Despite forecasts that predict the economy will put the brakes on rising home prices or turn them around, the National Association of Realtors remains bullish on real estate -- the economy's strongest sector.

That could give home sellers a false sense of security.

Real estate's saving grace thus far is job-growth driven demand -- the same fuel that's helped drive the nation's longest economic expansion on record.

In the past decade, more workers with larger incomes have purchased homes in record numbers at ever-escalating prices.

"The baby boom generation is continuing to buy homes, while the children of the boomers -- an even larger generation of about 85 million people -- are entering the market as first-time buyers, and are benefiting even more from the drop in interest rates," said David Lereah, NAR's chief economist.

But last year's fourth quarter of mounting sales and earnings estimates fell well below forecasts and sent Wall Street reeling and layoffs mounting in and out of the high tech industry -- the foundation of the so-called New Economy.

And then there are those pesky rising energy costs, which NAR concedes could be the wild card that topples the deck.

"As consumers are hit with bigger and bigger energy bills, there will be less money for consumer spending. Considering that two-thirds of our Gross Domestic Product depends on consumer spending, the impact could be significant if severe winter conditions persist," he said.

Recession indicators

And it's not just lost jobs and energy costs that threaten the economy's roll. At least ten indicators point to a 50 percent chance the nation's economy will lapse into a recession this year, albeit a short, shallow one, according to 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.

Rosen's report, Recession Risk Rising says, historically, with just one or two of these factors present a recession is likely.

New homes sales are also in trouble.

This week, the National Association of Home Builders' Housing Market Index reflected the second consecutive monthly decline, the lowest rating since February of 1997.

Despite favorable interest rates, builders perceive that the recent stock market contraction and lower consumer confidence have douced demand for new homes, according to Robert Mitchell, NAHB president.

The NAHB forecasts a modest, 5 percent slow down in sales this year.

Meanwhile, home owners are financially hunkering down instead of moving up.

The Mortgage Bankers Association of America's Refinance Index rose dramatically from 1572.1 last week to 2800.6 compared to a rise in the Purchase Index of only 292.8 to 332.9.

Refinancing activity represented 64.1 percent of total applications, increasing from 54.6 the previous week, MBAA said.

While no one is predicting a national buyer's market, sellers in a growing number of communities don't enjoy the negotiating edge they've had for much of the decade.

What's a seller to do?

"Sellers should be especially careful in such a market to recognize and avoid the temptation to be greedy, but rather price their homes to sell," says personal finance counselor Eric Tyson, also co-author of "House Selling For Dummies" (IDG Books, $16.99).

"Otherwise, they risk having their homes sit on the market, viewed as stale goods and ending up getting a lower price in markets where prices are falling or poised to fall," said Tyson.

Not pricing the home right is the biggest mistake sellers make in any market, experts say. Checking the most recent comparable sales, touring similar listings, and watching the classifieds to see why other homes sell at certain prices are all techniques to help you price it right.

"If your price is unrealistic, a buyer will have a hard time getting financing if the lender's independent appraisal shows the price to be seriously inflated," says San Francisco broker George Devine, co-author of "How To Buy A House In California" (Nolo.com, $24.95).

Here are some additional suggestions sellers can use to cope with a market in transition.

• Know your market. Just as buyers need to know the market's twists and turns, so do sellers. Robert Campbell, a real estate investor and publisher of the Web-based San Diego Real Estate Report says sellers should 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.

• Know the rules. Likewise, sellers need a working knowledge of the home selling process.

  Too often, sellers mistakenly believe their initial purchase and subsequent ownership imbues them with the knowledge to sell.

  "They know just enough to be extremely dangerous. They've been through one transaction and now many of them are first-time sellers. First-time buyers realize they don't know anything. First time sellers think they know more than they do," says John V. Pinto, a Realty World broker in San Jose, CA.

• Beat the rush. If you know you are in a market in transition and it experiences seasonal flux, sellers will be out in force within a few months. List soon. Lower interest rates will reduce the number some fence sitting buyers who'll jump in the market early this year hoping they can cash in on near record low interest rates.

  "We've been encouraged to set up appointments and talk to sellers who thought they wanted to wait a little longer before selling. We are telling them to get a jump on the competition since the market will come even earlier this year. The best market will be in the beginning of the year," says Sandra Kay Holte, a Park Company agent in Fargo, ND.

• Expose it. While sellers may want to get out in front of the pack they shouldn't move so fast they don't give their property sufficient exposure to the market and all possible buyers. Knowing the market can help you determine when to accept an offer and prevent you from leaving money on the table.

• Inspect it. Get a thorough home inspection, because if something obvious turns up after the sale, you could be open to a suit. The court could rule that being unaware of what should have been an obvious defect is not a defense.

  "Get the inspection, but you don't have to do the work. I don't believe in having the work done. If you are in a strong market nobody is going to quibble and ask you to put on a new roof," said Ray Brown, San Francisco broker and author of "House Selling For Dummies" (IDG Books, $16.99).

• Disclose it. The inspection will also help you make all the disclosures necessary to let the buyer know exactly what's for sale.

  "Even if you sell it "as-is" that does not exclude you from disclosures," Brown said.

• Curb improvements. Give your home curb appeal to draw traffic, but avoid major improvements. You won't realize much of a return on your money if you sell in a short period and you could end up paying more than you expected.

  "A foolish seller puts on a roof and then sells the house. If there's a leak, guess whose roof it is?" asks Brown. "Leave money in escrow and let the buyer pick his or her roofer. Then if anything goes wrong, it's their roof."

• Consider back up offers. Offers that include a contingency for the buyer to sell a home and offers from buyers who aren't preapproved are both red flags that could leave you twisting in the wind. Too many offers that don't gel could leave your home on the market too long. Buyers could begin to think something's wrong with the property and avoid it.

• Juggle multiple offers. If your market still generates multiple offers, delay offer presentations so you can arrange to accept them in an orderly fashion, or you'll likely alienate the best buyers.

  "Accepting offers shouldn't look like the Oklahoma Land Rush," says Brown.

• Make concessions. If your market has begun to swing in the buyers' favor and you aren't flexible enough to make concessions you could find your home languishing on the market.

"We encourage them to to offer to pay 'points,' but not for the sake of buying down the interest rate. It's for the buyer's costs at closing. Most buyers don't have the cash so we encourage the seller to advertise that they will pay this," says Holte.

"We are also encouraging sellers to pay a bonus to the agent who brings in a buyer. This stimulates both the buyer and their agent. We only encourage this for the potential slow sale for less appealing homes or ones that may be priced a little higher than the average home," she added.

Published: January 18, 2001

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.