It makes sense. The price cut was too good to be true, unless there was some underlying inventory clearing reason behind it. In addition, Google outed the Nexus 5 when they posted a YouTube video showing off Android 4.4 (KitKat). That video has since been pulled, but screenshots have not, and they show a Google clad in a green shirt holding a Nexus device that is clearly different from a Nexus 4 being held by a woman standing a foot or so away.
Aside from the bargain pricing, the timing looks good, too. The Nexus 4 hit went on sale in November of last year, while its predecessors, the Nexus S and Galaxy Nexus, were similarly released at the end of the year (December of 2010 and November of 2011, respectively).
A few Nexus 4 devices remain on sale in Google Play in other countries, but once those are gone, the Nexus 4 will be gone from the Play Store for good. Of course, folks will likely be able to find the Nexus 4 on eBay. Oh wait, they already are.
It's unclear what the specs of the upcoming Nexus 5 will be, or who the manufacturer will be, but LG is expected to be the handset manufacturer, considering its work on the Nexus 4.
The Nexus 7 appears to be "Asus property," with the 2013 version also being created by Asus, and the Nexus 10, which was built by Samsung for the 2012 version, is expected to be a Samsung product again this year, assuming the 10-inch Nexus tablet is refreshed.