It Depends What You Mean by Bottom

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Peter Dennehy, whom I mentioned in my most recent entry, wrote back with some thoughts and I wanted to reply to a couple of topics he raised.

First, Peter thinks I misconstrued his statement as being a call that the bottom would come in 2008, but this is not correct. I took the line I quoted -- "a lot of people believe that this will be the year that the elusive bottom is reached" -- to be a statement about the prevailing sentiment among market participants, not about what the market would actually do in 2008. And, as I said in my article, I entirely agreed with it.

Second, Peter raises the point that there are many indicators of housing market health, including inventory, sales activity, and building activity, and that they will bottom at different times. I agree with this as well, but at the same time, what people not involved in the real estate industry really care about most are prices. So when I talk about "the bottom" without making any other qualifications, I am talking about aggregate home price levels. I think that this is a reasonable interpretation for anyone being quoted in a non-industry publication.

Just to be abundantly clear here, Peter has not called for a price bottom in 2008. His letter contains a detailed outlook for what he thinks the year might have in store.

-- RICH TOSCANO