The latest in a flurry of economic forecasts for 2001 says one or two of a group of economic factors alone often points to a recession, but today's economy is suffering an unusual convergence of nearly a dozen danger signals.

Like other forecasts, however, this one also says the down turn could be but a blip in the economy's continued expansion curve.

Any down turn, however, could give sticker-shock beleaguered home buyers a window of opportunity they haven't enjoyed in years.

Timing, however, will be crucial if, as many forecast, the softer economy will be but a fleeting economy.

There's a 50 percent chance the nation's economy will plunge into recession this year, and if the Feds don't continue aggressive policy to head it off that could rise to 70 percent, according to Kenneth T. Rosen, a professor at the University of California, Berkeley's Haas School of Business and chairman of Lend Lease Rosen Securities LLC, a real estate investment management firm in Atlanta, GA.

The report Recession Risk Rising, says ten indicators suggest a rising threat of recession: 1) venture capital excesses and the Internet bubble, 2) a high-tech slowdown, 3) an over-valued stock market relative to historical P/E ratios, 4) tighter credit markets, 5) high private sector debt levels, 6) higher energy costs, 7) a record trade deficit, 8) an extremely tight labor market, 9) an inverted yield curve, and 10) a large government surplus..

"It's important to note that no one or two of these factors historically have meant that the United States was heading into a recession. But seldom have so many danger signals converged at the same time," said Rosen.

The forecast comes on the heels of others predicting consequences of varying levels for the economy at large and the real estate market segment.

• Kiplinger.com, along with Standard & Poors/DRI foretells of an average nationwide home price increase of just 2.6 percent, the most modest price gain since 1995. For 100 large metro areas tracked by S&P/DRI, the price change ranges from a high of 12.3 percent in Boston to a low of the minus 6 percent in San Francisco. Last year, 13 of the report's 100 cities enjoyed double-digit price increases. Boston topped the list at 27.2 percent, according to the Kiplinger.com report.

• UCLA's Anderson Business Forecast last year predicted 2001 would bring a 60 percent chance of slight negative economic growth of the gross national product in the second and third quarters this year. Anderson hedged its forecast by saying there's a 40 percent chance the slow down could be milder. The down turn is forecast to include a corresponding deceleration in rising residential real estate values -- though not a reversal of fortunes.

  What's a buyer to do? No one is predicting a nationwide buyer's market, but even in the hottest seller's markets buyers will gain some ground and if you are considering a home buy this year you'll need a sound strategy to cope with the change.

  Scrutinize home economics. Financial counselor Eric Tyson says regardless of what the economy is doing, it's time for you to buy a home when owning is cheaper than renting.

  "Prospective buyers should analyze their local housing market by comparing the after-tax monthly cost of buying a given home to the cost of renting that same home. If that analysis shows that owning has gotten far more costly than renting, that highlights the danger in buying without the expectation of holding on for a long time - at least five to seven years," said Tyson, who co-authored "Home Buying For Dummies" (IDG Books, $16.99) and penned several "Dummies" guides to personal finances.

  Also, don't consider the home purchase in a vacuum or merely based on market conditions -- no matter what the economy is doing. Instead, take a more holistic approach to home buying and consider how a home purchase fits with all your other financial needs, goals, obligations and lifestyle.

• Find a leader. In a transitional market, it's crucial to hire a solid point person to help design and lead your home buying strategy. You need an experienced real estate agent, attorney or other realty professional who's skilled in both buyer's and seller's markets and markets in transition. Seek referrals from family, friends, co-workers and others you trust who have also recently enjoyed success in a home buying transaction.

  "Act like it's a military invasion. Sit down with your joint chiefs of staff and figure every move," says San Jose broker John V. Pinto.

• Learn the rules. As Clint Eastwood's Dirty Harry character once said: "You can't play the game if you don't know the rules." You need a working knowledge of the home buying process and its costs from mortgages to inspections to title and escrow. Bone up on the glut of information available on the Internet, at free home buying seminars and workshops and use the vast library of real estate guide books. Begin to learn the ropes well before shopping. There's a lot to learn.

  "Investigate everything," says Richard Calhoun, a real estate statistician and broker-owner of Creekside Realty in San Jose.

• Get preapproved. Get preapproved for a mortgage that you can truly afford, not what the lender is willing to risk. A preapproval -- in writing -- not only reveals to the seller that you are a serious shopper, it also prevents you from shopping for a home with a price that's over your head. Buyers often make the mistake of entering a buyer's market with no cash backing. Imbued with a false sense of power, some don't even get preapproved. Even sellers anxious to unload their home aren't going to wait for the money to show up.

  "It used to be 'Does this buyer have enough income? Enough cash to close? Good credit?' All three have been reduced to 'Is this buyer preapproved'," said Drew Beveridge, a mortgage broker at Partners Mortgage in San Jose, CA.

• Know your market. Robert Campbell, a real estate investor and publisher of the Web-based "San Diego Real Estate Report" says buyers should also track real estate market trends like investors pore over business reports.

  A seller's market doesn't become a buyer's market over night and if you aren't tracking indicators during the transition you won't see the change coming. The five key indicators to watch are interest rates, building permits, home sales, loan defaults and foreclosure sales. Together, they provide a pointer to the market's overall direction.

  John Burns, head of published research for Irvine, CA-based new home data bank Meyers Real-Estate Information, Inc., says monitoring job growth is also key.

  "If your economy is dependent on a single employer or industry (such as Los Angeles's dependence on the defense industry 10 years ago, or St. Louis' dependence on TWA today), I would be particularly cautious. Job losses lead to housing depreciation, which will have a far greater negative impact on the housing market than a stock market decline," Burns said.

• Pay the right price. If you know the market, you'll also have a good idea what the going prices should be, but there's more you can do to avoid paying seller's market-prices in a transitional market -- or low balling in a buyer's market.

  Make the same price checks a seller makes to price it right -- check comparables, keep track of the sale price range for your street and immediate neighborhood, use the local newspaper to monitor asking prices and visit open houses to learn what conditions warrant certain prices.

  "Starting at 25 percent below what the home is worth generally won't work unless the seller is desperate," said San Francisco broker Ray Brown, co-author of "Home Buying For Dummies" (IDG Books, $16.99).

• Buy low. Buy the least expensive house possible on the best block, buy in a community's least expensive neighborhood or buy in a city's least expensive community.

The tactic is much like strategy used to buy and sell stocks -- buy low and sell high. The cheapest home in a neighborhood in transaction will eventually give you the greatest return on your investment.

History reveals, even in a market headed for the doldrums, things eventually turn up.

Next Week: Part 3-The New New Economy's Impact: What's A Seller To Do?

Published: January 12, 2001

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.