The current decline in home values has one very bright spot: combined with relatively low mortgage interest rates, homes have reached their highest level of affordability in four years.
According to the National Association of Home Builders (NAHB), 20% of households in LA County can now afford the median price of a home. Compare this to 2% in 2005. The NAHB relates the cost of paying for a home, based on average home prices and mortgage rates, to the median household income.
While the increased affordability is no doubt fueling the rapid sale of bargain-priced foreclosures, primarily among first-time buyers and investors, it is also creating a lot of pent-up demand that will be experienced in the future.
Interest rates declined last week, with a 1/8% drop nearly across the board. Where all rates began the week of November 21.