Normally people accept the idea that lower home prices are bad because people who already own homes may have lost value in their home. However, there is an upside to lower prices. The upside is that more people can afford to by homes or can buy homes that are nicer or better located.

A recent report on the affordability of homes in California was released and shows that more people can now afford to buy a home. Affordability has to do with the price of homes available and the interest rates that people can get on home loans. We are now at the record level for affordability that was seen in 2009.

Existing home owners should also be happy that affordability is up, because it means that more people can afford to buy. Hopefully this will lead to fewer properties on the market and fewer vacant units. More people in homes means better neighborhoods. So, in the long-run the current low prices will rebound and more homes will be occupied.

Record low interest rates mean that it is a great time to get a loan. However, the other factor that comes into play when deciding to buy or invest in a home is the price level of homes. As we all know, home prices have come down dramatically in nearly every market. This is in part due to the high number of properties available for sale and the, relatively, low number or buyers.

There may be a change on the horizon. While most people do not expect home prices to shoot up any time soon, there may be more stability and possibly some minor increases in prices. This is a result of the lower levels of available homes. A recent article in the Wall Street Journal stated that inventory levels dropped by an average of 22% nationwide. Of course the amount of change in the housing inventory varies depending on the city and state, but the trend is fairly evident. If this trend continues, it should be expected that prices would increase, even if it may be slightly.

Maybe we are on the road to recovery???

The average 30 year fixed rate for January 19th, 2012 is 3.88%. According to the Primary Mortgage Market Survey (PMMS), published by Freddie Mac this is the lowest since the inception of the survey in 1971.

To gain an understanding of what this low interest rate means, you have to think about what it translates into based upon a particular loan amount. To keep things simple, I will use a loan amount of $100,000 for this example. At a fixed interest rate of 3.88% on a 30 year loan, the payment is $471 per month.

If you compare this to the 7.00% interest rate in January of 2002 (10 years ago) you would have had a payment of $665 per month for a $100,000 loan.

Going back even further, to January 1982, the interest rate was 17.48% which translates to $1,465 per month for a $100,000 loan.

These super low interest rates and the huge drop in home prices makes right now a great time to buy. In many cases, rental costs are higher than the cost to own.