Home prices have dropped so quickly and so far in the past 6 months that valuations (the difference between what a home should cost and its actual price) are the lowest they've been since 2004, according to a report released just this week.

The Cleveland-based bank National City Corp. (NCC, Fortune 500), together with financial analysis firm Global Insight, revealed last week that more than 88% of the 330 housing markets surveyed showed price declines and improved affordability during the last three months of 2007.

"Housing valuations are almost back to long-term norms," said National City's chief economist, Richard DeKaser. He called current affordability "the best in the past four years."

But DeKaser cautioned that home prices could fall even further.

"This isn't to say home price declines are over," he said. "We could move below historic norms. By the end of 2008, housing markets could be broadly under valued."

Price declines have continued into 2008 and interest rates, although they have inched up lately, have been steady or lower compared to late last year. Soaring foreclosure rates have added inventory to many housing markets, depressing home prices further.

The biggest gains in affordability occurred in California, Michigan and Florida, which are areas that have also been some of the hardest hit by foreclosures. Those states registered 43 of the 50 biggest price declines.

Bend, Ore. currently tops the overvaluation list. Home prices there were judged to be about 59% higher than their fair-market value. Miami, despite a median home price decline of 5.7% last year, is the most overvalued big city, by 44%.

All the best bargains were found in Louisiana and Texas. Houses in Houma, La were under valued by 31.2%, according to the report. Dallas was the most undervalued big city, by 30%.

My advice to anyone thinking of buying a home this year: don’t hesitate in getting the ball started with your real estate plans. With so many great deals available all over town, now’s the best time to start doing whatever it takes to ensure you’ll be in the best position to take advantage of the best deals real estate has seen in 4 years.

Start working on your credit today, getting your finances in order, and exploring your financing options. Since the real estate market always goes up and down  in cycles, prices that are low right now, will definitely go back up in the next few years.

The home you buy in 2008 for $150,000 could easily be worth more than $200,000 once the market turns back around.