“Yet when the MLS showed record high numbers it is happily used by everyone. When it shows a breakdown in the listed inventory, it is tossed aside. In reality the breakdown in listed inventory is perfectly explainable and should be noted but by no means does it mean a breakdown in the secular trend.”
I wouldn’t say it is tossed aside. rather the importance shifts.
In my quest for a home, I looked at inventory first and foremost as well. yet if I continued to rely on inventory as the most important indicator, I would have bought already.
Rather, I would say because the real estate cycle is a fluid and cyclical one, it requires changes in importance of various indicators at different times during the cycle.
Yes, when the bubble was peaking and started the downward shift, inventory absolutely was the most important indicator.
as the bursting of the bubble accelerates, would be seller psychology change to the point where no one but those with a real need to sell would be populating the MLS. in fact, realtors now actively discourage unrealistic sellers. (ziprealty actually penalize sellers past a certain days on market). so inventory as per the MLS shifts in the type of sellers but also stay flat or even dips. but guess what, there’s a new indicator that starts riding high, foreclosures. you simply can’t call bottom when foreclosures continue to go upward.
just as the inventory was the leading indicator to signal the end to the peak of the bubble, the foreclosures is now the leading indicator to signal the bottom.
logically, the next leading indicator to use to signal the true rise of the market? sales.
got to use all three indicators, they are all important, but their importance change at different stages of the cycle.
