Rising Mortgage Rates Offset by Off-Peak Values
With Arlington Heights home values down 26.9 percent from the market peak, rising mortgage rates should not alter affordability for Chicago area homebuyers.
The average home value in Arlington Heights was $270,000, according to recent data from Zillow. That’s down from the average home value of $369,000 in 2007.
However, even with Arlington Heights home values up 5.5 percent year-over-year, they should still remain within reach for buyers even as interest rates steadily climb, as they are expected to do.
That differs from real estate markets in places like San Jose, Seattle and the Valley of the Sun, where rising mortgage rates are expected to impact heated markets, especially in California as rates climb from 4 percent to 5 percent. Zillow examined affordability in key markets if rates were to rise to 6 percent and 7.1 percent.
The 7.1 percent threshold is the point at which homebuyers nationwide will be back to spending 20 percent of their monthly incomes on a mortgage payment.
But at 5 percent mortgage interest rates and assuming homes in these metros appreciate in line with Zillow’s Q1 2013 home value forecasts, homes in half a dozen markets will look more expensive than their historic norms on a monthly payment basis: San Jose, Calif. (22 percent more expensive); Los Angeles (19 percent more expensive); San Diego (14 percent more expensive); San Francisco (11 percent more expensive); Portland, Ore. (7 percent more expensive); and Denver (1 percent more expensive).
At 6 percent, five more major markets become more expensive: Riverside, Calif. (11); Miami (7 percent); Seattle (5 percent); Sacramento, Calif. (4 percent); and Washington (2 percent).
At 7.1 percent mortgage rates, the point at which homeowners in the United State as a whole are back to spending their monthly historic average on mortgages, homes in another 7 large metros fall into the more expensive bin: Phoenix (13 percent); Boston (10 percent); Philadelphia (9 percent); New York (7 percent); Baltimore (6 percent); Pittsburgh (5 percent); and Charlotte, N.C. (2 percent).
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