As homebuyers and real estate industry professionals look for an economic beacon to follow in order to avoid crashing on the rocks, Realty Times finds itself inundated with forecasting requests.

That begs the question -- which economic signals are worth paying attention to?

With home sales dropping in 2006 from five-year consecutive record highs, consumers reacted to softening home sales in a number of ways. Some wanted to buy a home but held off hoping prices would drop. Some sellers put their homes on the market and found no buyers. Consumers in some markets are finding that home sales are picking up and prices are rising.

Despite falling interest rates, higher inventories, and softening prices, home sales softened nationally in 2006, suggesting a powerful psychological affect at work in certain markets. After years of record highs in home prices, consumers simply didn't want to pay any more for homes. They felt that sellers had "earned" enough equity, and they didn't want to be caught on the downward slide in home values. In addition, slow wage gains and rising fuel costs kept many from buying.

That said, buying conditions are currently more favorable than they were during the boom, but will that bring buyers to sellers' homes?

One way to peer into the future is to read the tea leaves of economic indicators. Each of these indicators matters individually, but when taken as part of the aggregate, it's unknown which are the most important in moving buyers to the closing table.

According to Investopedia, economic indicators are "statistics used to measure current conditions as well as to forecast financial or economic trends."

These data are "used extensively in technical analysis to predict changes in stock trends or price patterns. In fundamental analysis, economic indicators that quantify current economic and industry conditions are used to provide insight into the future profitability potential of public companies."

Economic indicators include such things as gross domestic product (what we produce in goods and services on U.S. soil), employment, consumer price index and producer price index which indicate the rate of inflation (rising prices), retail sales and consumer confidence which indicate consumers willingness to spend, and so on.

But in housing, economic indicators are a separate but carefully considered data points. The National Association of Realtors tracks the housing indicators that its researchers believe most impact housing including:

• Existing home sales (closed transactions of consumer-owned homes)

• Pending home sales (existing homes under contracts that have not yet closed)

• New home sales (new homes under contract that have not yet closed, which can include standing builder inventory or homes to be constructed.)

• Housing starts (houses beginning construction)

• Housing affordability (an index that shows the median homebuyer's ability to buy a median price home in their area, adjusted for their ability to qualify for both fixed and adjustable rate-mortgages)

• Mortgage rates (the rate at which banks will loan money to homebuyers using the most popular types of loans, benchmark 30-year fixed rate mortgage)

• Mortgage applications (indicates the number of homebuyers intending to buy a home)

NAR supplies housing indicators with its existing home sales reports, and researchers also monitor the other indicators, including both housing and economic indicators, to make forecasts.

Forecasts are based on trends, so researchers look for upward momentum or recession over time.

"Sales weakened in 2006 despite job growth, income gains, and low rates because people think that prices may decline and want to hold back," says NAR Senior Forecast Economist Lawrence Yun.

He predicts that 2006 was a bottom for the housing market. "The year will end with existing-home sales 9 percent lower than in 2005 and home-price appreciation closing out the year essentially flat. The more cyclical new home sales are projected to finish the year 18 percent below that of last year, and post a reduction in prices," he says. "But there is good news: the market has essentially already bottomed. The pace of existing-home sales is expected to rise in the first quarter of 2007 -- on a seasonally adjusted basis -- from its current 6.2-million-unit pace to 6.3 million. Home prices, which have been falling since August, will follow this positive sales trend and begin to strengthen by the second quarter. By this time next year, sales will be higher by 5 percent, with home prices rising 2 percent."

The bottom line is that at any given time, consumers are in control of the market.

Published: December 28, 2006

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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.