Certainly the housing market is in a condition that hasn’t been seen for many years.  The word uncertainty is being thrown around, and with good reason.  The median home price in theUnited stateshas fallen nearly 40% in just over five years, but the worse is definitely over.

Although the percentage of sales of distressed homes will rise, the federal government’s latest loan-modification program might allow as many as 1.5 million to two million homeowners to refinance, estimates Mark Zandi, chief economist at Moody’s Analytics. Zandi says that further home-price declines nationwide will be limited to 3% to 5% and that 2012 will be the year that prices finally stabilize — setting the stage for gains in 2013.

Short-lived spikes in prices will affect some cities sooner. When housing markets touch bottom and begin to stabilize, price appreciation tends to be spread unevenly, creating a lot of confusion about where the recovery is occurring and when, says David Stiff, chief economist at Fiserv Case-Shiller. Even within a single city, more desirable neighborhoods will stabilize first, while prices in other neighborhoods may fall at a rapid pace.

Houses haven’t been this affordable the 1970’s. The benchmark of affordability — the ratio of median home price to median family income — has fallen to 2.6, below the historical ratio of 2.9, says Stiff, chief economist at Fiserv Case-Shiller. Another measure, the percentage of monthly family income consumed by a mortgage payment (principal and interest, using a mortgage rate of 4.1%), is 12% nationally, the lowest since 1971.