One week after Freddie Mac chief economist Sean Becketti warned that "if rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017", mortgage rates continued their upward trend. According to the latest update from the mortgage giant, the 30-year fixed reached 31-month highs, touching level not seen since April 2014 in the week after the Fed hiked its interest rate for the second time in the past decade.

The average rate for a 30-year fixed mortgage was 4.3%, up from 4.16% last week, Freddie Mac said in a statement Thursday. The average 15-year rate climbed to 3.52%, the highest since January 2014, from 3.37%.

Mortgage rates have surged since October, when the 30 Year fixed was offered at 3.40%, tracking a jump in Treasury yields on expectations of rising inflation.

Freddie Mac's chief economist Becketti was more sanguine after last week's unexpected warning, saying that “a week after the only rate hike of 2016, the mortgage industry digested the Fed’s decision. Following Yellen's speech last Wednesday, the 10-year Treasury yield rose approximately 10 basis points. The 30-year mortgage rate rose 14 basis points to 4.30 percent, reaching highs we have not seen since April 2014."

So what does this surge in yields mean? According to a separate analysis released by RealtyTrac, home affordability in the fourth quarter tumbled to the lowest level since the financial crisis, Q4 2008. In a nutshell the report found that:

• 29% of Local Markets Less Affordable Than Historic Norms, Highest Since Q3 2009;
• Annual Home Price Appreciation Outpaced Wage Growth in 81 Percent of Markets;
• Affordability Index Improved From Year Ago in 18 Percent of Markets;

Here are the details.

According to the quarterly RealtyTrac report, 29% of U.S. county housing markets were less affordable than their historic affordability averages in the fourth quarter, up from 24 percent of markets in the previous quarter and up from 13 percent of markets a year ago to the highest share since Q3 2009 — when 47 percent of markets were less affordable than their historic affordability averages.

Nationally the affordability index in the fourth quarter was 103, down from 108 in the previous quarter and down from 116 a year ago to the lowest level since Q4 2008, when the national home affordability index was 102.

The report analyzed median home prices derived from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics in 447 U.S. counties with a combined population of more than 184 million. The affordability index is based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment — including property taxes and insurance. An index of 100 indicates market affordability on par with historical norms while above 100 indicates more affordable than historic norms and below 100 indicates less affordable than historic norms.

Counties in New York, Dallas, San Francisco less affordable than their historic norms

Out of the 447 counties analyzed in the report, 130 counties (29 percent) had an affordability index below 100, indicating they are less affordable than their historic norms.

Counties with the lowest affordability index in Q4 2016 were Cumberland County, Tennessee in the Crossville metro area (58); Genesee County, Michigan in the Flint metro area (77); Denver County, Colorado (79); Adams County, Colorado in the Denver metro area (81); and Wilson County, Tennessee in the Nashville metro area (83).

The most populated counties that were less affordable than their historic norms in Q4 2016 included Kings County (Brooklyn), New York (affordability index of 91); Dallas County, Texas (91); Queens County, New York (95); Tarrant County, Texas, also in the Dallas metro area (93); and Alameda County, California, in the San Francisco metro area (93).

The most populated counties that were less affordable than their historic norms in Q4 2016 included Kings County (Brooklyn), New York (affordability index of 91); Dallas County, Texas (91); Queens County, New York (95); Tarrant County, Texas, also in the Dallas metro area (93); and Alameda County, California, in the San Francisco metro area (93).

Home price growth outpaced wage growth in 81 percent of counties.

Annual home price growth outpaced annual wage growth in 363 of 447 counties (81 percent) analyzed in the report, up from 77 percent of counties in the previous quarter and up from 57 percent of counties a year ago.

Since bottoming out in Q1 2012, the national median home price has increased 60 percent while average weekly wages have increased just 1 percent during that same timeframe.

The most populated counties where home price growth outpaced wage growth were Los Angeles County, California; Harris County, Texas, in the Houston metro area; Maricopa County, Arizona in the Phoenix metro area; San Diego County, California; Orange County, California; Miami-Dade County, Florida; Kings County, New York; and Dallas County, Texas.

Counties with the strongest annual growth in average weekly wages were Woodbury County, Iowa in the Sioux City metro area (15 percent); Maury County, Tennessee in the Nashville metro area (14 percent); Iredell County, North Carolina in the Charlotte metro area (11 percent); Walton County, Georgia in the Atlanta metro area (9 percent); Elkhart County, Indiana in the Elkhart metro area (8 percent); and King County, Washington, in the Seattle metro area (8 percent).

In conclusion, “Rapid home price appreciation and tepid wage growth have combined to erode home affordability during this housing recovery, and the recent uptick in mortgage rates only accelerated that trend in the fourth quarter,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “The prospect of further interest rate hikes in 2017 will likely cause further deterioration of home affordability next year. Absent a strong resurgence in wage growth, that will put downward pressure on home price appreciation in many local markets.”

So all the US economy needs is a burst in wage growth. Good luck.