James Glassman says House Prices will be in Equilibrium this spring

He argues that price to household income will be within their long-term norms soon. His analysis is here: http://online.wsj.com/public/resources/documents/econreport12312007.pdf.

This may or may not be correct; it is also beside the point.

First, in the markets where prices got really out of hand relative to fundamentals (Florida, Arizona, Inland California, etc.), prices have a long way to drop until the long-term price-to-income ratio returns to "normal." Second, and more important, household income is not the key fundamental to focus on--rents and inventories are. Until inventories drop to roughly the six month range (they are now in excess of ten months), it is hard to see where a house price turnaround will come from.