Rising rates will cool the housing market. But a crash is unlikely.

Home prices have been setting record after record, making this a great time to be a homeowner. Unlike stocks and bonds, which have fallen sharply this year, U.S. home prices have kept on rising.

Stocks were down a record 13.5 percent for the first four months of the year, as measured by the FT Wilshire 5000 Total Market Index, and bonds were down a record 9.4 percent for the period, according to the Bloomberg Aggregate Bond Index.

Not so houses. Freddie Mac says that house prices rose 5 percent for the first quarter of this year, and the National Association of Realtors (NAR) says the median price of homes changing hands was up 6 percent.

From the start of last year through this year’s first quarter, median home sale prices were up 21 percent, according to the NAR, and Freddie Mac’s home price index rose 24 percent.

And wait, there’s more. From the start of 2020 through this year’s first quarter, the NAR says median home sales prices were up 41 percent, and Freddie Mac’s home price index was up 38 percent.

But if you step back a bit and do some elementary arithmetic, it’s clear that the days of such rapid home price growth are almost certainly over.

Why? Higher mortgage costs caused by the Federal Reserve raising rates to try to bring down inflation. On Wednesday, the Fed raised interest rates by half a percentage point, saying inflation was much too high.

Not long ago, when the Fed was in full stimulus mode, rates on 30-year fixed-rate home mortgages were at record lows, dipping below three percent for a good part of 2020 and for parts of last year.

Now, mortgage rates are rising sharply — up almost two points from the end of last year through late April.

The combination of rising house prices and rising mortgage rates means greatly increased monthly interest and principal payments for people buying homes these days compared to what their payments would have been last year. This makes it much harder for people buying homes to qualify for mortgages and holds down the rise in home prices.

Let’s look at some numbers, using Freddie Mac’s house price statistics and Bankrate’s mortgage payment calculator.

Let’s say that you bought a home for $500,000 at the end of last year and took out a $400,000, 30-year fixed-rate mortgage to help pay for it. (That’s a 20 percent down payment, the ratio that I’m using for all my calculations.)

The interest rate on that mortgage would have been 3.11 percent, and your monthly interest and principal payments would have been $1,710.

Now, let’s say you took out a $400,000 mortgage at the current 5.1 percent interest rate to buy a $500,000 house in late April. Your monthly payment would have been $2,171 — a 27 percent increase that would cost you about $5,500 more a year than it would have cost last year. Which means that you needed 27 percent more income to qualify for that mortgage than you needed last year.

But what was a $500,000 home at the end of 2021 would have become a $525,000 home, based on the 5 percent increase in Freddie Mac’s home price index.

That would mean a $2,280 monthly payment, a 33 percent increase over last year that would add $6,840 to your annual mortgage outlays and require 33 percent more income to qualify for the loan.

Obviously, if you keep jacking up the price of homes by double digits and combining that with sharply higher mortgage rates, you get fewer and fewer eligible buyers. As a result, we don’t see people lining up to bid on homes the way they did a few months ago. That’s why I don’t think that the double-digit annual growth in house prices since the start of 2020 can possibly continue.

And I’m not the only person who thinks this way.

“Price growth will steadily decelerate where year-over-year annual home price gains will look quite normal at five percent by the end of the year,” Lawrence Yun, chief economist of the National Association of Realtors, said in an emailed statement.

That’s pretty close to Freddie Mac’s home price projections. Freddie’s predicted price increase falls to 2.2 percent this quarter, down from 5 percent in the first quarter, then continues to fall to 1 percent a quarter next year.

“I think we’re at the most pivotal part of the housing market since the aftermath of the Great Recession about a decade ago,” said Len Kiefer, Freddie Mac’s deputy chief economist. “If we’re not in a period of permanently high inflation, then the days of 10 percent annual growth are coming to an end.”

But even though the days of double-digit national home price growth seem to be over, I don’t think we’re looking at anything like the home price bubble that popped in 2006 and helped touch off the Great Recession, which ran from late 2007 through mid-2009. That’s why I don’t think there will be a price crash.

“This hasn’t been a credit-fueled housing bubble,” Kiefer said.

These days, you don’t hear about “liar loans,” no-down-payment mortgages and similar financial excesses that were a feature of the house price bubble in the early 2000s.

We’ve got legitimate mortgage lenders these days rather than the predators we saw during the bubble. We’ve also got borrowers who have put up down payments of 20 percent or so, giving them a serious financial stake in their homes and the financial ability to weather price downturns.