actually come in lower tomorrow.  Its becoming very clear that until the housing sector begins some sort of recovers, the US economy will continue to struggle.

Other data due out this week includes July housing starts and permites, PPI, Industrial Production and Capital Uilization Tuesday.  Mortgage Bankers Association weekly mortgage applications come out on Wednesday.  Weekly Jobless Claims, July Leading Economic Indicators, and August Philadelphia Fed Business Index are all due out Thursday.

With the current conditions of the real estate market people have been able to purchase high end properties that they may not have been able to afford in a steady market.  This recent trend to buy that great deal has also left that purchaser wondering what to do with their “old” property.

We see this on a daily basis…in efforts to rid themselves of their old property; sellers are steadily lowering their asking prices with very little to no bites.  This has made the option to put the property up for lease not so bad.  This option that you would think as bad actually can turn out to be profitable in just a few weeks time.

Why is leasing Hot?  People are relocating to St. Louis and are more interested in scouting the area out, so leasing a place has become more appealing.  Some other reasons for the increase in the leasing trend include are attributed to the rise in status of Washington University’s medical school and the nationwide recognition that some of our area hospitals are starting to receive. It’s attracted Medical Students from all over the world to come and do their fellowships.  The rise in divorces has left those couples in dismay scrambling to get some sort of property, so the lease has appealed to them.

Why open your home? We have a lot of clients who are timid about opening their homes to a renter.  What if they damage the place?  What if they don’t pay their rent… etc?  When a lease is done properly it can not only cover your mortgage but could lead to a possible sale.  We make sure to screen prospective tenants for our clients, by running background, employment, income verification and criminal checks.  We also offer a guarantee, if they tenants do not pay their rent in the first six months, we refund our commission.  For the record we have not had to do that.

So when your realtor says the “L”word, don’t be afraid! Leasing can turn out to be a very lucrative move in the long run.

Liz Rainey

Housing continues to show very little improvement and there is an increasing recent concern that deflation is looming.  June pending home sales were expected to be up 5% but actually declined 2.6% from May levels and year over year sales are down 20.1%.

On the brighter side, earnings reports have been positive recently and are possibly indicating that the economy may be improving after all.  Although nobody really knows who is buying the products that manufacturers are producing.

The consensus economic outlook is for slower than average economic growth for several years. The Gross Domestic Product (GDP) report released this week was consistent with this view. GDP increased at a 2.4% annual rate during the second quarter of 2010, which was below the long-term average of about 3.0% per year. With a high Unemployment Rate, below normal economic growth is far from ideal for the labor market, but this is what investors expect. If the economy performs much more poorly, however, the consequences could be severe. The Fed’s Bullard stated this week that he is worried about the risk of a deflationary period in the US similar to that of Japan, which would be very undesirable for the economy, but which would likely lead to lower mortgage rates. He emphasized that he thinks that the most likely scenario is for continued modest economic growth.

The best steps to take to stimulate the economy are being highly debated right now. It’s not clear whether further monetary stimulus from the Fed would be effective enough to offset the downside effects. As a result, most Fed officials feel that they should not take additional actions unless the economy experiences a major downturn. Given enormous budget deficits, fiscal stimulus (more government spending) is also a highly contested option. The Fed’s Fisher pointed to uncertainty about government policies and regulations as a major obstacle for faster growth, but this may not change very quickly. In any case, if the economy follows the expected path for modest economic growth, it may be difficult for the Fed or the government to launch any major new stimulus actions.

When it comes to the housing market a great number of home owners looking to sell have decided to use leasing as a way to maintain ownership in a dismal market.  The reason for this can be attributed to the downfall in the country’s economy, which has lead to a record number of foreclosures and short-sales in the recent years.  The option to lease has given home owners a chance to “hold” and wait for the market to recover.

For some, leasing is really not an option it is a necessity.  With the down turn in the housing market home owners have progressively been losing value in their property. The ones who can afford to wait, do just that.  For the ones who can’t wait, but don’t want to take the loss on their property, leasing has been that light at the end of the tunnel.

There is definitely much to consider when making the decision to lease or buy. During these times loss in equity, poor credit scores, and stricter guidelines on loan approvals have pushed many towards the words “l-e-a-s-e.”

Cory Spielberg and Doug Cohen will shed more light on the recent leasing epidemic on All Things Real Estate this Sunday morning at 10am on KFNS.

Looking ahead, many economists believe that U.S. interest rates will remain low for an extended period of time.  Words from Fed Chairman Bernanke last week seemed to reiterate that the economy continues to struggle particularly with jobs and a housing sector that remains in recession.

After a strong week last week in the stock market and selling in the bond market, one focus will be treasury auctions. Strong demand continues for treasury bills with a total of $104B set to be sold Tuesday, Wednesday and Thursday this week.  June new home sales are to be announced Monday and are expected to be up 4.25% from May. Other key data announcements this week include early estimates of 2nd quarter GDP and the Chicago Purchase Managers’ Index.

