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Priced Out: Where Higher Rates Could Hurt Home Buyers Most

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

Photograph by JF Creatives/Gallery Stock

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Home, Sweet Unaffordable Home

Higher mortgage rates and home prices are conspiring against potential homeowners. To see where consumers may be priced out if rates hit 5 percent -- or 6 percent -- real estate information website Zillow Inc. screened 100 major metropolitan markets, using the average percentage of monthly income going to mortgage payments from 1985 to 1999 as a base figure for affordability. 

Here we highlight 10 places where 5 percent mortgages, which Zillow expects we'll see by year end, would push that percentage of monthly income (based on income and wage growth data from the Census Bureau and the Bureau of Labor Statistics) furthest above the average. We include Zillow's median home values as of September 2013 and its forecast of values a year from then, which go into affordability calculations, as well as analysis of each market by Zillow chief economist Stan Humphries. We order cities by their distance above the average. We then do the same for 10 cities where a 6 percent rate would hurt the most (there's some overlap). Californians, we feel for you. 

Methodology details are on the last slide.