Priced Out: Where Higher Rates Could Hurt Home Buyers Most

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

Photograph by Radius Images/Corbis

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Pain at 5%: San Jose, Calif.

 Monthly income devoted to mortgage bill:

• historic average: 35.6%

• at 5% interest rate: 42.4%

Fueled by the recent boom in the tech sector, San Jose has become one of the most expensive places in the country for wannabe home buyers. Homeowners here paid an average 35.6 percent of monthly income to cover the mortgage between 1985 and 1999; they're now paying 38.9 percent. The median home value here as of the third quarter of 2013 was $732,200 – the highest on this list – and median income is $95,506. Zillow forecasts a 7.4 percent gain in the median home value by the end of third quarter. If rates rise to 5 percent by then, over 42 percent of a potential homeowner’s monthly nut will be needed to pay the mortgage. At a 6 percent rate it will take 47.4 percent.