The Federal Reserve on Wednesday voted to raise its benchmark interest rate by a quarter of a point to the highest point in more than a decade, and the housing market is now bracing for impact.

The Fed lifted its rate to range between 2 percent and 2.25 percent. This is the third time in a year the Fed has raised its rate. The committee points to an upbeat economy that is “healthy and moving forward.”

“These rates remain low,” Federal Reserve Chairman Jerome Powell said at a news conference. “This gradual return to normal is helping to sustain this strong economy for the longer-run benefit of all Americans.”

While the Fed’s key rate is not directly tied to mortgage rates, it does often have an impact to home loan rates.

“The era of super-low mortgage rates is over and consumers will face higher interest rates over the next two years,” says Lawrence Yun, chief economist of the National Association of REALTORS®. “Another rate hike by the Fed is almost certain before year’s end, along with three further rounds of increases in 2019. These interest rate increases are occurring for good reason: an improving economy. Therefore, home sales should hold steady as the opposing forces of higher rates and more jobs neutralize each other. Home price growth will surely slow, however, as higher interest rates limit the stretching of the homebuyers’ budget.”

The Fed strongly hinted at more hikes ahead. “The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective over the medium term,” the Fed said in a statement. “Risks to the economic outlook appear roughly balanced.”

The number of policies purchased through the National Flood Insurance Program has dropped over the past decade, according to a report from the Urban Institute. The total is now just over 5 million. So as flood risks heighten, that leaves a lot of homeowners at risk.

Forty-three percent of homeowners wrongly assume damage from heavy rain flooding is covered under their standard insurance policy, according to the 2016 Consumer Insurance Survey, conducted by the Insurance Information Institute.

But in reality, special circumstances are required to get a standard insurance policy to kick in for such damage. For example, if hurricane-force winds caused roof damage that then leads to water damage within the home, insurance will most likely cover repairs. However, if a nearby river crests due to heavy rainfall and causes the flooding, a standard policy will likely not cover the damage. This recent article in MarketWatch notes that many other natural disasters are covered by homeowners’ insurance—wildfires, tornadoes, and hailstorms—yet not floods.

The NFIP has been struggling to pay off claims over the past few years and has faced several lapses or near-expirations as Congress assesses how to continue funding it. Private flood insurance only accounts for about 15 percent of all flood premiums nationwide, with the NFIP providing the remainder. The National Association of REALTORS® has renewed its call for a strengthened NFIP, along with a robust private market. The NFIP is currently authorized until Nov. 30.

“The National Association of REALTORS® remains focused on ensuring Congress and the White House enact long-term reauthorization and reforms to strengthen the program’s sustainability,” NAR President Elizabeth Mendenhall said in a statement. “Flooding is the most common disaster in the United States, one that affects Americans in communities both coastal and inland every year.”

The fall season is cooling down more than the temperature outside; it’s also putting a much-needed chill on hot housing markets, where home prices have become unaffordable to the average buyer. More than one in four home sellers dropped their asking price last month, according to a new report by real estate brokerage Redfin. With inventory starting to inch up, sellers are facing stiffer competition in the market and adjusting their price expectations, according to the report.

Nearly 27 percent of homes that were listed in the four weeks ending Sept. 16 saw a price drop, according to the report. Redfin defines a price drop as a reduction in the home’s value between 1 percent and 50 percent. The areas seeing some of the biggest price drops year over year are Las Vegas; San Jose, Calif.; Seattle; Atlanta.

“After years of strong price growth and intense competition for homes, buyers are taking advantage of the market’s easing pressure by being selective about which homes to make an offer on and how high to bid,” says Redfin Senior Economist Taylor Marr. “But there are some early signs of a softening market, and the increase in price drops may be another indicator that sellers are going to have trouble getting the prices—and the bidding wars—that they may have just months ago. Instead, many are finding their homes are sitting on the market without much interest until they start reducing their prices.”

For the fourth consecutive week, mortgage rates continued to climb as home buyers face higher borrowing costs.

“Mortgage rates are drifting upwards again and represent continued affordability challenges for prospective buyers—especially first-time buyers,” says Sam Khater, Freddie Mac’s chief economist. “Borrowing costs are moving right now for three main reasons: the very strong economy, higher U.S. government debt issuances, and global trade tensions.”

Khater says despite the uptick in rates, mortgage applications for home purchases have managed to increase on an annual basis for five consecutive weeks. “However, given the widespread damage caused by Hurricane Florence in the Carolinas, the next few months of housing activity will likely be somewhat volatile,” he adds.

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 20:

• 30-year fixed-rate mortgages averaged 4.65 percent, with an average 0.5 point, rising from last week’s 4.6 percent average. Last year at this time, 30-year rates averaged 3.83 percent.
• 15-year fixed-rate mortgages averaged 4.11 percent, with an average 0.5 point, increasing from last week’s 4.06 percent average. A year ago, 15-year rates averaged 3.13 percent.
• 5-year hybrid adjustable-rate mortgages averaged 3.92 percent, with an average 0.4 point, dropping from last week’s 3.93 percent average. A year ago, 5-year ARMs averaged 3.17 percent.

Luxury housing markets continue to climb, as 20 major counties post double-digit gains in home prices, according to realtor.com®’s 2018 Luxury Home Index, released today. The number of sales at or above $1 million climbed 6 percent over the last year. Realtor.com® defines the luxury price tier as the top 5 percent of residential sales.

Two-thirds of luxury housing markets are seeing inventory move faster than a year ago, according to the report.

“The conditions in the luxury segment are quite different from the market overall—it’s really a tale of two markets,” says Danielle Hale, realtor.com®’s chief economist. “Although U.S. median listing prices show signs of slowing growth, luxury prices are moving in the opposite direction in many places. For the second consecutive month, we’ve seen more markets with double-digit, entry-level luxury price growth than in the past four years.”

Sarasota, Fla., remains the nation’s fastest-growing luxury market. Sales prices there have climbed 21 percent since a year ago. Half of all luxury homes in Sarasota sold within 165 days, which is 22 percent faster than a year ago.

Rounding out the top five for fastest-growing luxury markets was Queens, N.Y.; Santa Clara, Calif.; Boulder, Colo.; and Collier, Fla. Each of these cities saw an annual price growth between 13 and 15 percent, according to the report.