“If I were to pick one metric as a leading indicator, it’s really mortgage rates rising at their fastest pace in history,” said Taylor Marr, deputy chief economist at Redfin. “It’s one of the earliest signs the market is changing.”

A mortgage rate that jumps to 5.5 percent, from 3.5 percent, can add hundreds of dollars to a monthly house payment, narrowing the choices of homes people can afford.

Policymakers are especially worried about the price of housing because of its ability to drive inflation throughout the economy. For example, shelter accounts for roughly one-third of the basket of goods and services used to measure the consumer price index. If housing costs don’t slow down soon, it will be harder for overall inflation to simmer down to more normal levels.

For the past two years, the combination of low interest rates, stimulus aid from Congress, and people’s flexibility to choose where to live and work have boosted demand for the handful of homes available, sending home prices soaring. The average sale price of existing single-family homes rose 15.2 percent in March compared to the year before, according to NAR.

Real estate agents, buyers and housing experts are noticing a bit of a cooling, but they say the market is still churning. For example, it may be that a seller gets 10 offers instead of 20. But there’s still a long way to go before the housing market returns to normal, experts say.

Mortgage rates hit 5 percent, ushering in new economic uncertainty

Becky Enrico-Crum, president of Boise Regional Realtors, in Idaho, works seven days a week to meet the demand. And she isn’t expecting a slowdown anytime soon, because builders just can’t keep up. If no additional homes were listed for sale in the Boise area, the supply of homes would run out in approximately three weeks.

“People think, ‘How high can this go, is it a bubble? Are we going to crash?’ ” Enrico-Crum said. “We really don’t have that, because it’s just back to simple supply and demand.”

In New York’s Hudson Valley home prices have seen some of the fastest growth in the nation as wealthier households relocate from New York City and scoop up the few homes available. Ryan Basten, a broker associate in Ulster County, N.Y., said he isn’t seeing a drop-off, especially as new transplants bring money to spend.

“In the past two months, interest rates have gone from 3.5 percent to 5.5 percent, which is a dramatic increase, and I don’t see that that’s affecting competition at all,” Basten said.

“If it gets to 6, 7 or 8 [percent], then people may have a knee-jerk reaction to that, but I haven’t seen it yet,” Basten added.

But shifts on the opposite side of the country may start to tell a different story. In California, tours of for-sale homes dropped 21 percent by the end of March, compared to the first week of 2022, according to the home-tour technology company ShowingTime. That’s in contrast to the same period last year, when touring activity in California climbed more than 76 percent.

In Los Angeles and Orange County, the number of home buyers who applied for a mortgage dropped 18 percent in February compared to the year before, Redfin research shows. In San Francisco and San Diego, the drop was 13 percent. That was before the Fed enacted its first rate increase this year.

Even as the Fed tries to settle the housing market, its tools are limited. Rate hikes can’t build houses. Zoning rules and construction costs — boosted by supply chain issues and labor shortages — have made it more difficult for builders to meet the demand.

Some Fed officials wanted larger March rate hike despite uncertainty