When the housing market crashed 10 years ago, the Federal Reserve responded by pushing rates to record low levels. Those very low interest rates helped the housing market get back on its feet by making it cheaper for buyers to own a home. Now that the economy is revving up, the Fed has announced its first rate hike of 2017, while hinting at additional increases throughout the remainder of the year.

Spurred by the release of the February jobs report, this week’s rate hike was expected. It boosted the 30-year fixed mortgage rate to 4.30%, up from last week when it averaged 4.21%. (By comparison, a year ago at this time, a 30-year fixed-rate averaged 3.73%.) According to Freddie Mac, increasing inflation, continued gains in the labor market, and the Fed’s intentions for further rate increases are all likely to keep pushing mortgage rates up this year. (Read more here).

So, after all these years of low interest rates, what effect does a rate hike have on America’s housing market? A notoriously conservative group, the Federal Reserve only began to consider raising rates as unemployment fell and wages began to rise. Taking into account that the housing market is healthier than it has been at any point in recent memory, and that any dip in the housing market will likely be offset by gains in other areas of the economy, a rate hike shouldn’t be an overwhelming blow to the housing industry. Yes, as interest rates go back up to more normal levels, the cost of buying a house also rises. But that’s not necessarily a game ender.

To see how prices might be hit by rising rates, real estate consultant John Burns ran the numbers, assuming the rate for a 30-year fixed mortgage gradually moves back up to 6 percent – from the current average of just over 4%. For homebuyers who lock in relatively low rates now, the cost of homeownership is still pretty affordable – depending on where you live.

So if current rising rates aren’t that big a deal, what’s the impetus to buy now? Because even one percentage point can seriously affect your purchasing power (i.e. how much house you can afford).  According to Lawrence Yun, the Chief Economist and Senior Vice President of Research at the National Association of Realtors, a simple mortgage calculation shows a loss of about 12% in purchasing power from a one-percentage point rise in mortgage rates. For example, a person taking out a $200,000 30-year fixed rate mortgage at 3.75% rate would have a $926 monthly payment (just principal and interest). At 4.75%, and with the desire to keep the same monthly payment, the loan amount has to be cut to $177,500.  The buyer’s purchasing power has been reduced due to the higher rate.

So what’s the bottom line? According to the experts at Freddie Mac, the days of historically low interest rates are over for now. But a reasonable rate hike is not bad for America’s housing market. It reflects strong economic growth, which could make the housing market even more competitive. However, if you have your eye on a particular home or neighborhood, you should probably get a move on before successive rate hikes put it out of your price range.

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