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Back in the mid-eighties and nineties, Americans spent nearly 20 percent of their median monthly incomes on their home loans—compared to just 12.5 percent today, according to Zillow.

The trouble is that wages have either stagnated or dropped at the same time that home values are rising. Pre-bubble, U.S. homebuyers spent 2.6 times their median annual incomes on the purchase price of a typical home, but now they are spending three times their incomes—meaning homes are 14.5 percent more expensive relative to income, according to Zillow. That is all made possible by government-subsidized, record low rates.

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“The days of historically high levels of housing affordability are numbered,” said Zillow Chief Economist Stan Humphries. “Current affordability is almost entirely dependent on low interest rates, and there’s no doubt that rates will begin to rise in the next few years.”

Rates will rise because the Federal Reserve will inevitably have to get out of the business of buying agency mortgage-backed securities, which currently drives down rates. This won’t happen immediately, but it will in the next two to three years.

Article source: http://www.cnbc.com/id/100631625