In a previous entry, I talked about the "Housing Market Cycle"--how price change lags behind the number of home sales. That was a conceptual description. The graph above of total home sales, and total dollars spent to buy homes, in Whatcom County provides real data to support the concept.

 

Notice that the highest number of homes sold in Whatcom County (graph on left) peaked in 2004 at 9222, and declined to 9000 in 2005. Also notice that the total amount of money spent to buy homes continued to increase past 2004, peaked in 2005, and decreased very little in 2006 and again in 2007. The total dollars spent to buy homes remained almost stable even though the number of homes decreased dramatically. In fact, dividing the total dollars spent by the number of homes sold is:

It wasn't until 2008 that prices started to drop to $308,000, and then dropped significantly in 2009 to $264,000.

 

So there is quite a lag between the number of home sales drop off, and the average prices that homes sell for. We may be able to assume that the reverse should be true--as the number of home sales increase, it will take several years for home prices to increase.