With home prices in hard hit areas around the country dropping, affordability has improved dramatically. 

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 Tuesday by Wells Fargo and 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 three month period that ended June 30, 2004.

This is one sign of getting close to the bottom of the cycle.

Another is when you see the hardest hit areas in the country begin to increase in the number of sales.  San Diego, one of the hardest hit, is anticipated by some to be one of the first areas out of the down cycle.

Hawaii hasn’t seen a drop in the median home or condo price, and we may be seeing the first signs of the bottom in the national housing outlook. That isn’t to say prices won’t continue to fall, but an increase in the number of sales is one of the first signs of reaching the bottom. Check out the mixed reports.

Just like when housing prices increased by 20-30% in one year before it all ended, we see the opposite occurring now. 

In Stockton, Calif., the average price of a single-family home fell 35% to $230,800 in the first quarter of 2008 from $357,800 in the first quarter of 2006. Over the same two-year period, Stockton has gone from being 71% over-valued to 4.3% over-valued.

Are we close to the end? Any thoughts?