The Federal Reserve'sdecision to raise rates for the first time in nine years will likely lead to a spike in homebuying -- at least in the short term -- as nervous home shoppers race to close a purchase before rates head higher.

However, the longer-term impact on the housing market is less certain.

All of the hype and rumors about a possible rate hike, which raged in the market for more than year, are suddenly a reality. Those sitting on the housing sidelines may finally be pushed to pull the trigger.

Image placeholder title

"It could cause fence-sitters to get off the proverbial fence and commit," said Bob Curran, a managing director at Fitch Ratings.

But the longer-term impact is murkier. Much will depend on how much and how fast future rate hikes come. As rates rise, home purchases become more expensive, shutting people out of the market.

"If it was just a quarter point and they'd stay there indefinitely, it wouldn't be a big deal," said Alex Barron, founder and senior research analyst at Housing Research Center. "But this is just the first of a series of hikes."

On the surface, it appears the Fed is taking a cautious approach. In its statement, it said future increases would be "gradual" and likely remain "below levels that are expected to prevail in the longer run."

Other Rising Rates Stories

As long as rate increases come hand-in-hand with a stronger economy, job growth and a robust labor market, the hikes should have little impact, said Mike Neal, a senior economist with the National Association of Home Builders. "But if the increments are too large and move too quickly, that could certainly disrupt the economy, the labor market and the housing market," he said.

Curran speculates rates would have to rise 100 to 200 basis points over a short period of time to seriously reverse the housing market's recovery. "A big move in a short period of time has a bigger impact than 200 basis points spread out over two years," he said.

Much of the housing rebound from the dark days of the 2008 recession have come through historic-low mortgage rates. Generally, 30-year mortgages, which are priced off 10-year Treasurys, tend to rise as short-term rates go up. The 30-year mortgage rate averaged 3.95% on Dec. 10, according to Freddie Mac.

In the past, 30-year mortgage rates had to hit 6% or even 8% before housing saw a serious pullback. However, this is a different era, where young buyers are used to seeing historically low mortgage rates. They may back off sooner when rates tick up to even 5% in a short time span. "It's a young generation that's only known really low rates," said Curran.

Indeed, a recent report from Berkshire Hathaway HomeServices showed the dichotomy among the generations. The report found existing homeowners, who were mostly Baby Boomers, were "indifferent" to the Fed raising rates. However, 62% of prospective homebuyers, who were mostly Millennials and Gen-Xers, said rising rates would make them feel anxious about their current financial situation. In fact, 67% of prospective buyers considered today's mortgage rates as "average" or "high."

"The reality is that an entire generation of first-time buyers has never experienced a meaningful rate increase," said Stephen Phillips, president of Berkshire Hathaway HomeServices, in a statement. "This is a new and unfamiliar phenomenon to them."

Barron sees a potential housing pullback if mortgage rates hit even 4.5%.

For every 25 basis point increase in a mortgage rate, the base price of a home rises 3%, said Barron, who came up with the formula by comparing mortgage payments at the different rates. "So if [30-year fixed rate mortgage] rates were to go up to 5%, that would imply home prices would have to come down almost 14% to keep the same monthly payment," he said. "And a 14% drop in home prices is pretty significant."

For now, Curran expects housing starts, which includes both single family homes and apartments, to continue to tick up. He predicts starts to hit 1.095 million in 2015 and 1.202 million in 2016, up from 1.003 million in 2014 and well off the bottom of 554,000 in 2009. While starts are rising, they're still far below the historic average of 1.5 million starts and the 2005 high of 2.068 million.

"It's been a real roller coaster ride," Curran said.

However, all bets are off if rising rates come with higher oil prices, terrorist attacks and geopolitical events that affect the domestic or global economy.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.