This is what I think: Campbell is missing the inventory part of this. He’s got sales, he’s got price, but he doesn’t have inventory. So he generates a buy signal in January 1996, but then generates a false Sell signal in 12/01, which turns again into a Buy signal in January 03. However, I can’t criticize his approach too much, because it’s the only published buy-sell method I’ve seen, so he sure gets credit for coming up with a system.
I’m surprised the OFHEO price index is fairly flat. In Campbell’s book, he says prices rose 150% from 1982 to 1990, and fell 30-40% untkil 1996. But the blue line doesn’t show that.
Why do sales decrease from 1999 to 2001? This surprises me,because I bought my house during that time, and the market was HOT. People were making offers on homes without even having seen them. Realtors had to check the MLS every hour. Once, my realtor called me to tell me about a house that had just been listed a few minutes before. I rushed over to see it, and as I arrived, darn it, a couple was already there. I asked them if they were looking at it, and if I could join them and see it too “Oh no, we’ve already made an offer”, they said. That is how it was. Houses were sold within hours of being on the MLS. The house we ended up buying had just been put on the MLS a few hours prior to our offer, and there were several backup offers going late into a Friday evening. It was absolutely crazy back then.
A friend told me the night he listed his house, a couple came over at midnight and woke him, to make an offer on his house; they had not even seen it. He sent them away, and called his agent at 8am ruefully the next morning. “Don’t worry,” said the agent, “I’ve got 4 other people on their way over to look at it”. So how could sales be down in that time period?
