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Earlier today, DataQuick reported that home sales increased in the California Bay Area. The report mentioned "a perception among potential buyers that prices have bottomed out." First, a little history: When the housing bubble was inflating, the demand for housing surged with the widespread use of non-traditional mortgage products. Looking at a supply-demand diagram, this surge in demand pushed the curve to the right. At the same time speculators were buying up properties, reducing the supply with the intention of selling later at a higher price. This activity shifted the supply curve to the left (this activity was classic storage). So with the surge in demand, combined with speculators removing supply from the market, prices skyrocketed. This is exactly what I described in April

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