The following grid will show you what a 1% increase in interest rate will do to the monthly payment at various loan amounts, and how much more of a home a buyer could have afforded at the lower rate versus the higher rate.  A grid of loan amounts is listed below followed by one example of a buyer and seller situation at one particular price point.  These figures are based on principal and interest payments on a 30 year fixed rate loan and are rounded figures. 

Loan Amount     Pymnt @ 5.875%      Pymnt @ 6.875%      Difference in House Price Based on Higher Rate

$150k               $889.00                   $988.00                      $21k   

$175k              $1036.00                 $1151.00                     $24k  

$200k               $1183.00                 $1313.00                    $25k

$225k               $1329.00                 $1476.00                    $28k

$275k               $1627.00                 $1807.00                    $34k

$350k               $2072.00                 $2301.00                    $44k

$425k               $2517.00                 $2795.00                    $53k

$500k               $2954.00                 $3285.00                    $63k

Examples:

Buyer -

A Buyer wants to buy a home but wants to hold out for the price to drop from $225k to $200k (assume 100% financing for these purposes).  If the rate goes up from 5.875% to 6.875% then the client's payment will be the same on the house at $200k at 6.875% as it would have been on $225k at 5.875%.  If the seller only came down to $210k and the rate went up 1% while the buyer was waiting then they would have been better off buying at $225k at the lower rate. 

Seller-

A seller has a home listed with for $225k and the market data states it should be reduced to $200k in order to sell the home, but the seller wants to hold out for a better market, the perfect buyer, etc.  If they hold out and the rates went up 1% then their buyer pool goes down significantly, the buyer now has to pay $130.00 more per month for the same loan on that home.  It also slows the market down as rates go up and that can create more depreciation to overall home values in an area as inventory would potentially increase as well.