Mortgage rates have gone up and down for many years. However, the effects are always seen when the prices go up. According to a past report by CNBC, "When the bottom fell out of the housing market in 2007, the Federal Reserve responded by pushing borrowing rates to record low levels."
When the interest rates are low, it aids the housing market to gain a foothold by making it cheaper for purchasers to own a home. Yahoo Finance previously posted that, "As of this summer, the average selling price of a single-family home has made up all the ground lost to the housing bust."
However, when the mortgage rate rises by 6 percent, the cost of buying a home goes higher as well. CNBC further reported that the rise could put pressure on home prices, which have bounced back more than 50 percent since bottoming out in early 2012.
John Burns, real estate consultant said that, assuming the rate for a 30-year fixed mortgage gradually moves back up to 6 percent from the current average of just more than 4 percent, the outcome would be that San Francisco, San Jose, California, and Miami may be overrated by more than 20 percent.
However, it does not affect all cities, even if the mortgage charges are up by 6 percent. Those undervalued markets include Chicago, Atlanta and Detroit as disclosed by Yahoo Finance.
For buyers who are under low rates now, the cost of homeownership is still reasonably priced, but it depends on the location of the place. John Burns expects that disparity from one city to the next to continue for longer periods of time.
In the costliest places such as San Francisco, New York, Honolulu, Los Angeles, San Jose and Orange County, California, the price of buying a house can consume half of the typical income. CNBC also noted that, "Home buyers in more affordable cities, including Cleveland, Philadelphia, Pittsburgh, Minneapolis, Atlanta and Detroit, can expect to spend roughly 20 percent of income or less."