I remember in the spring of 1998, sitting at an awards ceremony for one of the nation's largest independent real estate companies when the president/founder of the company predicted: "Anything with a door on it will sell in the next 12 months."

He was dead-on. What began that year was one of the largest real estate value surges in the markets where his company sold real estate. History has proven him right, as well, with average appreciation growing in many regions in double digits every year.

If you're buying a house to live in, the three key aspects of real estate are: location, location, location. If you're looking to buy real estate as an investment, however, the three key aspects are: timing, timing, timing.

Robert M. Campbell notes this principal very well in his book "Timing the Real Estate Market," published last fall. Every once in a while, a book comes out that you want to read thoroughly, thumb through regularly, and file as a reference work in your personal library. "Timing the Real Estate Market" is one of these books.

Many times, I'll read a real estate pub and it's timely – so timely, that it's no good to me, because the material is dated. In six months the principals it touts are obsolete because the nature of the economy upon which it's based has changed. The beauty of Campbell's "Timing" is that it prepares for the reader proven methods of reading a regional economy so the real estate investor will know just when to buy and when to sell to maximize his or her returns on real estate investing.

The meat of the book can be found in Chapter 4 – The Five Vital Signs Indicators: Your Window into the Future. If you're so busy you can't read all 100 pages, then memorize these 10 pages. Here they are in brief:

Vital Sign Indicator #1: Existing Home Sales. This is the best leading indicator of real estate price trends. As sales increase, the inventory of homes drop, thus pushing up prices. When the opposite happens, prices drop.

Vital Sign Indicator #2: New Home Building Permits. This indicator is important for two reasons, Campbell writes: 1) Real estate construction is the largest single industry in the U.S. (making up roughly 15 – 20 percent of the total U.S. economy). The overall U.S. economy floats up and down on the new homes industry. 2) New homebuilders are keenly aware of the demand for housing. Watching them is like watching the future economy.

Vital Sign Indicator #3: Mortgage Loan Defaults. This indicator is the first sign that the 4th indicator is about to rise. Mortgage loan defaults mean the local populace is undergoing financial stress – usually because of job loss. When you hear of layoffs coming to your region, mortgage loan defaults will follow and that brings us to the next indicator to watch.

Vital Sign Indicator #4: Foreclosure Sales. These sales can be watched in the classified ads section of your local newspaper – homes being sold by foreclosure will be located in the Trustee Sale heading. Watching these sales gives you an indication of how your local economy is doing. As they increase, the economy is softening and investors should take note for opportunities.

Vital Sign Indicator #5: Interest Rates. This is the only indicator not driven by the local economy. This indicator should also be judged in conjunction with the previous four indicators. Interest rates will not necessarily provide an indicator of when to buy or sell, but they can and will accelerate or slow the upward/downward trends on pricing and availability of investment real estate. Interest rates headed up can have both effects on the market – speed it up or slow it down – depending on what the other four signs are doing. Higher rates hurt rising homes sales prices, and they speed up declines in home prices when they're headed downward.

"The Vital Sign Indicators are market barometers for trend forecasting in real estate," according Campbell. "They measure supply and demand changes that will lead to changes in market conditions." Real estate investing can be very rewarding if the investor times entrances into and exits out of the market appropriately. Campbell's method of timing those moves is a great tool to do just that.

Published: January 17, 2003

Use of this article without permission is a violation of federal copyright laws.

Mr. Carr is an award-winning real estate broker in Northern Virginia and authored "Real Estate Investing Made Simple: a commonsense approach to building wealth." He also contributed to Donald Trump’s book, "The Best Real Estate Advice I Ever Received," and is an active trainer and coach of top producers in the Washington DC market. As a sought-after expert on real estate, Mr. Carr has been featured on CNN, various broadcast outlets and was the former real estate editor for The Washington Times. He accepts questions at his blog www.RealEstateOlogy.org.