A homebuyer who could have bought a home valued at $393,700 in January 2018, is likely to afford a home worth $372,000 today, to keep their monthly payment the same as they would have in the beginning of last year, when mortgage rates were at 4.15 percent, according to a study by Zillow .
The study  indicated that rising interest rates were likely to bite into homebuyers' budget more than they might have anticipated. The study, which forecasts mortgage rates to rise to 6 percent by the end of 2019, said that at that rate a buyer would be able to afford a home worth $319,000 to maintain their budget.
This would also result in making concessions on location as well as space, the study pointed out. Additionally, buyers who were being pushed towards less-expensive segments of the market where the inventory crunch was also the most pronounced were likely to push prices in that segment upward. It would also result in the loss of potential homes that could be bought. "Right now, home shoppers wanting to spend no more than 30 percent of their median U.S. income can afford 56.5 percent of available homes," the study found. "With rates at 6 percent, they would be looking among 48 percent of available homes – a loss of 49,660 potential homes."
So then would timing the market help? Not really, according to Aaron Terrazas, Senior Economist at Zillow. "A home is the most valuable asset that most people will ever own, so it's especially important not to gamble with it," he said. "In the end, the best time to buy a home is always when the time is right for an individual buyer – often when they're financially ready, when they're relocating to a new area or a major life event requires them to upsize or downsize."
At the metro level, the study found that the impact of the rising mortgage rates was being felt more acutely in the hottest housing markets. For example, in San Jose, a 6 percent mortgage rate would have buyers making the $118,400 median household income looking at homes that were $102,100 less expensive than those they might consider now.