Homes Less Affordable as Prices Fall, Rates Rise, Zillow Says

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Rising mortgage rates are driving up the cost of buying a house even as prices fall, making property more expensive across the U.S., according to a new study by Zillow.com, an online provider of home valuations.

Monthly payments on 30-year fixed mortgages are 6 percent to 10 percent higher in 41 of the top U.S. housing markets than they were two months ago. First-quarter prices have declined from a year earlier in 88 percent of those areas, Zillow said.

"We're going to need about a 30 percent decline in house prices if you are going to keep payments stable,'' said Morris Davis, a former senior economist with the Federal Reserve and now a real estate professor at the University of Wisconsin-Madison's School of Business.

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The average monthly mortgage payment rose $131, or $1,572 a year, since the beginning of April in the 41 areas surveyed, Zillow said. The figure is controlled for population.

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U.S. housing was less affordable in April than the previous month even as sales increased in some markets, the Realtors data show. The composite homebuyer index fell to 129.8 in April from 130.6 in March. A value of 100 means that a family with the national median income has exactly enough income to qualify for a mortgage on a median-priced home.

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Mortgage payments rose the most in the California metropolitan areas of Ventura and Santa Rosa, gaining 10 percent, according to Zillow. That added $220 a month to loan payments in Ventura and $189 in Santa Rosa. Home prices in those areas fell about 20 percent in the first quarter from a year earlier, the company said.

The annual cost for a 30-year fixed-rate mortgage to buyers with good credit in the Ventura area is now $2,640 more now than 60 days ago. That amounts to $79,200 more over the life of the loan, without adjusting for inflation, Zillow said.

The trend holds true in California metro areas including Sacramento, San Francisco, Los Angeles, San Jose and San Diego, where mortgage payments on median priced homes range from 7 percent to 10 percent more now than in April.

California is among the states hardest hit by the biggest drop in U.S. home sales in 26 years.

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