Homes are biggest bargain since 2004

With prices crashing around the nation, home price affordability has improved dramatically in many U.S. cities, especially San Diego. As a result, 53.8% of all new and existing homes sold nationwide during the first three months of 2008 were affordable to families earning the median household income of $61,500, according to the latest Housing Opportunity Index released by the National Association of Home Builders (NAHB). That's up from 44% during the first three months of 2007, with home prices the most affordable they've been since the 3-month period ended June 30, 2004.

Three factors have combined to substantially increase housing affordability, according to NAHB. Mortgage rates have returned to near the record low levels of a few years ago, family income nationwide has risen by $2,500 (from 2007 to 2008) and home prices are dramatically lower compared with a year ago. However, this doesn't mean that buyers are flocking back to the market. Many remain reluctant to act in what they continue to perceive as falling markets. Additionally, lender standards have tightened dramatically during the past 12 months, with Lenders requiring much higher down payments, better financial documentation and higher credit scores than they did during the boom, cutting back on the number of potential buyers.

Of hope, the temporary jumbo loan cap limit increase to $729,250 ($697,500 in San Diego) is revitalizing jumbo markets, which had essentially shut down. These are now getting easier to find, stimulating movement in the market nationwide.

Source: CNNMoney.com, May 28, 2008.