Will rising mortgage rates undermine home prices?

Thanks to historically-low mortgage interest rates, U.S. homes, despite being more expensive relative to median annual incomes, are more affordable now than they were in the pre-housing bubble era, according to a new report from Zillow.

U.S. homeowners in the fourth quarter of 2012 paid 12.6 percent of their median monthly incomes in mortgage payments, according to Zillow. That’s close to 37 percent more than homeowners paid from 1985 to 1999, Zillow says, when mortgages took up 19.9 percent homeowners’ median monthly incomes.