How simple it was a year ago when low unemployment, low inflation, low interest rates, and high consumer confidence were all in alignment to produce one of the busiest markets in recent history. The National Association of REALTORS and the National Association of Homebuilders both reported record sales for 1998 and 1999, and housing starts are once again on the increase in January of 2000. But despite such a rosy economic climate, there are signs that the economic climate is not only changing - it's confused about where it wants to go. Will the home market soon follow?

The stock market is beginning to teeter with such dizzying highs and lows and with such unpredictability that some pundits are afraid that stock-picking has become too speculative, particularly with issues that boast more cachet than earnings. Even the Federal Reserve Board Chairman Alan Greenspan has suggested that stock pricesare higher than many company profits suggest they ought to be. Although he said there would be a slowdown this year, the economy was still exceedingly strong.

To keep inflation from gaining on economic expansion, the Fed has raised interest rates three times last year. while inflation was still clocked at two percent under a U.S. economy ahead at three percent. But, meanwhile, consumers were already beginning to feel the pinch of rising costs in goods and services, particularly in the healthcare industry and at the gas pump. In some areas gasoline prices have nearly doubled.

Mortgage prices have gone up accordingly, with interests rates almost a point and half higher than they were six months ago.

In a recent interview Vincent Daniel of CIBC World Markets said he expected mortgage originations to take a dip, similar to the 15 percent drops of the 1992, 1993 and 1995 markets. "When interest rates rise, mortgage volumes decline," he said.

Home prices have shot skyward, too. The Affordability Index by the N.A.R. shows that the median home price has risen from $122,000 in 1997 to $133,300 in 1999, a difference of nine percent in two years. These two factors alone are enough to shut out many first time homebuyers. Starter homes have jumped from 103,200 in 1997 to 113,300, also a nine percent difference, but median salaries for these buyers for the same period have only increased six percent.

It is the first-time buyer who is instrumental in driving the homes market, according to the annual home buying survey by the N.A.R. When the first-time buyer is shut out of the market, move-up buyers are not able to sell their homes and move to more expensive, larger properties. Housing sales inevitably slow down.

In January, The NAR reported a slower recovery from seasonal adjustments from this time last year, but says that the slower sales were due to less inventory on the market, not more. In fact, inventories are at their lowest in a year, at three months on hand. That should mean that demand from buyers is still high, or could it also mean that fewer sellers are are putting their homes on the market?

When a market is starting to swing in favor of the buyer, there will be more homes for sale, and at more attractive prices. The data are confusing, but the question is timely - are we headed for a buyer's market? For the answer, look at what is happening at the local level.

"The emergence of a buyer's market in any area is preceded by a decline in the growth of employment," says John Tuccillo, economic expert and author of Click & Close and The Eight New Rules of Real Estate, Dearborn. "The key indicator is the number of net new jobs created in an area relative to the nation as a whole. The data are released on the first Friday of each month for the previous month and can be obtained readily from any good local business paper."

Piggyback on Tuccillo's idea and take it one more step. Check your local paper, business journal, or chamber of commerce for the most recent commercial/office space leasings. When space starts to become more and more available, businesses are letting go of employees. You can also use this information to trend where businesses are locating in your region and use it to market your relocation services to their HR personnel.

Yet another way to tell is to keep focused on the number of days it takes a home to sell. Nationally, homes are selling in three months, but that may not be true of your area. Compare your MLS reports monthly to see changes in trends.

In the midst of conflicting economic indiciators, play it safely and don't be overbuoyed by a seasonal adjustment such as rising home sales in the spring. Buyer activity invariably picks up as families with children (still the single largest buyer demographic) buy homes so they can move during summer vacation. Compare the same period to last year to see if home sales in your area have slowed despite a seasonal adjustment.

Published: March 17, 2000

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.