Captain Obvious: Real Estate Price is Inversely Related to Supply.

In his neat blog, Real Estate Mathematics, Enten Eller dissected the mathematical relations between price changes and inventory changes of real estates:

Looking at the bottom red circle, we see that inventory started to fall in month 27 and price started to climb in month 31 — approximately a 4 month lag. At month 47, there was a drop in inventory and in month 50 we see a major jump in price, a 3 month lag. At month 51 there was a jump in inventory (or at least a reporting of such) and in month 57 there was a major drop in price (a 5 month lag). In that same month, there was the start of a run up in inventory rate of change and in month 60, the drop in price rate started to decrease..

In short, rate of price change is lagging inventory by about four months. So what does that say about the next four months of prices in Seattle? They should be pretty flat (that is the same prices as seen a year ago) and may actually start to decline.

Has the bubble burst? Link