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Priced Out: Where Higher Rates Could Hurt Home Buyers Most

By Suzanne Woolley - 2014-01-09T16:47:41Z

Photograph by Ashok Sinha/Gallery Stock

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Pain at 5%: Los Angeles

Monthly income devoted to mortgage bill:

• historic average: 35.4%

• at 5% interest rate: 46.4%

Owning a home here is less affordable than it's been in recent history. Demand in the ultra-luxury home market and strong interest from investors has made LA one of the least affordable cities in the U.S. In 2013's third quarter, 38.2 percent of monthly income went to the mortgage bill, compared with an average of 35.4 percent from 1985 to 1999. If rates hit 5 percent, paying the mortgage will take 46.4 percent of the monthly nut for anyone with an income near the $59,113 median -- a theoretical point, granted, because no lender would give that person a loan. At 6 percent, the mortgage bill will take just under 52 percent of monthly income. Zillow forecasts a 10.6 gain in the median home value by September, to $532,566.