Real-estate prices have fallen so low that nearly 60 percent of California households could afford to buy an entry-level home, a trade association said Wednesday.

The California Association of Realtors reported that affordability soared to 59 percent in the fourth quarter of 2008, compared with just 33 percent a year earlier.

"I think it's the best news because it means the markets are working and the first-time buyers and investors are responding," said Leslie Appleton-Young, the association's vice president and chief economist.

The association considers its affordability index the most fundamental measure of housing well-being for first-time buyers in the state.

Last year's fourth-quarter affordability is the highest since the index was created in 2003. And demonstrating the volatility of the state's housing market, the index hit its record low of 23 percent in the second quarter of 2006.

Under the association's formula, an affordable price for first-time buyers is 85percent of the median price statewide and in selected markets.

California's housing market has been roiled by a huge number of foreclosures. The bargain-price property is driving huge sales gains in some parts of the state.

"That property is perceived to be a good deal and long-term investment," Appleton-Yound said. "That stuff is selling."

The latest report also showed:

The median entry-level price fell 40 percent, from $411,170 in the fourth quarter of 2007 to $248,030 in the comparable period last year.