This article appears in Real Estate Outlook 2018.

Speculation abounds about interest rates. When will the Federal Reserve raise rates again? How quickly and how often will they rise?

One thing experts agree on: “We know that interest rates are going to continue to rise,” said Alessandro Rebucci, associate professor at the Carey Business School at John Hopkins University and an expert in international finance, applied macroeconomics and financial crises.

“The recent tax cut means much higher government borrowing, household consumption and business investment, so also higher wages and inflation. The stock market will continue to adjust downward toward more realistic valuations or turn bear if the Fed fails to deliver on its balancing act. Volatility is back with a vengeance and here to stay,” Rebucci said.

James P. Gaines, chief economist at the Real Estate Center at Texas A&M University, agreed.

“We’re expecting to see movement. The Fed has said it’s going to raise rates with between one and four increases. Assume it’s three — about 75 basis points. With that, long-term rates will adjust upwards to some extent,” Gaines said.

But, rising interest rates probably won’t have much of an impact on the housing market this year, Gaines said.

“People who are on the fence about buying a home will see prices go up and interest rates go up and they may think, ‘I might as well buy now,’” Gaines said. “The kicker is that inventory is low. Everything works in a circle.”

Hoping for a soft landing

“The housing market will naturally cool down in this process, hopefully landing softly rather than crashing,” Rebucci said. “For many American households, the higher cost of mortgage financing, once higher interest rates have fully passed through, combined with more limited deductibility of interest payments will outpace any tax relief approved late last year. This is a net negative for the housing market.

“There are also pockets of oversupply in many metropolitan areas, with some uncertainty as to whether the maturing millenials will continue to boost demand for condos in more central areas,” Rebucci said.

Buyers may downgrade

Interest rates are not expected to spike, Gaines said. During the last boom the mortgage rate was 6 percent. Now we’re in the 4 percent range.

“By and large it will not make that much of an impact on the housing market. ... The home buyer who is looking at a $300,000 home might buy a $275,000 or $250,000 home, but they will still buy. This might give them the push they need to buy now,” Gaines said.

Interest rates on the move also affect home builders, who “get nervous when rates go up,” Gaines said. Because rising rates make it more difficult for buyers to afford the home they want, builders will try to create homes in more affordable price ranges, Gaines said.

In the long run

While the Federal Reserve controls short-term rates, the market determines the long term.

“The imbalance between demand and supply of longer-dated U.S. government paper does not bode well for longer-term bond prices or the stability of their yields to which our mortgage market is anchored,” Rebucci said. “Because of the tax cuts, the Treasury needs to issue massive amounts of new debt. The Fed would like to stop buying, while foreigners, concerned by the widening trade deficit, are watching rather than shopping in the bond market. The odds of a recession — and a serious housing market correction — within the next 24 months are definitely higher than they were before the tax cuts.”