By Katie Curnutte

SEATTLE (Zillow) —The housing market is in great shape right now. Inventory is tight, leading to home value increases across the country. In some places, such as Las Vegas and parts of California, values are up north of 20 percent since this time last year.

Even so, affordability is at all-time highs, according to a Zillow analysis of mortgage payments compared to household income. So it stands to reason this recovery should continue, unchecked.

But there's one piece of the puzzle that has our economics team here at Zillow concerned. Namely, the fact that current high affordability seems to be driven primarily by low mortgage rates. At current mortgage rates, the U.S. as a whole and the 30 largest metros covered by Zillow are more affordable than their historic norms.

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But mortgage rates are on their way up. They recently crossed 4 percent and are expected to continue to rise slowly and steadily. And as they rise, home buyers will end up paying larger and larger portions of their incomes on their mortgage payments.

So we took a look at the areas of the country that will become less affordable as mortgage rates rise to 5, 6 and 7.1 percent.

What will happen when we get there? Our economists believe we'll see more price volatility as consumers have to spend more of their incomes to buy a home, or we'll see home value appreciation stagnate or fall somewhat as incomes catch up. We're not worried about another national housing bubble, but lessening affordability will certainly bring back some uncertainty to what is currently a very hot housing market.

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