Mortgage rates have risen nearly 50 basis points since the start of the year, signalling that the time of historically affordable mortgage rates in the wake of the 2009 housing crisis may be over.
At the end of 2017, mortgage payments took up only 15.7% of the median U.S. household income, according to a fourth quarter affordability analysis conducted by Zillow (Z) , compared to the 21% chunk mortgage payments averaged in the '80s and '90s.
However, in a worse case scenario where mortgage rates reach 6% next year -- near the high end of forecasters' expectations -- mortgage payments will take up 20.5% of the median household's income.
"For nearly a decade now, homebuyers have been buoyed by historically low mortgage rates that made buying a home more affordable than it was for prior generations, but tomorrow's buyers may not be so lucky," said Zillow Senior Economist Aaron Terrazas. "Rates are showing a clear upward trend, bringing an end to an era of historically affordable mortgage payments. Bigger life considerations typically take precedence in the decision to move, but some homeowners who locked in a lower mortgage rate may look to alternatives like renovating their current home instead of becoming a buyer in a stressful, competitive market."
The bad times are already present in seven large U.S. markets.
In San Jose, for example, the share of income needed for mortgage payments rose from 36% historically to 46.1% at the end of 2017, exacerbating an already present affordability crisis in one the U.S.'s hottest housing markets.
Renting isn't a better alternative for most at this time either. The typical rental payment requires 28.9% of the median income, according to Zillow's data, but in 14 large U.S. metropolitan areas rent takes up more than 30% of median income, a threshold that is widely considered to be mark unaffordable housing costs.
In the New York City metro area residents on average spend 26.3% of their income on mortgage payments compared to 29.7% historically. But in Los Angeles, residents spend 41.6% of their income on mortgages compared to 35.2% historically.
Residents in Miami-Fort Lauderdale, San Francisco, San Diego, Denver and Portland, OR join Los Angeles and San Jose residents as the current homeowners paying more of their income now than has historically been the case.