CKC Communications is a public relations and marketing company that specializes in social and interactive media development, event planning, and media relations. They are heavily involved in building business to business relations as well as connecting businesses with their surrounding communities.

Sean and his team pride themselves on helping businesses navigate through the ever changing times. His unique background and experience has helped several area businesses thrive during these hard economic times.

Upper End Properties is happy to have the experience and contacts that Sean and his team brings to an already successful real estate boutique.

Sean Hadley’s BIO:

Sean Hadley has worked in and around the media for over 10 years. He started his career in Kansas City as an Associate Producer at the NBC Affiliate. There he assisted in coverage of the Pharmacist who was arrested for diluting cancer drugs. He also helped revamp KSHB’s Sunday night sports show, before taking a job at KSDK in St. Louis.

At KSDK Sean served as an Assignment Editor for several years. He was involved in coordinating coverage for several big stories in the St. Louis area including the discovery of Sean Hornbeck and the Praxair Explosion.

After working at KSDK for more than 4 years Sean got a chance to work on National Media scene as a producer NBC News. There he continued to grow and expand his editorial knowledge. He was involved in planning news coverage for some of the Nation’s top stories including the election of the country’s first African-American President Barrack Obama and the death of Pop Icon Michael Jackson.

He returned to the St. Louis area in hopes of serving more of an active role in the community. He formed CKC Communications, a public relations/marketing firm that specializes in helping businesses gain exposure through cost efficient marketing methods, as a way of getting involved in the community.

CKC Communications prides itself on keeping businesses connected with the surrounding community. We accomplish this through various marketing techniques including the use of social and interactive media. Our firm has the experience and the resources to accomplish a variety of needs.

With the onslaught of the housing market recession, the age-old retirement strategy of “trading down” has become ineffective.  The housing market crash has had a sever effect on high-end homes, causing the difference in price between the upper and middle markets to decrease.  If the smaller homes are not really much cheaper, what is the point of moving at all?  It is this revelation plus the overload of cash-out refinancing that have made retirees question the trading down process.  There will always be complicating factors in the home market, but fortunately we now have access to tools and strategy to see us through.  Taking time to plan your financial future can be the key to smooth transition within the housing market.  This Wall Street Journal article by M.P. McQueen gives quality insight to this topic and links to Laurence Kotlikoff’s helpful financial planning website.

http://finance.yahoo.com/focus-retirement/article/109776/trading-down-can-it-still-bankroll-your-retirement?mod=fidelity-livingretirement

Upper End Properties Gets Down and Dirty at Habitat For Humanity

It was a hot summer day when a crew of 9 from Upper End Properties met at the office at 8am and caravanned to North Saint Louis City to meet the wonderful people of Habitat for Humanity.  “I must say I was a little bit nervous that we would be getting in the way rather than helping build a home” said  Operating Partner of Upper End Properties Cory Spielberg.  “I thought we would be painting, prepping, or cleaning.  I was wrong!  Donna Hurst and Jen Ross were hanging siding.  Betsy Kerner, Megan Rosenkoetter, Beth Sprunt, and Amy Fischer were laying hardwood flooring.  Christina Mchugh and Liz Rainey were dominating the jig saw and miter saw in preparation for the rest of the crew.  The team work involved in building a home is extremely important.  This was a great team building experience and I would encourage other small businesses to take a day and volunteer on this type of project.”   The goal of Habitat For Humanity is to develop communities with people in need by building and renovating houses so that there are decent houses in decent communities.  For more information visit  http://www.habitat.org/how/factsheet.aspx.

There are several people who volunteer more on a full-time basis and do an amazing job of keeping the single day volunteers in line and structured.  “The entire day was unbelievable, but the 30 minutes the 9 of us spent at lunch to me was the most special,” said Cory. “ The Upper End Properties crew sat in a circle to eat lunch, laugh, and talk about all the different jobs they were each working on.  “One of the Crew Leaders, Jim Kennedy of Des Peres, MO made us feel at home.  We bombarded Jim with questions about Habitat and his experience.”  Like a teacher with his students they continued a discussion about Jim’s Habitat For Humanity experience.  “I have been doing this since I retired from the Federal Reserve Bank in 1993 and I love it,” said Jim.  “One of the girls said and you don’t get paid for this?”  Jim and many of the other “gray hairs” as he called it enjoy spending their retirement giving back.  No money, not a lot of recognition, just heartfelt love for philanthropy.

As the day winded down and the crew from Upper End Properties helped clean up, the understanding for more volunteers became more apparent.  “Everyone has to do their part”  said Cory.  “If everyone chips in just a little bit, the world becomes a better place.  It has to start somewhere and if people are not taught this growing up, then the work place is a great place to learn.  Whether you are helping build a home or just writing a check, it is a must that as human beings, we all do our part.”

For more information on Upper End Properties Charitable Giving Program visit http://www.upperendproperties.com/charitable-giving-program.html