If we were to survey the landscape to see if people rate the decline in housing prices as either a curse or a blessing, we are sure most would say curse. After all, most homeowners have suffered a loss of equity over the past five years.

However, there is an upside to the decline in home prices, particularly for first-time homebuyers and owners looking to trade up, and that's affordability. According to financial data provider Fiserv, the monthly mortgage payment for a median-priced single-family home is 40 percent cheaper than it was five years ago, falling to $700 from $1,140.

Lower prices are really the only way to remedy a supply glut. Watching an asset's price fall is unpleasant, to be sure, but prices fall only so far and the glut clears, and then prices generally rise.

For example, Miami was one of the most overbuilt metropolitan regions and suffered serious price deflation. But the glut in Miami appears to have cleared, thanks to lower prices stimulating more demand. In the third quarter of 2011, Miami home sales jumped 51 percent from a year ago. What's more, prices are again on the rise: the average sales price in Miami for a single-family home has risen 19 percent year-over-year.

It is more informative to focus on local numbers than it is to focus on national numbers. The National Association of Realtors reports that the national median single-family home price slipped 4.7 percent year-over-year to $169,500 in the third quarter. That said, the NAR's national median price really doesn't mean much to any specific local market.

The bottom line for us is that we've seen enough evidence of markets clearing to suggest more markets will resemble Miami in 2012. Fiserv, though expecting some price weakness over the next few months, expects most major markets to post significant price gains in the second half of 2012.

What will financing rates look like in 2012? We thought mortgage rates would be higher this year than in 2010; that hasn't been the case. The Federal Reserve has plainly stated that it is buying long-term securities in order to hold long-term borrowing rates low. It can be silly to fight the Fed.

Then again, markets can be potent forces. Consider this past week: news that another Mediterranean country, Italy , is close to insolvency did little to move interest rates or mortgage rates. In other words, investors weren't rushing into U.S. Treasury securities. In fact, Treasury rates and mortgage rates held steady for the week.

When the Greek crisis occurred, Treasury rates and mortgage rates dropped perceptibly. The fact mortgage rates hardly moved with the latest crisis suggests markets might be less willing to accept ultra-low rates in exchange for a haven from risk.

Courtesy of Jessica Regan.

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