Higher Mortgage rates = lower affordability

Interest rates are the highest in years, helping to make housing markets even more overvalued. A recent report figures that 71 of the 299 largest U.S. housing markets were "extremely overvalued" at year's end, up from 62 markets a quarter earlier. The report arrives at a fair market value based on population, income and interest rates and factors in historical premiums or discounts.

Rates have a direct affect on affordability. For example, a jump in interest rates from 6 percent to 7 percent on a 30-year loan adds about 10 percent to a monthly mortgage bill. A homeowner who financed a loan of $300,000 at 6 percent would pay about $1,800 a month. At 7 percent, the monthly payment would be $1,995.

Click here to see the rankings for the 299 U.S. housing markets.